While Australians are covered by Medicare, a government-funded universal healthcare system, you may find, like many other people, that taking out private health insurance in order gives you additional healthcare options as well as the ability to access items that may not be covered by Medicare.
The government employs a carrot-and-stick approach to encourage you to take out private health insurance. The “carrot” is a means-tested rebate which subsidises the cost of premiums while the “stick” is the addition of 2% additional cost to premiums per year (known as the Lifetime Health Cover loading) for every year that you fail to take out a policy after you turn 31.
In addition, high-income earners – that is individuals with a taxable income above $90,000 and couples with a taxable income above $180,000 – must also pay the Medicare Levy Surcharge (MLS) if they don’t hold a policy.The majority of Australian households do not pay the MLS and won’t save on tax if they purchase private health insurance.
It’s not our job to tell whether you should have private health insurance – we’ll leave that weighty decision up to you. Our concern is simply whether general treatment cover, which covers dental services, is worth your money and whether it should be a part of your overall policy package.
This covers you for some or all of the extra costs of being a private patient in a public or private hospital. Medicare generally covers you for 75% of the Medicare Benefits Schedule (MBS) fee while private health insurance funds cover the remaining 25%. However, many doctors charge more than the standard MBS fee, meaning there is a “gap” between what Medicare and your fund will cover. Some funds offer “gap cover” but generally any amount beyond the MBS fee will have to be paid by you. In addition to the hospital charges, you may charged for all or part of the cost of theatre fees, intensive care, drugs and pharmaceuticals to name a few.
This covers you for treatment by what are known as “ancillary health service providers” such as dentists and dental specialists, chiropractors, phsyiotherapist and optometrists. Policies vary widely between the funds so what may be covered by one will not be covered by another and rebates, which is the amount you receive back from a fund when you make a claim for a service, also differ depending on you are with. There are also limits on the amount you can claim back in a year.
Medicare does not cover you for ambulance services so you either need to have it included as part of your hospital or general treatment policy, or you can take out a separate ambulance-only policy. The type of cover offered by the funds varies depending on the state in which you live.
For more information on private health insurance and the Private Health Insurance Ombudsman, visit privatehealth.gov.au
With a wide array of insurers, and a bewildering number of policies out in the marketplace, making a simple comparison of private health insurance policies can seem all but impossible. So how do you work out which policy is the right one for you?
The reality is that “extras” cover (also known as extras or ancillary), which includes everything from dental services through to physiotherapy and optical services, doesn’t really offer value for money if you're only an infrequent user of these services. On average, your rebate (the amount you receive back from your fund) only compensates you for about 50% of the cost of dental treatment (although some of the smaller not-for-profit funds return anywhere up to 75%). Even the one time head of the government organisation which oversees private health insurance in Australia has expressed doubts about its value, pointing out you would be better off putting money aside for these services should you eventually need them.
When you first take out a policy your fund will issue you with what's known as a Standard Information Statement which outlines your general entitlements; it does not, however, go into all the detail you might require so you will need to contact your fund for more information.
In recent years, the Australian market has witnessed the rise of sites that offer to compare all the private health insurance policies out there and provide you with a list of possible options to consider. While they have their place and can simplify the challenging process of sifting through the many hundreds of policies offered by funds, they don't take every possible policy into account, meaning you won't get a complete picture of the policies on offer. You will likely find it more effective to go to the government website privatehealth.gov.au which offers a detailed, expansive and unbiased comparison of the many products available.
It's easy to be dazzled by the slick advertising, sophisticated apps and customer service offered by the bigger share holder driven funds and assume their products are superior. However, many of the smaller funds offer polices that provide more detailed, generous cover and give you back far higher rebate amounts than their larger competitors. This is why you should make sure that any search you undertake includes as many different funds as possible because the right policy for you might come from an entirely unexpected quarter.
And remember once you find what you think is the right policy, don't feel pressured to sign up immediately. Ask for the information to be sent to you, take your time to consider your options and only sign up once you done as much detailed research as possible.
Your health needs change over time and so once you take out a policy, it’s always a good idea to check whether it remains a good fit for you and whether you should seek out a new policy, a new fund or both.
If you have what is popularly known as 'extras' cover ' your fund officially calls it either general or ancillary treatment cover ' which includes things like dentistry, optometry and physiotherapy, you could be forgiven for thinking there is no rhyme or reason behind the rebate amount you receive when you make a claim.
There are a number of factors that shape your rebate amount, and contrary to what your fund may tell you, your dentist is not the issue.
For example, from March 2012 to March 2017, average dental fees per service only rose by 3%, with dental fees overall just keeping pace with the Consumer Price Index; by way of contrast, while the average rebate fees paid out rose 4%, it was dwarfed by a staggering increase in premiums of 38%.
You are, in other words, considerably worse off and it's not the doing of your dentist, who has effectively capped their fee increases well below those of premium increases by your fund.
Quite a number of insurers are trying to direct policy holders like you to their own contracted dentists (they may use the warm-and-fuzzy term 'preferred providers', which is misleading since they are no more or less qualified than your own highly-skilled dentist) or their own clinics with the promise of higher rebates.
Sounds like an easy decision, right? They're offering you more money if you use their dentist. The sting in the tail though is that it means leaving your dentist behind, someone who knows your treatment history and the best way to treat you. If you choose to stay with your own dentist, then you are effectively being discriminated against by your own fund.
Mind the gap
So the next time you're staring into the yawning chasm between the fee you've paid to your dentist, and the rebate your fund has handed back to you, remember that your dentist is in your corner. If your insurer ever tells you that you are getting back such-and-such an amount solely because of the fees charged by your dentist, remember that the amount you receive back as a rebate is entirely at the discretion of your fund.
Would you like to take some concrete action? You can file a complaint with the Private Health Industry Ombudsman and also add your voice to our Time2Switch campaign, where we are working to restore balance to the relationship between patients like yourself, the dental profession and private health insurers.
No system is perfect and there is a good chance that at some point during the time you hold private health insurance that something will go wrong.
Your first course of action should be to contact your fund directly and seek redress through them. However, if they are unable or unwilling to assist you, or you feel that you have been given the wrong information, you can make a complaint to the Commonwealth Ombudsman.
The number of complaints made about private health insurance has increased year-on-year in the last couple of years. 4265 complaints were received in 2014-15 which represented a 24% increase on the previous year. Complaints were primarily about the level of rebates paid by funds – what you thought you would receive back isn’t what you get back at all or perhaps the treatment you received isn’t covered – followed by incorrect information, service issues, membership issues and waiting periods.
When you make a compaint, the Ombudsman will determine how serious the dispute is, and if further investigation is needed, will decide if the fund’s initial response was appropriate or whether additional action by the Ombudsman is needed.
To lodge a complaint, go to the Commonwealth Ombudsman and select the Private Health Insurance Ombudsman option.
The aim of the Time2Switch campaign is to create a more workable balance between the profession, our patients and the health funds.
Provides access to the Standard Information Statements which every insurer must have available by law, as well as supplying a list of every registered health fund in Australia, and the ability to search and compare their policies.
Looking to get private health insurance for the first time or considering a switch in policy? First, ask yourself these essential questions.
Private health insurance is confusing. Understand more before you make any decisions by reading through these frequently asked questions and answers.