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About Private Health Insurance

About private health insurance

Private health insurance is provided through private health insurers registered under the Private Health Insurance Act 2007. The financial performance of registered private health insurers is monitored by PHIAC, an independent Australian Government body, to ensure solvency and capital adequacy requirements are met.

A health insurer is registered either as:

  • an open membership organisation (anyone can apply to join), or

  • a restricted membership organisation (available only through specific employment groups, professional associations or unions).

Health insurers follow a principle known as `community rating'. Under this principle, the premiums charged by the insurers do not vary according to your age (other than age at entry for Lifetime Health Cover), gender, state of health, or the size of your family. For example, a single, healthy 20 year-old and a single, unwell 60 year-old will both pay the same premium for the same cover. However, the cost of premiums for similar cover may vary between insurers.

Private health insurance is different from trauma and disability insurance. These insurances are 'risk-rated' rather than ‘community-rated’ and generally offer lump-sum payments in the event of specific illness or loss. They are not a substitute for private health insurance.

Insured groups

The insured groups provided for under the Private Health Insurance Act 2007 are:

(a) for policies other than a non-student policy or a policy referred to in paragraph (c), the insured groups are:

I. only one person

II. 2 adults (and no-one else)

III. 2 or more people, none of whom is an adult

IV. 2 or more people, only one of whom is an adult

V. 3 or more people, only 2 of whom are adults

VI. 3 or more people, at least 3 of whom are adults

(b) for policies that are a dependent child/non-student policy, the insured groups are:


I. 2 or more people, only one of whom is an adult

II. 3 or more people, only 2 of whom are adults

(c) for policies that before 31 December 2008 cover a dependent child non-student which have as conditions of the policy that the non-student is not covered for general treatment, other than hospital-substitute treatment, and must have his or her own policy with the same insurer covering general treatment (other than hospital-substitute treatment), the insured groups are:

I. 2 or more people, only one of whom is an adult

II. 3 or more people, only 2 of whom are adults.


‘Dependent child' is defined in the Private Health Insurance Act 2007 as a person:

(a) who is:

I. aged under 18 or

II. a dependent child under the rules of the private health insurer that insures the person; and

(b) who is not aged over 25 or over; and

(c) who does not have a partner.


‘Dependent child non-student' means a person who:

(a) is aged between 18 and 24 (inclusive) and was born before 1991; and

(b) is a dependent child under the rules of the private health insurer that insures the person as referred to in subparagraph (a) (ii) of the definition of ‘dependent child’ in the Private Health Insurance Act 2007, whether or not the person is wholly or substantially dependent on an adult insured under the same health insurance policy; and

(c) does not have a partner; and

(d) is not receiving full-time education at a school, college or university.

Note: A ‘dependent child non-student' is therefore a ‘dependent child’ as defined in the Private Health Insurance Act 2007.

Health insurers are not required to offer all types of cover to all categories of insured groups.

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Standard waiting periods for pre-existing ailment/s or illness

When you decide to take out or upgrade private health insurance, you may already be unwell. You may have what is referred to as a pre-existing condition or illness. Under the Private Health Insurance Act, a health insurer may impose a 12-month waiting period on benefits for hospital treatment where it should have been reasonably apparent to either the contributor or a medical practitioner who conducts an examination, that there was a pre-existing condition in the six months prior to joining a hospital table or upgrading to a higher level of cover.

For psychiatric, rehabilitation and palliative care, the waiting period is 2 months.

It is important to check this with your health insurer prior to your admission to hospital. Remember, your health insurer will need at least a week or so to advise you about whether the pre-existing condition 12-month waiting period applies.

Even if you are already ill, health insurers must allow you to purchase any type of cover. If an insurer refuses you membership, this may be an offence under the Private Health Insurance Act 2007.

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What is the exact definition of a pre-existing condition?

A pre-existing condition is a condition, illness or ailment, the signs or symptoms of which, in the opinion of a medical practitioner appointed by the health insurer, existed at any time during the 6 months prior to the member becoming insured under the policy.

In forming an opinion about whether or not an illness was pre-existing, the health insurer appointed medical practitioner who makes the decision, must take into account information provided by your own doctor.

