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Do You Need Private Health Insurance and Is It Worth It?

You don't need private health insurance. Until you do. So, what does private health insurance cover, and why is it so important? Depending on your policy, private health insurance covers the health care needs which are not provided under Medicare, such as physiotherapy or treatment in a private hospital with the doctor of your choice. It's important because it puts you in control of your own healthcare.

To fully answer the question, "Is private health insurance worth it?", you need to look at the factors that determine if private health insurance is for you.

Difference between private health insurance and Medicare

Briefly, Medicare is a healthcare system designed to give all Aussies a range of hospital and health services at low or no cost. Private health insurance, on the other hand, can give you many services and options which are not covered by Medicare.

Depending on the policy you take out, you can get things such as:

  • Hospital cover: This enables you to receive treatment as a private patient in either public or private hospitals.
  • Extras cover: This helps with the costs of allied health services which aren't covered by Medicare, such as osteopathy, chiropractic, home nursing, and dental treatment.
  • Ambulance cover: Because Medicare doesn’t cover ambulance transport, you can purchase cover from a private health insurer or, if available in your state, a subscription from the state ambulance service.

The government provides incentives and taxation policies to encourage as many Aussies as possible to take out private health insurance. When considering your level of required cover, you need to assess your needs both now and into the future, and any possible waiting periods,

What does private health insurance cover?

While private health insurance broadly covers hospital, general treatment (extras), and ambulance, you can choose whether to buy separate policies for each or get a combined policy. Different providers have limitations on what and when you can claim.

Recently, the government found that while half the population have taken out private health insurance, many people don't fully understand what they are paying for and how much coverage they have.

To simplify this, a number of reforms to private health insurance were introduced from April 2020 onwards, such as:

  • All hospital insurance policies are now classified as Gold, Silver, Bronze and Basic.
  • Discounts are available for young people between 18 and 29, ensuring they pay far lower rates than most other age groups.
  • You can choose to pay lower premiums in exchange for higher excesses. You could save up to $200 for singles and $350 for families.
  • For Aussies who live in regional and rural Australia, insurers can now offer you travel and accommodation benefits as part of your hospital cover.
  • If you were wondering, "Am I still covered under my parent's health insurance?", the good news is that the government has increased the maximum age of dependents from 24 to 31 years. This is to encourage you to continue with private health insurance from the age of 31, which is when your lifetime health cover commences.

To fully explain these new tiers of hospital cover - Gold, Silver, Bronze, and Basic - the following table outlines the minimum levels of cover as mandated by the government. (It's also important to note that each provider may provide more benefits for each level, above these minimum requirements.)

 

Clinical Category

Basic

Bronze

Silver

Gold

Rehabilitation

Y (R)

Y (R)

Y (R)

Y

Hospital psychiatric services

Y (R)

Y (R)

Y (R)

Y

Palliative care

Y (R)

Y (R)

Y (R)

Y

Brain and nervous system

O (R)

Y

Y

Y

Eye (not cataracts)

O (R)

Y

Y

Y

Ear, nose and throat

O (R)

Y

Y

Y

Tonsils, adenoids and grommets

O (R)

Y

Y

Y

Bone, joint and muscle

O (R)

Y

Y

Y

Joint reconstructions

O (R)

Y

Y

Y

Kidney and bladder

O (R)

Y

Y

Y

Male reproductive system

O (R)

Y

Y

Y

Digestive system

O (R)

Y

Y

Y

Hernia and appendix

O (R)

Y

Y

Y

Gastrointestinal endoscopy

O (R)

Y

Y

Y

Gynaecology

O (R)

Y

Y

Y

Miscarriage and termination of pregnancy

O (R)

Y

Y

Y

Chemotherapy, radiotherapy and immunotherapy for cancer

O (R)

Y

Y

Y

Pain management

O (R)

Y

Y

Y

Skin

O (R)

Y

Y

Y

Breast surgery (medically necessary)

O (R)

Y

Y

Y

Diabetes management (excluding insulin pumps)

O (R)

Y

Y

Y

Heart and vascular system

O (R)

O

Y

Y

Lung and chest

O (R)

O

Y

Y

Blood

O (R)

O

Y

Y

Back, neck and spine

O (R)

O

Y

Y

Plastic and reconstructive surgery (medically necessary)

O (R)

O

Y

Y

Dental surgery

O (R)

O

Y

Y

Podiatric surgery (provided by a registered podiatric surgeon)

O (R)

O

Y

Y

Implantation of hearing devices

O (R)

O

Y

Y

Cataracts

O (R)

O

O

Y

Joint replacements

O (R)

O

O

Y

Dialysis for chronic kidney failure

O (R)

O

O

Y

Pregnancy and birth

O (R)

O

O

Y

Assisted reproductive services

O (R)

O

O

Y

Weight loss surgery

O (R)

O

O

Y

Insulin pumps

O (R)

O

O

Y

Pain management with device

O (R)

O

O

Y

Sleep studies

O (R)

O

O

Y

 

 

Y

Indicates the clinical category is a minimum requirement of the product tier.

(R)

Restricted cover permitted: insurers are allowed to offer cover for this clinical category on a restricted basis. A restricted benefit means you are partially covered for hospital costs as a private patient in a public hospital. You may incur significant expenses in a private room or private hospital so you should check with your insurer and hospital for details.

O

Optional for the insurer to include: insurers may choose to offer these as additional clinical categories.

 

Factors that determine if private health insurance is for you

While the amount of private health insurance you take out is mainly determined by your needs and budget, there are other factors which come into play.

Lifetime Health Cover (LHC) loading

The longer you delay taking out health insurance after you turn 31, the higher your premiums will be. If you decide to take out health insurance cover later in life, you will pay a 2% LHC loading on top of your premium for every year you are aged over 30.

Private Health Insurance Rebate

This is an amount the government contributes toward the cost of your premiums for private health insurance. The amount of the rebate is tested against your income.

Premiums versus Excess

This depends on how much budget you have for your premiums. If you select a policy which suits all of your needs, but find the premiums to be a bit pricey, you can bring down the cost by making your excess higher. Excess is the amount you have to pay, out of your own pocket, towards the overall cost of your insurance claim.

Pre-existing conditions

You need to check the exclusions in your health insurer's Product Disclosure Statement (PDS) to see if they will cover you for any pre-existing health condition. Some policies won't cover you if that condition was already present.

Can You Claim Private Health Insurance On Tax?

If you are wondering if your private health insurance is tax-deductible, it depends on whether you have to pay the Medicare Levy Surcharge (MLS). This surcharge is meant to encourage you to take out private health insurance and is a levy aimed at taxpayers who do not have private hospital cover and earn above a certain income.

You have to pay this surcharge:

  • If you are a single person with an annual taxable income for MLS purposes greater than $90,000; or
  • You are a family or couple with a combined taxable income for MLS purposes greater than $180,000. The family income threshold increases by $1,500 for each dependent child after the first;
  • And you do not have an approved hospital cover with a registered health insurer.

You can access the ATO's Private Health Insurance Rebate Calculator to figure out your income for surcharge purposes and also your private health rebate percentage.

At compare & connect, we know there is no single policy that suits everyone. So we make it easy for you to find the health insurance plan which suits your needs at a competitive price.

Tailoring our recommendations to each customer is an integral part of our service. We can save you hours on research.

Pradeep Raj 28 Jul 2022

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