Couple confused by health insurance excess

Health Insurance Excess

How does health insurance excess work and how does it affect the cost of your insurance?

An excess (also known as a front-end deductible) is a sum of money that you elect to pay towards your medical treatment. It’s an agreement you make with your health fund to take responsibility for some of your health cover costs in return for a lower premium. The higher the excess, the lower your premium should be, and you only pay it if you’re admitted to hospital.

What is a hospital insurance policy excess?

  • A hospital excess is the amount you must pay towards your hospital treatment at the time of going to hospital; you will be required to pay this amount upfront before you are admitted by the hospital, who will then bill your insurer for the remaining costs.
  • While some insurers require you to pay an excess every time you are admitted to hospital and others cap the amount at a maximum limit per year, most insurers will not charge a health insurance excess if you attend hospital for day surgery only.

Do you have to pay excess on extras?

  • No. An excess is only applicable to hospital cover, as extras benefits are normally paid as a percentage of a service provider’s fee or as a set number of visits per year.

Pros and cons of excess payments

There are both advantages and disadvantages to choosing an excess with your cover.

  • Some positives of opting for excess include:
    • Agreeing to pay an excess lowers the cost of your premiums.
    • The higher the excess you pay, the lower your premiums will be.
    • No health insurance excess is payable unless you need to be admitted to hospital.
    • No excess is payable for kids or day surgery, even though your premium is lower.
  • While some disadvantages of excess are:
    • Your policy may also require you to make a co-payment (a daily amount paid towards your hospital stay), so an added excess could prove expensive.
    • If you are a high income earner and you choose a higher excess than allowed, you could be subject to the MLS.
    • If you agree to an excess and then find you don’t have enough funds when being admitted to hospital, you may not receive cover.

Excess options in policies from finder.com.au providers

Health fundPolicy excess options available*Find out more
HIF
  • GoldStar Hospital has an excess choice of $200, $400 or $500 per person.
  • Gold Hospital as an excess choice of $100, $200 or $400 per person.
  • GoldSaver and GoldStarter have an excess of $200 per person per admission.
  • GoldVital has an excess of $500 per person per admission.
More info
Peoplecare
  • Premium Hospital has an excess choice of $150, $200, $500 or none.
  • Mid Hospital and Basic Hospital have an excess of $500.
More info
health.com.au
  • High Hospital has an excess choice of $250, $500 or none.
  • HeartCare Hospital, Basic Hospital and Simply Hospital have an excess of $500.
More info
AHM
  • White Deluxe, White Classic and White starter policies have an excess of $500.
More info
Australian Unity
  • Gold, Mid, Basic+ and Basic Hospital have an excess of $500.
More info
GMHBA Health Insurance
  • Gold, Silver and Bronze Hospital have an excess choice of $250, $500 or none.
More info
HCF
  • Premium Hospital has an excess choice of $250, $500 or none.
  • Mid Plus, Mid and Basic Hospital have an excess choice of $250 or $500.
More info
nib
  • Top, Advantage and Basic Hospital have an excess choice of $250 or $500.
  • Standard Hospital has an excess of $500.
More info
Transport Health
  • Top Hospital can be selected with an excess amount of $250.
More info

*The policies listed on this table are not a complete list of all hospital cover available from these providers, only the ones which have an excess or excess options attached.

Does an excess affect your tax?

A hospital excess has important implications for your income tax if you earn above a certain threshold, primarily due to the Medicare Levy Surcharge.

  • The Medicare Levy Surcharge. This is an additional tax of between 1% and 1.5% that singles earning over $90,000 p.a. and families earning over $180,000 p.a. must pay if they don’t have adequate hospital cover.
  • Adequate hospital cover. To be considered adequate, a health insurance policy must cover some or most of the basic hospital treatments and services and must not have an excess of more than $500 for singles and $1,000 for families. In this instance, opting for a higher excess to lower your premiums would not be advisable, as it could see you become eligible for the MLS.

Accidents, kids and health insurance excess

  • Accidental injury. Apart from day surgery, the only other time an insurer will not require you to pay an agreed excess before being admitted is if your need for hospitalisation is the result of being in an accident. In this case, most insurers will waive the excess requirement.
  • Kids. If you have a family, the chances of needing hospital treatment are increased, and if you had to pay a hospital excess for each child, receiving treatment could become very expensive. Fortunately, most health funds waive the excess for kids being treated in hospital as an incentive for taking out family cover, and they will continue to provide cover for dependant children until they reach the age of 21.

Looking for a policy with health insurance excess options? Contact an adviser for a quote

Picture: Shutterstock

Richard Laycock

Richard is the senior insurance writer at finder.com.au and is on a mission to make insurance easier to understand.

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