If you require hospital treatment, but you have less than 12 months membership on your current hospital table, a 12-month waiting period could apply if your condition was determined to be pre-existing (for psychiatric, rehabilitation and palliative care, the waiting period is 2 months).

Waiting periods

When you join a health insurer or increase your level of cover, you may have to wait some time before your insurance becomes effective. This protects you and others with your insurer, by ensuring no contributor makes a large claim shortly after joining an insurer, and then drops their membership. This ‘hit and run’ behaviour would result in increased premiums for everyone.

You should note that for benefit limitation periods you can remove the benefit limitation period if you transfer to another policy without a benefit limitation.

There is usually no waiting period if you need hospital or medical treatment because of an accident that happens after you join the insurer.

The Government sets the maximum time that health insurers are able to make members wait until they can claim benefits for hospital treatment. These maximums are:

• 12 months for pre-existing conditions

• 12 months for obstetric cases; and

• 2 months for psychiatric, rehabilitation and palliative care whether or not there is a pre-existing condition

• 2 months in all other circumstances.

The Government does not regulate waiting periods for benefits payable under general treatment (previously known as ancillary or extras) cover. These waiting periods are set by individual health insurers and you should make sure you are aware of general treatment benefit waiting periods that apply to your insurer.

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Waiting periods applying to New-borns

If you have a single membership and are expecting a child, you may need to transfer to a family membership or a single parent family membership. If you want your child to be insured from the time of birth, you may have to transfer to the new policy two months before your child is born. Ask your insurer to explain its policy on new-borns.

Transferring between insurers

You can transfer from one health insurer to another, for the same or a lower level of benefits, without serving additional waiting periods.

The insurer to which you transfer may impose waiting periods before you are eligible for any new or higher benefits on your new policy.

The insurer to which you transfer must give you credit for the waiting periods you have already served.

Benefits paid by the previous insurer may be taken into account by your new insurer when it determines your annual benefit limits.

Transferring between insurers will not affect your Lifetime Health Cover entitlements provided that you transfer from hospital cover with your existing health insurer to hospital cover with the new health insurer.

The transfer rules also apply when transferring to a different product of the same insurer.

No waiting period for DVA ex-Gold Card holders

If you held a DVA Gold card, or were entitled to treatment under a Gold Card before applying for private health insurance, no waiting period will apply for any hospital or general treatment covered by the policy.

You must apply for the insurance no longer than 2 months after you ceased to hold, or be entitled under the Gold Card.

Suspending your membership

Most insurers will let you waive, defer or suspend your membership if you are away from Australia for a certain period of time specified by your insurer. Suspension may also be permitted under other conditions, such as periods of unemployment. Ask your insurer what conditions apply.

You will not be paid benefits for services used or treatment provided while your membership is suspended. Similarly, the time for which your membership is suspended cannot count towards any waiting or qualifying periods.

Suspending your membership with the agreement of your health insurer will not affect your Lifetime Health Cover entitlements.

When you start paying contributions again, your benefit entitlements will continue on the same basis as before your membership was suspended.

Standard information statements

When you first purchase a private health insurance policy, the insurer is required to give you an up-to-date copy of the standard information statement (SIS) which contains details of what the policy covers and how benefits provided under it are worked out. Your private health insurer must issue you with an up-to-date standard information statement for your policy at least once every 12 months.

Notifying members of changes to insurer rules

Health insurers change rules and premium prices from time to time. Where the proposed change is or might be detrimental to your interest, the insurer must inform you of the proposed change within a reasonable time before the change takes effect. In addition, the insurer must provide you with an updated standard information statement as soon as practicable after the statement is updated.

Paying your contributions

Paying in advance

Generally, you must pay contributions at least one month in advance unless payments are made under a payroll deduction scheme or by direct debit.

The maximum period for which you may pay in advance is usually 12 months.

Some insurers offer a 'rate protection' policy under which, if you have paid in advance, you will not have to pay extra if rates are increased during the period for which you have paid. For example, if you pay your premium in advance for 12 months, and there is a rate increase after four months, with rate protection, you will not have to pay the increased rate until your 12 months of cover ends.

