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An excess is a sum of money that you need to pay whenever you make a hospital claim. 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 a payment you need to make when you're admitted to hospital. You'll be required to pay this amount upfront when you go to hospital – they will then bill your insurer for the remaining costs.
Some insurers require you to pay an excess every time you're admitted to hospital; others cap the amount at a maximum limit per year.
Pros and cons of a higher excess
Pros
The higher the excess you pay, the lower your premiums will be.
You only need to pay an excess if you're admitted to hospital.
You usually don't have to pay an excess for same-day surgery, even though your premium is lower.
Cons
You might also have to pay a co-payment, a daily amount paid towards your hospital stay.
If you're a high income earner and you choose an excess over $750, you might have to pay the Medicare Levy Surcharge.
If you can't pay your excess when you're admitted to hospital, you might not receive cover.
When don't you need to pay an excess?
Day Surgery
Many insurers won't charge a health insurance excess if you need to go to hospital for day surgery only.
Accidental injury
If you're hospitalised because of an accident, most insurers will waive the excess requirement.
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Does your hospital cover excess affect your tax?
It can, yes. If you earn above $90,000 p.a. (as a single) or $180,000 p.a. (as a couple), you'll be hit with the Medicare Levy Surcharge, unless you get basic hospital cover. The MLS is an additional tax of between 1% and 1.5% that higher earners need to pay if they don't have adequate hospital cover. Here's what you need to avoid it:
Singles
A hospital policy with an excess of less than $750
Couples and Families
A hospital policy with an excess of less than $1,500
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Frequently asked questions
You'll be required to pay an excess before you're admitted by the hospital, who will then bill your insurer for the remaining costs.
There is a range of different excess options for hospital cover, but the most common amounts are $250, $500 and $750.
Many insurers won't charge a health insurance excess if you attend hospital for day surgery only. It's also common for health funds to waive excesses for accident-related treatment, same-day admissions or if any kids are on your cover.
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.
Gary Ross Hunter is an editor at Finder, specialising in insurance. He’s been writing about life, travel, home, car, pet and health insurance for over 6 years and regularly appears as an insurance expert in publications including The Sydney Morning Herald, news.com.au, The Telegraph, Explore Travel and Escape. Gary holds a Kaplan Tier 1 General Insurance (General Advice) certification and a Kaplan Tier 1 Generic Knowledge certification which meets the requirements of ASIC Regulatory Guide 146 (RG146).
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