Are there any benefits in taking out a cheap policy? Learn about the pros and cons of low cost health insurance and compare online
With the cost of health insurance increasing every year, many people are opting for a more affordable level of cover. But as this guide reveals, basic cover excludes or restricts a large number of treatments and services and may really only be suitable for those with a limited need for medical treatment (e.g. the young and healthy) and those wishing to avoid the Medicare Levy Surcharge (MLS).
Compare affordable hospital and extras cover
What can you expect from low cost cover?
As the name suggests, basic health insurance covers only the basics: a core range of hospital treatments and some ancillary services.
Basic hospital cover
|What's typically included?||What's typically excluded?|
Basic extras cover
The average basic extras cover will usually include one or two ancillary services such as:
- General dental
- Chiropractic services
The benefit limits are generally quite low when compared to more comprehensive forms of cover and annual limits are often combined.
Why would you consider basic hospital cover?
The reason many people opt for basic hospital cover is to avoid the Medicare Levy Surcharge (MLS). This is a tax levied on high income earners (those who earn over $90,000 p.a. for singles and $180,000 p.a. for families) who don’t have private hospital cover.
Basic hospital cover often costs less than the extra tax this group must pay (1% to 1.5%), so many will purchase it just to avoid the MLS, without having any intention of actually using it.
Do all health insurers offer basic hospital cover?
Most Australian health funds will have some form of basic hospital insurance available. While not a comprehensive list, the following table outlines the basic health cover offerings from some of Australia’s leading insurance providers.
|Health fund||Basic hospital policy features|
|HIF’s GoldVital covers the essentials including removal of tonsils, adenoids and wisdom teeth, minor gynaecological procedures, intensive care and joint reconstruction and investigation.|
|Peoplecare's Basic Hospital allows for treatment as a private patient in a private or public hospital. It covers emergency ambulance, theatre and intensive care fees, same-day patient costs and in-hospital pharmacy bills. It also provides restricted cover for psychiatric, palliative and rehabilitative services.|
|health.com.au’s Base Hospital covers emergency ambulance, accident-related treatment, tonsils, wisdom teeth, adenoids and appendix removal, knee and shoulder reconstruction, dental surgery and Achilles tendon surgery. It also provides restricted cover for rehabilitation, psychiatric services and podiatric surgery.|
|AHM’s White Starter is entry level hospital cover for singles and couples. It includes emergency ambulance, accident-related treatment, partial cover for rehabilitation and the option to add extras such as optical, dental and physio. All other hospital services are excluded.|
|Australian Unity||Australian Unity’s Basic Hospital provides affordable hospital cover with no excess for accidents. It covers emergency ambulance, day surgery, joint reconstructions and investigations, surgical prostheses and home care.|
CBHS offers a Basic Hospital Cover policy that allows for treatment as a private patient in a public hospital. It includes full cover for emergency ambulance transport and minimum benefits for a wide range of hospital treatments that are covered by Medicare.
|GMHBA’s Bronze Hospital is entry level cover as a private patient in a public hospital and includes accident-related treatment and knee and shoulder reconstructions.|
|HCF’s Basic Hospital provides a basic level of cover for emergency ambulance, accident-related treatment, intensive care and hospital accommodation.|
|nib’s Basic Hospital covers emergency ambulance, treatment for accidental injury, removal of appendix, tonsils and adenoids, colonoscopies, dental surgery, gastroscopies, treatment for ear infections, gynaecological services, hernia repair and joint investigations and reconstructions.|
|Transport Health’s Public Hospital covers treatment as a private patient in a shared room in a public hospital. It includes emergency ambulance, approved prostheses and basic minimum benefit (MB) cover for a range of hospital services.|
How can I use health insurance to avoid the Medicare Levy Surcharge (MLS)?
There are three main types of basic health cover offered by insurers for those wishing to avoid the MLS. These are:
- Public hospital cover. This provides treatment as a private patient in a public hospital and the main advantage it offers over using the public system is that you get to choose your own doctor.
- Public hospital cover with extras. This provides the same level of treatment as public hospital cover but includes some limited ancillary services.
- Private hospital and extras cover with excess. This provides treatment as a private patient in a public or private hospital and limited cover for some ancillary services, but the private hospital cover is subject to a range of exclusions and high excesses.
To try and prevent people from taking out basic policies with low premiums and high excesses just to avoid the MLS, the government has ruled that basic hospital cover must not have an excess of more than $500 for singles and $1,000 for families.
But even with excess limits such as these, many basic policies are still cheaper than paying the MLS levy, so this regulation has had little impact on forcing high income earners to take out valid hospital cover to help relieve pressure on the public health system.
Tips to keeping premiums low without compromising on cover
If your motivation for taking our basic health cover is not to avoid the MLS, but simply because you can’t afford a more comprehensive policy, there are a number of ways you can reduce the cost of your premiums while still maintaining an adequate level of cover. These include:
- Customising your policy so that you are only paying for the treatments and services you actually need (e.g. drop pregnancy services and IVF if they are of no use to you).
- Increasing your excess (the amount you must pay upfront for treatment). This can reduce your premium, but make sure you will have the money for the excess if you need it at short notice.
- Paying your premiums annually and by direct debit (many insurers offer a discount for this).
- Paying before 31 March when the annual indexed premium price rise occurs to lock in your cover at the current price for another year.
- If you find a policy that offers a better deal for the same price or less, switch to a new provider.
- Joining a restricted membership fund if you are eligible (employers, clubs, associations and mutual banks often provide cheaper health insurance to their members).
- Taking out health insurance through your superfund, as it is often cheaper and you don’t need a medical exam.
- Looking for policies that offer value for money such as no hospital excesses and gap-free extras for kids (if you have children).