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What does private health insurance cover?

Thinking about getting private health insurance but unsure of its benefit? Find out what is covered.

Private health insurance covers some or all of the costs of health care as a private patient. While Medicare provides free hospital treatment in a public hospital and covers part of the cost of seeing a GP and most prescription medicines, private health cover gives you additional benefits including:

  • Choice of doctor and hospital
  • Access to a private or shared room in a public or private hospital
  • Choice of treatment time (where possible)

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What is private health insurance?

There are three main types of private health insurance:

  • Hospital cover. Hospital insurance covers in-hospital treatment as a private patient in a public or private hospital.
  • General treatment cover. General, also referred to as extras insurance or ancillary cover, covers selected ancillary services such as optical, dental and physiotherapy, none of which are covered by Medicare.
  • Combined cover. Hospital and extras offers combined cover with the option to tailor your own level of cover.

Are ambulance costs covered?

Ambulance cover is also included in many private health insurance policies, or can be purchased as a stand-alone policy. Ambulance services are not covered by Medicare. Some states and territories such as Queensland and Tasmania, provide free ambulance services to their residents, so whether you need ambulance cover or not will depend on where in Australia you live.

Types of private health insurance

Let’s look at the three types of private health insurance in more detail:

  • Hospital cover. Hospital insurance helps cover the cost of in-hospital treatment by your treating doctor or specialist, and hospital costs such as accommodation and theatre fees. It typically only covers those medical services listed under the Medicare Benefits Schedule (MBS). This means that cosmetic surgery or laser eye (cataract) surgery, for example, are likely to be excluded. Excesses and co-payments may also apply, depending on your level of cover.
  • General treatment cover. Ancillary services such as optical, dental, physiotherapy, non-PBS prescription pharmaceuticals and emergency ambulance services are not covered by Medicare, so general treatment cover provides a way of making these services more affordable. Benefit limits per household per year normally apply, and the premium price is directly related to the benefit amount payable.
  • Combined cover. Hospital and extras cover allows you to mix and match your cover depending on your circumstances and health care needs. For example, if you are young and healthy and unlikely to need comprehensive hospital cover in the near future, you can choose a more basic level of hospital cover and include more comprehensive cover for extras that you use regularly (such as major dental if you have a young family needing crowns, braces and other expensive dental treatments).

What’s covered by health insurance?

Insurers offer several levels of hospital and general cover, ranging from basic through to comprehensive. Hospital policies fall into four general categories:

  • Public. Public hospital covers minimum benefits for treatment in public hospitals only.
  • Basic. Basic provides basic in-hospital cover, but normally excludes or restricts cover for options such as cardiac-related services, non-cosmetic plastic surgery, rehabilitation, psychiatric services and palliative care.
  • Medium. Medium cover usually includes all those services not covered by basic, but excludes or restricts pregnancy and birth-related services, assisted reproductive services (IVF), cataract and eye lens procedures, joint, hip and knee replacements, dialysis for chronic renal failure and sterilisation.
  • Top. Top covers all services where Medicare pays a benefit, with the only exclusions or restrictions usually relating to cosmetic surgery or services performed outside Australia.

General treatment (extras) cover also falls into three main categories:

  • Basic. Basic extras cover includes at least one service such as general dental, optical, physiotherapy or chiropractic.
  • Medium. Medium extras cover includes most general treatment services such as general and major dental, optical, physio, chiro, podiatry, occupational therapy and non-PBS pharmaceuticals, but often excludes orthodontics, health management and hearing aids.
  • Comprehensive. Comprehensive extras usually includes cover for all services, including those excluded in medium policies, with benefit limits required to be average or above average for the industry.

What are the benefits of private cover?

While the cost of private health insurance continues to rise, it still represents good value for money given the numerous benefits it provides. These include:

  • The ability to choose your own doctor and hospital with a private or shared room and substantially shorter waiting periods than in the public system.
  • Cover for those services not covered by Medicare such as dental, optical, physio, chiro, ambulance and non-PBS pharmaceuticals.
  • Tax relief in the form of an annual Government rebate on your health insurance premiums.
  • You won't have to pay the Medicare Levy Surcharge (MLS) if you have basic hospital cover.
  • Avoidance of the Lifetime Health Cover loading by taking out private hospital cover at an early age.
  • Better health care services and facilities (by taking the strain off the public hospital system and freeing up government funds to go towards the upgrade of hospitals).
  • Peace of mind of knowing that you and your family will be covered if you experience any major health problems.

Commonly asked questions

Q: How do I know what level of cover I need?

  • A: You need to look at your age, lifestyle and personal circumstances (your marital status, your number of dependants, your general health, the services you most commonly use) and then compare the policies that meet all of your needs.

Q: What if I change my mind after taking out private health cover?

  • A: All insurers must provide a cooling-off period (usually 30 days after taking out cover), during which you can cancel your policy and receive a full refund of premiums paid.

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Q: What if I decide to switch health funds?

  • A: Simply notify your new insurer of the details of your previous policy and they will take care of the transfer process. Provided that you are switching to a similar level of cover, you should not have to re-serve any waiting periods already served with your previous insurer.

Q: Does private hospital cover include all my in-hospital expenses?

  • A: No. You will usually need to pay for personal expenses, such as telephone calls, newspapers and some high-cost non-PBS pharmaceuticals, yourself.

Q: Can an insurer refuse to cover me if I am old or chronically ill?

  • A: No. Private health insurers must provide cover to everyone, regardless of their health status, age or claims history and they must charge everyone the same premium rate for the same insurance policy. However, they can and usually do impose waiting periods for pre-existing medical conditions.

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Picture: Shutterstock

Richard Laycock

Richard is the senior insurance writer at finder.com.au and is on a mission to make insurance easier to understand.

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