Making the right health insurance choice

The changes to health insurance beginning from 1 April 2019, introduce a new series of product tiers or levels of cover which are likely to prompt us to think more deeply about what cover we really need.

The grouping into Gold, Silver, Bronze and Basic tiers, with the choice of considering an additional three 'plus' options, offers more clearly delineated choices than previously available.

As well there are improvements in other areas, including more flexibility with excess levels, 10 per cent premium discounts for young adults, and better terms possible for psychiatric patients, and country people needing travel and accommodation support. 

Consumers will also be able to take their complaints to a more strongly-resourced Private Health Insurance Ombudsman, with more staff and more powers to look into consumer issues with health funds.

Deciding on health insurance commonly throws up numerous questions. There are many choices to make: from the first step of deciding whether to have insurance, then what conditions you want to cover and at what level of cost. 

It may seem a tiresome task but deciding on your health insurance needs is worth taking seriously.  Quite apart from your future health care, it involves significant costs whether you have it or not, and if nothing else, may help you to focus on your state of health now and in the future.

We recommend taking the time to peruse the official Private Health Insurance Ombudsman comparison website which is user-friendly, allows you to compare policies and cost different options. Taking a few minutes to understand how best to use the site is well worth the time.

But be aware that not all health funds will be putting all or any of their members on to the new tier system immediately. As a result, the website will not provide information tiers for every fund until individual funds announce their revised policies.  

Here are five questions and answers to help you better understand the new private health insurance reforms and how they can assist you to evaluate your health insurance cover.

1. Why have health insurance?

With the increasing cost and complexity of health insurance and not least of the services covered, it pays to reflect on what it is you hope to receive through insurance.

For most people it is peace of mind, that in the event of a serious health problem, they will be able to access the right care when they need it.

The new tiers system will aid the decision process by simplifying the path to your choice. 

Australia’s health system provides the best of acute care when we are in dire need of treatment, such as after road accidents or in the event of a heart attack, but it is a different matter when it comes to less urgent, elective care. Even for life-changing treatment such as cataract surgery, hip replacement or in some cases even cancer treatment, patients dependent on public services can wait weeks or many months longer than those who can afford private insurance and expensive gap costs.

An important consideration is that, having private health insurance does not necessarily protect patients from out of pocket costs. As our Out of Pocket Pain report last year found some people can face between $5,000 to $10,000 for treatments such as cancer care and joint replacement. 

A vital consideration is your health status now and likely in the future. For those with chronic health conditions, health insurance in most cases provides a measure of protection against some if not all treatment costs and can reassure and comfort those who can afford it.

An important and separate consideration is the impact of tax penalties for those on higher incomes who do not take out insurance. As well, for those over 30 who do not take out insurance, there is the increasing burden of the Lifetime Health Cover surcharge of an extra 2 per cent on premiums for each year for each year over 30 you do not sign on for insurance.

So, there is a great deal of information to get across if you wish to make an informed decision. As the Health Insurance Ombudsman states: 'There are many things to consider when looking into private health insurance.'

2. Where do I find out what I need to know?

If you wish to go back and start with the basics, the explanatory information on the Private Health Insurance Ombudsman’s site provides a simple and detailed guide.

Many people have combined hospital and general policies, however, this guide is focused on hospital insurance and does not refer to general or extras cover, with the exception of natural therapies, many of which are no longer eligible for health insurance subsidies.

The details of the latest changes you need to consider are given in the Department of Health information sheets.

This website includes details about the tiers (see table) which will help you assess what overall level of cover you would like. As an example, if you were to choose the very limited basic cover, the health fund would be required to offer only restricted cover for rehabilitation, hospital psychiatric services and palliative care. Under special provisions for mental health patients, you can upgrade your cover if they wish to have private psychiatric hospital cover, without incurring long waiting periods. At the other end of the tiers, gold level provides unrestricted cover in most cases for all private hospital costs unless the consumer has chosen to pay an excess. However out of pocket costs for doctors’ fees could still be payable with gold policies.

Resources to help you:

Compare policies;

Health funds list

Healthy Cover - CHF's guide for consumers

CHOICE consumer’s guide

Private Health Insurance Ombudsman’s overview

3. How do the tiers help me select the cover I want?

Your decision-making about insurance will be made easier with the new tiers because you can more easily identify the level of cover you need for a given condition or range of treatments.

