Managing your policy

Health insurance: Managing your policy

Discover how managing your policy can help you save on health insurance in the long run.

Private health insurance provides cover the things not covered by Medicare, such as a choice of doctor and hospital, a shared or private room, reduced waiting times for treatment and cover for ancillary services such as optical, dental and physiotherapy.

As private health insurance provides such important protection for you and your family, managing your policy should ensure it remains relevant, up to date and affordable. The best way to achieve this is by regularly reviewing it (approximately every six months) and comparing it with what’s currently available in the marketplace.

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How does private health insurance work?

There are three main types of private health insurance available: Hospital, extras and combined.

What is hospital cover?

Hospital cover pays a benefit towards your treatment and accommodation as a private patient in a public or private hospital. It offers a choice of your own doctor and hospital and usually involves little or no waiting periods.

Most health funds offer three levels of hospital cover:

  • Basic cover. Basic hospital usually excludes cover for cardiac-related services, non-cosmetic plastic surgery, rehab, psychiatric services and palliative care.
  • Medium cover. Medium hospital covers most of what basic doesn’t include, but often excludes pregnancy and birth-related services, assisted reproductive services (IVF), cataract and eye lens procedures, joint replacements and renal dialysis.
  • Top cover. Top hospital covers every service where Medicare pays a benefit.

What is extras cover?

Extras provides a benefit towards the cost of ancillary services not covered by Medicare. These can include general and major dental, optical, chiropractic services, physiotherapy and some natural therapies such as acupuncture and naturopathy.

Extras cover is available in three main levels:

  • Basic. Basic extras covers general dental, optical, physio, chiro, osteo and emergency ambulance transport.
  • Medium. Medium extras covers everything included in basic cover, but with more generous benefit levels, plus some major dental, podiatry, occupational therapy and travel vaccines and immunisations.
  • Comprehensive. Comprehensive extras covers everything covered by medium cover with the highest benefit levels and includes orthodontics, psychology, speech pathology and some non-PBS prescription medicines.

What are combined policies?

Many health funds offer combined packages for those who want all of their insurance needs taken care of in a single policy. The main benefit of combined cover is the convenience it offers. You only have to purchase, review, maintain and claim on one policy from one provider, and you may also receive a discount from the insurer for purchasing both types of cover through them.

Lowering premiums and health fund discounts

If, when managing your policy, you find your premiums are becoming unaffordable, there are several things you can do to reduce the amount you are paying:

  • Pay annually in advance, as many insurers charge admin fees for monthly payments.
  • Pay before the annual premium increase on 31 March to lock in your current rate for another year.
  • Pay by direct debit, as many insurers will reward you with a discount.
  • Increase your excess level (the amount you pay towards a treatment or service).
  • Switch to a restricted membership fund if you are eligible, as premiums are usually lower and benefits are higher.
  • Review your level of cover, as you might have cover for items you don’t need (pregnancy and IVF cover if you are older).
  • If your insurer can’t deliver, switch to one who can (there are over 30 funds to choose from, so shop around).

Health insurance discounts

One of the best ways to reduce your premium costs is to join a health fund that offers discounts. These are reductions in premiums offered if you qualify in certain categories, which can include:

  • Loyalty discounts. Awarded to those members who stay with their insurers the longest.
  • Affiliation discounts. Discounts for purchasing products or services from providers with whom an insurer has an arrangement.
  • Referral discounts. A reward for recommending an insurer to friends and family, who then become members.
  • Switching discounts. Incentives for switching from one insurer to another, such as waived waiting periods or a free initial period of cover.
  • Health and fitness discounts. Discounts for members who join approved health and wellbeing programs and classes.
  • Corporate discounts. Joining certain companies, super funds, associations and clubs can give you access to discounted health insurance (up to 12%).
  • Family discounts. Discounts for children, such as no hospital excess and gap-free extras, can save you a lot of money as a family.
  • Single parent discounts. Single parents should receive a reduced rate from normal family cover, so make sure you are receiving it and switch if you’re not.

What are restricted benefits?

You may also find when reviewing your policy that some benefits have restrictions attached to them. A restricted benefit is one that only pays a reduced benefit amount, so if you were to need this service, you would find yourself with significant out-of-pocket expenses as a private patient.

If the restricted benefit applies to a treatment that you are likely to need, you have four main options:

  • Seek treatment as a public patient
  • Seek treatment as a private patient in a public hospital
  • Pay most of the cost yourself
  • Switch to a policy that doesn’t have a restriction on this benefit

Will you pay an excess?

Another important factor to consider in the management of your health insurance is the excess that applies to your hospital cover. This is an amount that you must contribute yourself towards your hospital admission, and can be anything from $200 upwards, depending on the policy. Generally, the higher the excess the lower the premium, but you need to decide whether it provides good value for money and also whether you would be able to come up with the money at short notice prior to being admitted to hospital.

Some policies include an excess and a co-payment, which is an amount you must pay towards your accommodation costs for every day you are in hospital. If your policy is charging you both an excess and a co-payment, it might be worth your while to shop around for one that doesn’t require quite as much money upfront.

Are there any out-of-pocket expenses?

You may find your policy also has a gap between the fees your hospital or doctor charges and the amount you can get back from Medicare and your insurer. This can mean substantial out-of-pocket expenses (costs you must pay yourself), so you should ask your doctor whether they have a gap cover agreement with your insurer before being admitted to hospital.

Out-of-pocket expenses can also be incurred where providers of ancillary services, such as optical and dental, charge more than what is covered by your insurer. To counter this, many insurers have a list of preferred providers with whom they have a gap cover arrangement, so check with your insurer to see if this is the case with your policy and if it isn’t, consider switching insurers.

Policy in arrears

An important part of managing your policy is ensuring your policy doesn’t fall into arrears. Being in arrears is when you have not paid your premiums on time and it can have serious repercussions:

  • You won’t be covered for any hospital or extras costs incurred
  • After two months, your insurer may cancel your policy
  • You may have to re-join and re-serve waiting periods as a result

To avoid being in arrears, you need to know when payments are due and always make them on time. The best way to do this is to set up a direct debit with your bank, so your payments come out automatically every month.

Leaving a fund

If upon reviewing your policy, you decide it no longer suits your needs, you have the option to switch to another health fund offering a better deal. Your circumstances may have changed, you may have found the same cover elsewhere for a lower price or you may be dissatisfied with the service you are receiving from your current insurer.

Whatever the reason, once you find a better policy, switching is relatively easy. All you do is provide your new health fund with the details of your old policy and they will facilitate the move for you, requesting a clearance certificate on your behalf from your previous insurer.

Portability laws ensure that your current benefits travel with you, such as not having to serve new waiting periods for equivalent hospital cover, and retaining your current Lifetime Health Cover loading status. Your new fund may also waive the waiting periods you have already served on similar extras cover, although they are not obliged to do so.

However, you will lose any bonuses or discounts you may have accrued, so the benefits and drawbacks should be carefully weighed up before switching to another insurer.

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Richard Laycock

Richard is the insurance editor at finder.com.au. He is on a mission to make insurance easier to understand.

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