Find out what you need to know before taking out a combined hospital and extras policy.
Private health insurance is divided into two main areas: hospital and extras cover. A combined hospital and extras policy can protect you against a range of health related costs.
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What is a combined hospital and extras policy?
Combined a combined health insurance policy includes both of the main types of health insurance:
- Hospital cover for in-hospital treatment
- Extras cover for ancillaries such as optical, dental and physio
Many health funds offer combined packages and this often suits people who want all of their health insurance needs taken care of in one single policy. The main advantage of combined health cover is the convenience of only having to purchase, review, maintain and claim on one policy from one fund. There is also the incentive of possibly obtaining a discount for purchasing both types of cover through the one fund.
Hospital and extras insurance are totally different forms of cover. Hospital cover is to help pay for treatment and accommodation in a hospital during an illness or injury, while extras is to help cover the costs of ancillary health services that we all may require, but which aren’t usually covered by Medicare. Personal circumstances will dictate whether one form of cover is more important to you than the other. If you are young and healthy, you may only require basic hospital cover and opt for more comprehensive extras such as dental and physio. If you are older and starting to develop chronic complaints that might require surgery, then hospital cover may be a higher priority for you than extras. Other important differences include:
- Not having sufficient hospital cover when your income is above a specified level attracts a Medicare Levy Surcharge, while extras does not.
- You are charged a Lifetime Health Cover (LHC) loading of 2% for every year you don’t take out hospital cover after you turn 31 years of age. Extras policies don't have this penalty applied.
What benefits does hospital policy cover?
Hospital cover pays for your treatment and accommodation in a public or private hospital. As an Australian permanent resident, you are entitled to hospital treatment under Medicare, but many people take out private hospital cover because it offers several advantages over the public healthcare system:
- Treatment as a private patient in a public or private hospital
- Treatment by your own doctor
- Little or no waiting lists
Most health funds offer different levels of hospital cover:
- Basic cover. Covers treatment in a private or public hospital, but often excludes cover for cardiac-related services, non-cosmetic plastic surgery, rehab, psychiatric services, palliative care and others.
- Medium cover. Often covers much of what basic cover doesn’t, but frequently excludes pregnancy and birth-related services, IVF, cataract procedures, joint replacements and dialysis.
- Top cover. Generally covers every service where Medicare pays a benefit.
Top hospital cover will usually include:
- Treatment as a private patient in a private hospital
- Emergency ambulance treatment and transport
- Surgical procedures such as joint reconstructions and removal of appendix, tonsils, adenoids and wisdom teeth
- Palliative care
- Psychiatric treatment
- Approved rehabilitation programs
- Major heart surgery
- Childbirth and inpatient pregnancy services
- Fertility treatments such as IVF
- Plastic and reconstructive surgery to repair injury or congenital defects
- Major eye surgery
- Renal dialysis treatment.
Whether services and procedures such IVF, heart surgery and psychiatric services are covered or not will depend on the fund, but typically most will not cover cosmetic surgery, alternative medicines and any surgery or hospital treatments for which Medicare does not offer a benefit.
While hospital cover is insurance you only claim on if you become ill or injured and need to go to hospital, extras can reimburse you for general services that aren’t covered by Medicare. These can include:
- General dental care (e.g. cleaning, fillings, extractions)
- Major dental care (e.g. orthodontics, wisdom teeth, crowns, bridges, root canal work and dentures)
- Optical care (e.g. prescription glasses, contact lenses)
- Chiropractic care
- Hearing aids
- Basic. Covers the main services including dental (general only), optical, physio, chiro, osteo and often emergency ambulance transport.
- Medium. This generally covers everything covered by Basic, but with more generous benefit levels, plus some major dental, podiatry, occupational therapy and in some cases travel vaccines and immunisations.
- Comprehensive. Usually covers everything Medium does and typically applyies larger benefit levels and also includes orthodontics, psychology, speech pathology and some prescription medicines not covered by the PBS.
Because people have different needs when it comes to ancillary services, many funds will allow you to mix and match your extras to suit your requirements (e.g. optical and dental only if that is all you need), although benefit levels are usually restricted to an amount per person per year and waiting periods apply to most services.
Both hospital and extras health insurance cover are subject to waiting periods and benefit limits. In the case of hospital cover, the Private Health Insurance Act stipulates that the waiting period for pre-existing medical conditions and obstetrics (pregnancy) must be no longer than 12 months and no longer than two months for other hospital benefits (apart from accidents, in which case the waiting period is waived).
What are waiting periods?
Waiting periods for extras vary with funds but most apply a two month waiting period for services such as optical, general dental, physio, osteo and chiro and up to 12 months for major dental or 36 months for hearing aids. The reason waiting periods exist is to prevent people with pre-existing medical conditions from taking out private health insurance, obtaining the benefit and then cancelling their policy. This not only costs the fund, but affects every other health fund member, because premiums would rise rapidly if this practice was allowed to occur.
What claims limits?
Benefit limitation periods are another form of waiting period. These vary between funds, with some applying restrictions to certain hospital products, where only a minimum benefit is payable for up to three years. They can also apply to extras, where only minimum coverage for dental may be available in the first year, increasing after three years. Like waiting periods, benefit limitation periods are used to keep private health costs down, to prevent people from jumping the queue and to ensure that loyal members get the services they need in the long term.
The main advantage of choosing a combined hospital and extras policy through one fund is convenience. You only have one premium to pay and one fund to deal with. The downside of this is you may not be getting the most value for money on one type of coverage or the other. So it really comes down to knowing what you need and doing the research via a comparison website to see whether you would be benefit more from a combined policy, or purchasing your hospital and extras insurance separately to take advantage of deals from two different funds. There is also the question of discounts and bonuses. If your current fund offers great hospital cover but less attractive extras, this may be offset by the fact that they also provide loyalty bonuses for years of membership and for taking out combined hospital and extras insurance cover.
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