Private health insurance excess

When you take out a hospital insurance policy, you’ll likely be given the opportunity to choose your excess amount from a range of options. If you choose to pay a higher excess, you’ll pay a lower premium on your hospital policy in return. Similarly, if you elect to pay a lower excess, you’ll have a higher premium.

While health insurance providers can offer any excess amount they’d like, the Australian Government has set maximum policy excess levels for policies that qualify the holder for an exemption from the Medicare Levy Surcharge (MLS). If you’re a high-income earner, you’ll need to take out a hospital policy with an excess of no more than $750 for singles or $1,500 for couples and families to avoid the MLS. If you have a partner or children/dependants, the policy must include all members of your family and remain active for the full financial year to avoid the surcharge entirely.

It can be hard to know which excess option is right for you, so here are a few things you might like to consider while making your decision:

• Your age. Young people typically have fewer hospital admissions.
• Your health. If you have a history of health concerns, you might expect to have more hospital admissions.
• Your finances. Factors like how much you can afford to pay as a lump sum if you are admitted to hospital could affect whether you choose a higher or lower excess.
• Your planned surgeries. If you know you’ll need an elective surgery in the coming years, you might want to adjust your excess accordingly. Keep in mind, you may need to serve any relevant waiting periods again when changing your excess.

Your excess is an amount that you contribute to your hospital treatment and does not apply to extras cover, which is for out-of-hospital healthcare. If you have a combined hospital and extras policy, the premium reduction from choosing a higher excess will only apply to the hospital cover component of your health insurance premiums.

Whether you’ll have to pay an excess will depend on your policy. However, you’ll typically need to pay when you’re admitted to hospital as a private patient.

There may be situations where you’re not required to pay your excess, depending on your policy as well as the fund you choose and your level of cover. With that said, here are a few common examples of when you may not need to pay your excess:

• Accidental injury. Some health funds offer accident overrides on eligible policies. Depending on the terms, they may not charge you an excess when you’re admitted to hospital as the result of an accidental injury.
• Day surgery. If your hospital treatment doesn’t require an overnight stay, some health funds may waive your excess if your policy is eligible.
• Child dependants. If you have dependent children included on your family or single-parent hospital policy, you may not need to pay an excess when they are admitted to hospital depending on your health fund and policy.

A co-payment is an amount you pay per day of your hospital admission. This is similar, but independent of your excess. Most policies will have one or the other, but in some cases, you may have to pay both.

Your co-payment may be capped at a certain amount so if you have an extended hospital stay, you won’t have to worry about paying indefinitely. This will depend on your policy.

When you have hospital cover and are treated as a private patient, there’ll typically be a difference between what Medicare and your health insurance together cover, and the total fees charged by your doctors and hospital. In this case, you’re responsible for paying this difference, which is referred to as the gap.

Most health funds have either a ‘no gap’ or ‘known gap’ agreement with a variety of hospitals and doctors. If your hospital and doctors participate in your fund’s no gap agreement, you won’t have to pay this expense. On a known gap agreement, you’ll still pay a gap, but it’ll be a reduced amount that you’ll be notified of before your treatment. It’s always a good idea to speak to your health fund and any treating doctors prior to a hospital admission to understand what your potential out of pocket expenses will be.