When no 'rate protection' policy applies, the insurer will ask you to pay the balance owing on the new rates, or reduce the length of time your payment covers. When you are advised of rate increases, check whether the increase will affect the length of time your advance payment covers.

Discounts on premiums

Generally, you may get discounts for contributions paid in advance on a half-yearly or yearly basis. You may also receive a discount if your contributions are automatically deducted from your salary, wages or bank or credit card.

Unpaid contributions

Your private insurance will lapse - meaning you are not insured - if you are more than two months behind in paying your contributions.

Some insurers may not accept payment of arrears in excess of two months. In such cases they may impose further waiting periods when you resume contributions.

Cancelling your membership

If you decide to cancel your membership, your insurer should pay back any contributions you have paid in advance. The insurer may deduct a small administration charge.

Benefits you will receive

The amount of benefits you receive for hospital or medical treatment will depend on the type of cover you purchase, and whether you have chosen to contribute to the costs of your hospital treatment in exchange for paying a lower premium.

The amount of benefits you will receive also depend on the hospital and doctor you choose, and whether the hospital has an agreement with your insurer and the doctor is participating in the insurer's gap cover arrangements.

When your health insurer has an agreement with your hospital and your doctor is participating in the insurer's gap cover arrangements, you are less likely to have out-of-pocket costs. If you choose to go to a hospital that does not have an agreement with your insurer, you may have significant out-of-pocket costs.

Well in advance of receiving treatment you should check with your health insurer on whether there is an agreement in place with your hospital and whether your doctor is participating in the insurer's gap cover arrangements. You should also ask your doctor(s) and hospital for an estimate of their costs and how much will not be covered by your health insurer. Your health insurer should also be able to assist with calculating likely out-of-pocket costs.

You can ask any health insurer about the hospitals that have agreements with that insurer and doctors who are participating in the insurer's gap cover arrangements.

If you have general treatment cover (previously known as ancillary or extras) you need to be aware that the benefits health insurers will pay for general services may be 'capped', and some services might not be covered at all.

Your benefit options as a privately insured patient

 

Ineligible claims

Benefits will generally not be paid:

  • if you will be paid compensation by a third party
  • for certain general treatment (previously known as ancillary or extras) services provided by someone not recognised by your insurer or if you are not covered for general benefits
  • if you put false or inaccurate information on your claim form
  • if you are more than two months behind with your contributions
  • if you claimed benefits for services provided while your membership with the insurer was suspended
  • if the service provider is directly related to you - that is, if he or she is your spouse, parent, child or sibling, or
  • if your claim is made two or more years after the date of service.

 

Prostheses

Surgically implanted prostheses, such as a lens for a cataract surgery, a stent for cardiac surgery or an artificial hip or knee component during a hip/knee replacement, are sometimes required during a medical procedure. For every medical procedure covered by the Medicare Benefits Schedule (MBS) requiring a surgically implanted prostheses, clinicians have determined at least one clinically suitable prostheses that must be covered by health insurers at no additional cost to you (called a ‘no-gap’ prostheses).

There may be some prostheses available which cost more than the ‘no-gap’ ones. If you choose to use one of these prostheses, you will have to pay the difference between the ‘no-gap’ amount and the total amount charged by the supplier for the prostheses.

For each procedure, you should ask your health insurer how much it will pay for a particular prostheses, and whether you will have any ‘gap’ to pay.

Don’t forget that if your private health insurance policy has exclusions – where you can’t claim for some services, for example joint replacements – then you won’t be able to claim for any prostheses provided as part of these services either.

Private Patients' Hospital Charter

To help you understand what you can expect from your health insurer, doctor and hospital, a Private Patients' Hospital Charter is available. It will assist you with some of the important questions you may need to ask those involved with your health care.

Copies of the Charter are available from health insurers, the Department of Health and Ageing and the Private Health Insurance Administration Council (PHIAC).

Private Health Insurance Ombudsman

If you have a problem with your health insurance arrangements, you should first discuss it directly with your health insurer.

If you are unable to reach a satisfactory agreement with your insurer, contact the Private Health Insurance Ombudsman on the toll free number: 1800 640 695.