Private Health Insurance

Definition

OPTIONAL type of insurance under which members pay a premium in return for payments towards health related costs not covered by Medicare.

It contributes to much of the health care funding and gives Australians more choice of what care they wish to access.

Private hospitals provide 1/3 of all hospital beds and 40% of hospital separations.

Tiers of private health insurance

Gold (Covers most categories of hospital treatment- rehabilitation, brain and nervous system, heart and vascular system, assisted reproductive services)

Silver (Covers the second most categories of hospital treatment- Heart and vascular systems, brain and nervous systems, rehabilitation)

Bronze (Covers the second fewest categories of hospital treatment- brain and nervous system, rehabilitation)

Basic (Covers the fewest categories of hospital treatment- rehabilitation)

Extras (general treatment)

On top of private hospital cover, people receive cover for general treatment (EXTRAS

You can choose which services, even ones not generally not covered by Medicare, but the price/level increases with each addition (premium)

Private health insurance options

-Private hospital cover

-General treatment cover

-Combined cover (hospital and general treatment)

Covers

-Basic benefit of most policies is the right to be admitted as a private patient in a public or private hospital

-Many expenses are met by the insurance company

-Medicare will still pay 75% of the doctor’s schedule free for treatment in private hospitals

-Greater choice in terms of hospitals and doctors

-In private hospitals, patients get their choice of doctor, can have their own room and generally don’t have to wait for extended periods for elective surgery

-Private hospitals usually charge more than the schedule fee for services

-Private health insurance companies pay the addition costs (sometimes the total bill may exceed the amount covered by the insurance company)

-If this is the case, the patient pays the rest (the gap)

Health insurance pay

Medicare pays 75%

Private health insurance pays majority of the rest

Patient MAY have to pay the gap

PHI Incentives

When Medicare was introduced many people opted out of private health insurance, putting strain on the public health system. To encourage people to go back to PHI the government introduced FOUR incentives:

PALM

-Private health insurance rebate

-Lifetime cover

-Medicare levy surcharge

-Age based discount

Private health insurance rebate

The money given back to the individual

Thresholds:
-Individuals with an income under $93 000 received a 25 per cent rebate.
-Individuals with an income between $93 001 and $108 000 received a 16 per cent rebate.
-Individuals with an income between $108 001 and $144 000 received an 8 per cent rebate.
-Individuals with an income of $144 001 or more received no rebate.
-Families earning under $186 000 received a 25 per cent rebate.
-Families earning between $186 001 and $216 000 received a 16 per cent rebate.
-Families earning between $216 001 and $288 000 received an 8 per cent rebate.
-Families earning $288 001 or more received no rebate.

Lifetime health cover

-If you take PHI after the age of 31 you pay an extra 2% on premiums every year you are over the age of 30

-If you are 40 and you get PHI for the first time, you pay an extra 20% on your premium

THIS ENCOURAGES YOUNG PEOPLE TO TAKE OUT PHI AND KEEP IT FOR LIFE

-The max Lifetime Health Cover Loading is 70% and that is if you take it out at 65 for the first time

-If you have PHI for 10 consecutive years your lifetime health cover loading is removed

Medicare Levy Surcharge

Those with private health insurance earning more than $97,000 (for individuals) or 194,000 (for families) have to pay the medical levy surcharge.

The Medicare levy surcharge increases as income increases. This is incentive for those on higher incomes to take out private health insurance, which takes financial pressure off Medicare.

Aged based discount

Targeted at people 18-29

-2% reduction in premiums each year a person is aged under 30 (MAX 10%)

-If eligible you can keep discount until 41 years old, and once you reach 41 it decreases 2% each year until you have a 0% discount

Advantages of PHI

-Enables access to private hospital care

-Choice of doctor while in public or private hospital

-Shorter waiting times for some medical procedures, such as elective surgery

-Depending on the level of cover purchased, services such as dental, chiropractic, physiotherapy, optometry and dietetics could be paid for

-Helps to keep the costs of operating Medicare under control

-High income earners with private health insurance do not have to pay the additional tax, called the Medicare levy surcharge

-Government rebate for eligible policy holders

-Lifetime Health Cover incentive

-The age-based discount may provide cheaper private cover for those aged 18–29

Disadvantage of PHI

-Costly in terms of the premiums that have to be paid

-Sometimes have a ‘gap’, which means the insurance doesn’t cover the whole fee and the individual must pay the difference

-Qualifying periods apply for some conditions, such as pregnancy

-Policies can be complex to understand and so create confusion for the average person