If you study this table you can see at a glance how the levels of cover are divided into four categories. The scope of cover for increasingly expensive treatments rising in stages from Basic through to Gold.

The lowest cost tier, Basic, offers few or limited number of services or treatment categories that must provide cover and even then need only provide for restricted or limited benefits.

Bronze is required to offer cover for a significantly wider range categories of treatment, such as for operations for hernia and appendix and for several types of cancers including breast cancer.

More expensive categories appear in the Silver tier and include treatments for heart and vascular problems and medically necessary plastic and reconstructive surgery.

Gold provides, as a minimum, coverage for all categories of treatment, meeting all hospital costs, less any excess the consumer has agreed with the health fund to pay. 

The tiered approach, in grouping of treatments by their cost, can help you to focus your calculations on which treatments or range of treatments you would like to or expect to need to cover in the future.

Bronze cover, for instance, does not have to include cover for treatment for the heart and vascular system, an important consideration when we consider that cardiac disease is the most common cause of death. In its acute forms, cardiac disease is routinely treated in public hospitals at no direct cost to the patient.

Then, consider Silver, which does not have to include cover for cataracts, another very common procedure for which there tends to be long waiting lists in the public hospital system.

In both cases health funds may offer in their lower premium tiers some form of cover for these clinical categories.

4. How do I find the cover I can afford?

The tiers help to compare the range and cost of different levels of insurance.  The differences in premium costs between the tiers can amount to thousands of dollars year, so it will pay to choose carefully.

Having decided on approximately the range of services you want cover for, it may be that your preferred choices are across different tiers.

There is a solution provided by an additional mechanism in the new system that can help you to refine your choice, and possibly reach a more economic premium.

The mechanism is the 'plus' option.  Funds can modify the cover they offer in the tiers to meet individual needs, with potential for savings on premiums.

The 'plus' offerings will vary between funds. But the sort of 'mix and match' options available could include having a Silver level policy providing coverage for Gold level benefits like cataracts and joint replacements, but not for pregnancy and childbirth.

It is important to note that even top levels of insurance including Gold may not provide total cover for doctors’ costs. Some funds do provide information about the no-gap or known gap arrangements they have with specified doctors.

At the other end of the scale, Basic cover may offer limited benefits, such as ambulance costs and restricted public hospitals services which may suit some people whose main aim is to avoid paying the Medicare levy surcharge.

In a separate benefit, insured patients requiring psychiatric care in a private hospital will be able to upgrade their cover to access higher benefits without serving a waiting period.

Another important change in the new system giving consumers more flexibility is the increase in excess limits. These are being stepped up from $500 to $750 for singles and from $1,000 to $1,500 for couples and families.

Increasing your excess, particularly when you are in good health, can save you hundreds of dollars a year in premiums which after a year or two would make up for any excess.

Another potential saving for young adults will be a new provision allowing insurers to offer people aged 18 to 29 discounts of up to 10 per cent off private hospital insurance premiums.  That discount gradually reduces after age 41.

Health funds will also be able to offer travel and accommodation benefits as part of their hospital cover to those who need to travel long distances to have specialised hospital treatment.

However, one area where coverage has been tightened concerns natural therapies. Sixteen therapies which have been deemed not to be evidence-based will no longer be eligible for health insurance subsidies.

5. What health insurance fund offers the best options?

Given the significant variations in what health funds offer for similar premiums, this has always been a challenging question. However, the website has made it much easier to compare and contrast fund policies.

 At, after a simple process of clicking the button for each treatment category you want covered, you can then open a page which lists several policies offering cover responding to your choices.  The list shows the monthly premium and importantly the policy’s ranking on how closely it accords with the services you selected as important, as well as other listed services, relative to all the other policies in your results.

You can prompt the site to show more policies that may restrict cover on one or more of your important hospital services, resulting in large out of pocket expenses on hospital admissions as a private patient, or requiring you to join public hospital waiting lists for those services. You can click to show more policies which will list policies that may have below average benefits or limits for one or more of your important General treatment (extras) services and limited cover for other services.

You can also select a few policies and click on Compare to see more details of how well listed services are covered.

By holding your cursor over an item on the page you can see additional information about specific policies.

The Private Health Insurance Ombudsman which administers the site will also have a role in strengthening consumer protections. It has expanded resources and powers to resolve complaints or issues raised by consumers about private health funds.