Mind the gap: the tricky part with health insurance

Angus Kidman 7 June 2016


Gap payments of $2,000 or more are becoming increasingly common, new figures reveal.

When choosing a health insurance fund, you're likely to worry about two key elements: how much you're paying in premiums, and the range of services which are covered by your policy. As a cautious consumer, you also need to grapple with the fiddlier detail of gap payments: the amount that the insurer won't cover if you have a procedure.

While the majority of services that you need in a hospital will be covered, the number where you have to pay is increasing. According to the Australian Prudential Regulatory Authority, which monitors gap payments, the proportion of services with no gap payment fell from 88.4% in March 2015 to 85.9% in March 2016. If that trend continues, we'll be increasingly out of pocket even if we do have insurance.

The average gap payment is relatively small at just $19.23. But that average conceals some much bigger individual numbers. Analysis of claims by BUPA customers suggests that for some common major procedures, the gap will be much higher.

For instance, if you have both knees replaced, there's a 39% chance you'll end up paying a gap payment of between $2,001 and $5,000. That said, at least 37% of the patients in BUPA's data didn't pay any gap fee for this procedure. For a radical prostatectomy, that proportion was a much lower 17%, as you can see in the table below.

Procedure$0Under $500$501-$2,000$2,001-$5,000$5,001-$10,000
Knee replacement (both knees)37%13%2%39%8.9%
Radical prostatectomy17%11%8%35%28.0%
Breast reduction27%6%3%33%28.7%
Incision of femur/pelvic bone36%21%14%29%0.6%
Shoulder replacement50%16%4%29%0.8%
Excision of intervertebral disc/s35%33%4%26%1.4%
Hip replacement60%10%5%25%0.3%
Knee reconstruction56%11%8%24%0.1%
Radical prostatectomy and pelvic lymphadenectomy26%10%7%23%29.7%
Knee replacement63%10%6%20%5.0%

You can't always control which hospital or surgeon performs your procedure in an emergency, and under those circumstances a gap fee might not be your major concern. However, you can review your policy carefully to establish what level of gap is likely to exist.

June typically sees health insurers offer deals and incentives to persuade people to sign up. There's nothing wrong with hunting down a bargain, but ultimately health insurance is still a service. Make sure that what you're paying for is going to meet your needs.

Angus Kidman's Findings column looks at new developments and research that help you save money, make wise decisions and enjoy your life more. It appears Monday through Friday on finder.com.au.

Picture: Shutterstock

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