A beginner's guide to health insurance

Health insurance can feel like a complex puzzle of features and benefits. But once you understand the basics, it’s much easier to navigate. Whether you're considering getting your first health insurance policy or just want to brush up on what’s available, this beginner's guide will break down the essentials.

From understanding what health insurance is to finding the right private health insurance cover for your needs, keep reading to learn everything you need to know about private health cover. 

What is health insurance?

Health insurance helps cover the cost of medical services and healthcare, reducing your out-of-pocket expenses when you need treatment. In Australia, we have a mix of public healthcare services and private health insurance options.

Private health insurance

What is private health insurance? Simply put, it’s insurance that covers some costs of being treated as a private patient in a hospital. It also provides access to extras — other healthcare and medical services not covered by Medicare, such as physiotherapy, optical, or dental work — depending on what’s included in your policy.

With private health insurance, you have more options for accessing care in a private hospital and can potentially avoid long wait times in the public healthcare system. To be eligible, you must purchase a policy from a registered health insurer, pay an ongoing premium and, serve the relevant waiting periods associated with your level of cover.

Medicare

Australia’s public healthcare system, Medicare, provides access to essential health, medical, and hospital services at a subsidised rate. It helps reduce healthcare costs by covering some services like GP appointments, specialist visits, and public hospital treatments, but it doesn’t cover everything.

Medicare operates in two key ways:

1. Bulk billing: When a healthcare provider offers bulk billing, Medicare can pay up to 100% of the cost for general practitioner (GP) visits. This means you won’t have to pay anything out of pocket for eligible services at a bulk-billing clinic.

2. Medicare rebates: For services not bulk billed, such as specialist appointments, Medicare covers 85% of the Medicare Benefits Schedule (MBS) fee. You may need to pay the remaining 15% as an out-of-pocket expense. For GP visits not covered by bulk billing, Medicare will rebate a set portion of the cost, and you’ll pay the difference directly to the provider. 

Medicare provides great support, but as a private patient in a hospital, even with Medicare, you might face extra costs (the ‘gap’ fee) — if your chosen doctor charges more than the Medicare rebate.

This is where private health insurance steps in to cover some or all of these additional expenses, depending on your policy. Additionally, private health insurance can offer quicker access to treatments, avoiding the longer wait times you may face as a public patient in a public hospital.

What are the different types of health insurance?

When it comes to private health insurance, there are different types of cover available to suit your needs. Each type of cover helps with different healthcare services, from hospital treatment to extras like dental and optical. Understanding the options will help you choose the right combination for your situation.

What does private health insurance cover? In Australia, private health insurance is generally divided into three types:

1. Hospital cover: This helps cover some of the costs associated with being treated as a private patient in a public or private hospital. It includes things like hospital accommodation, theatre fees, and a portion of your medical treatment costs. With hospital cover, you have more control over your care, such as choosing your own doctor and preferred hospital. 

2. Extras cover (also known as ancillary cover or general treatment cover): This helps reduce your out-of-pocket expenses for healthcare services that Medicare doesn’t cover, such as dental, physiotherapy, and optical. If you frequently use these services, extras cover can save you on healthcare costs.

3. Ambulance cover: Ambulance rules in Australia vary by state and territory, reflecting differences in how services are funded and covered. Ambulance rules and eligibility are included in private health insurance fact sheets to clarify state-specific variations.

Most private health insurers offer combined policies that package both hospital and extras cover together for more comprehensive cover. However, keep in mind that not all costs are guaranteed to be covered by private health insurance — it depends on your level of cover and any exclusions in your policy. You may still have some out-of-pocket expenses if your cover doesn’t pay for everything.

Benefits of health insurance

Many Australians choose private health insurance because it offers more flexibility and additional benefits compared to public healthcare alone. From shorter wait times to tax incentives, the advantages of having health insurance can make a big difference to your healthcare experience.

There are several key benefits to taking out private health insurance, including:

• Reduced wait times: With private hospital insurance, you may be able to access treatments quicker than through the public system, especially for non-urgent procedures like elective surgery.
• Choice of doctor and hospital: Having private health cover gives you the flexibility to choose your own doctor and the hospital you’d prefer to be treated in, whether that’s a public or private hospital.
• Government incentives: The Australian government encourages people to take out private health insurance through incentives like the private health insurance rebate. This rebate reduces the cost of your premiums based on your income. Additionally, if your taxable income exceeds a certain threshold, taking out health insurance can help you avoid the Medicare Levy Surcharge.
• Lifetime health cover: This initiative encourages Australians to take out hospital insurance earlier in life and maintain it, so they’re not hit with extra costs later on.
• Cover for extra services: With general treatment cover, you can claim benefits for services like dental or physio appointments, helping you manage your long-term health.

How do I choose health insurance?

Choosing a health insurance policy can seem daunting initially, but breaking it down into smaller steps can make the process more straightforward. Understanding what to look for and comparing your options will help you find a policy that fits both your needs and budget.

To choose the right health insurance policy for your needs, consider these steps: 

1. Identify your health needs: Do you need hospital cover, extras cover, or both? If you regularly visit the dentist or physiotherapist, extras cover might be worthwhile. If you're planning a family, you may want to consider looking for private hospital cover that includes maternity services.

2. Compare policies: Health insurance policies are usually ranked as Gold, Silver, Bronze, or Basic, with higher levels offering more comprehensive cover. Use resources to compare private health insurance policies and make sure you understand what each policy covers, from hospital treatment to out-of-pocket costs.

3. Consider your budget: Health insurance premiums vary depending on the level of cover and provider. The private health insurance rebate can help reduce these costs, which, according to the Australian Taxation Office, can be claimed as either reduced premiums throughout the income year or as refundable rebate when you lodge your tax return. But it’s important to choose a policy that balances affordability with the services you need.

4. Check for waiting periods: Some services may have waiting periods before you can claim. For example, private hospital insurance policies may require you to wait 12 months before making a claim for pre-existing conditions or pregnancy-related services.

5. Review your cover regularly: It’s important to review your health insurance every couple of years to ensure it’s still meeting your needs and providing value for money. Make sure you're not paying for health services you no longer need or missing out on better options.

Keep Reading: Learn 10 simple tips you can implement to improve your health today.

Private health insurance can be a great way to protect your health and get access to the care you need when you need it. From faster treatment at a private hospital to cover for extras like dental or physio, taking out private health insurance can offer valuable peace of mind.

If you’re ready to take the next step, visit Real Health Insurance and request a quote online now.