How does private health insurance work?

Health care and medical treatment in Australia is covered by the public health system, called Medicare, and a number of for-profit and not-for-profit private health funds. Private health funds compliment Medicare by paying a benefit for procedures and treatments that Medicare doesn't cover, such as dental and optical treatments.

What are the different types of cover available?

There are four types of health cover available in Australia: hospital, extras, combined hospital and extras and ambulance-only cover.

Hospital cover

Protect yourself against costs associated with going to hospital.

Extras cover

Cover yourself for extras costs such as dental and physio.

Combined

Get the best of both worlds with combined hospital and extras.

Ambulance

Cover yourself against the cost of emergency ambulance.

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How are health funds structured?

Health funds can be either for-profit or not-for-profit. Not-for-profit health funds are run to benefit members rather than shareholders. These types of private funds claim to provide their members with a wider scope of cover, lower premiums and greater benefits for covered items. One way this can be achieved is through tax exemptions. For-profit funds are not eligible for the income tax assessment exemptions that not-for-profit funds are.

How can you claim a benefit?

This differs depending on whether you receive hospital or extras treatment.

Hospital claim

The way you make a hospital claim will depend on whether or not you're being treated at one of your fund's member hospitals.

• In a member hospital, The bill will be sent straight through to your health fund.
• In a non-member hospital, you may get the bill sent to you, which you will then need to forward onto your private health fund.

Your claim will also depend on whether or not your treating doctor is a part of your fund's gap cover agreement.

This agreement between the doctor and your health fund ensures that your fund will cover any extra costs charged by your doctor above the Medicare Benefits Schedule (MBS). If your doctor is not part of this agreement, you will need to cover any out-of-pocket expenses.

You can view a list of member hospitals and gap-cover doctors specific to your health fund on your provider's website. The biggest health funds have the largest number of member hospitals and gap-cover doctors in each state.

Extras claim

Most eligible providers let you claim on the spot with HICAPS. If your provider doesn't do HICAPS you can usually:

• Claim online. Head to your fund's website and submit your claim online.
• Claim in person. Go into your fund's local branch.
• Claim by post, email or fax. Fill out the claim form and send it, along with the relevant documentation, to your health fund.

Who can get private health insurance?

Anyone who wants private health insurance in Australia can get it but it's not a legal requirement. A health fund can register as an open or restricted fund — for example, Commonwealth Bank operates a health fund for employees called CBHS and Teachers Health Fund provides health insurance for members of the education industry.

How do Australian health funds calculate premiums?

Unlike most types of insurance, which is risk rated and based on factors like your age, health and occupation, health insurance is community rated, so everyone pays the same price for a particular policy regardless of their health.

Health funds also operate on a national basis. However, there are slight differences in the cost of cover and access to facilities between states. For example, you'll find residents in Victoria pay higher premiums than residents in other parts of the country.

The largest health funds in Australia by market share

On average, restricted member funds have a high member retention rate. However, this indicator is likely to be attributed to workplace arrangements.

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Frequently asked questions

• Can a health fund refuse to give me private health insurance?

  If you're an Australian citizen, a health fund can't refuse to give you insurance regardless of your health or whether you're likely to make a claim or not.

  It's important to note that there's a distinction between private health insurance and life, trauma and total and permanent disability (TPD) insurance. Private health insurance is community rated, the other types of insurance are risk rated. A community rated policy means you're entitled to buy the same product as someone else, at the same price, and you're guaranteed the right to have your policy renewed if you wish.

• Can a fund change their premiums or policy rules?

  Yes, your health fund can change the terms and conditions of your private health insurance policy, but they have to tell you first. Any changes must also be reflected in the Standard Information Statement.

• Do I have to purchase private health insurance before my 31st birthday?

  You don't have to purchase private health insurance if you don't want to. If you do purchase private cover after 1 July after your 31st birthday, you'll pay the Lifetime Health Cover loading fee. This is an additional 2% fee on top of your health insurance premium that goes up every year after your 30th birthday for the next ten years. This fee is capped at 70%.

• Do I get a rebate if I take out private health cover?

  The Australian Government Private Health Insurance Rebate makes private health insurance cheaper for Australians. The government contributes towards the cost of your private health insurance premiums by offering a tax rebate based on your income and your age. You can claim the rebate back at the end of the financial year or you can have the rebate deducted from your premiums upfront.

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