What is a health insurance excess?
Like other forms of insurance, health insurance requires you to pay an excess when making a claim on your policy. The excess is the amount you have to pay towards the cost of hospital-related services before your insurance coverage kicks in.
How much is a health insurance excess?
The excess on an insurance policy is determined when you take it out, and most health insurance providers will allow you to select an amount from a few different options. The maximum excess amount you can select for a singles policy is $750 per person. For family and couples policies you can generally choose up to $1,500.
It’s important to keep in mind that choosing a higher excess amount can often lead to lower premiums, but the tradeoff is that you’ll need to be able to contribute this higher excess amount when it comes time to make a claim.
When do I have to pay my health insurance excess?
You’ll only have to pay your excess when you’re admitted to hospital as a private patient, in either a public or private hospital. You’ll generally need to pay the excess upfront before receiving treatment. Medicare may also assist eligible patients with some of the hospital costs.
How often you’ll need to pay your excess will depend on your provider and policy. Some policies only require the excess payment once per person per calendar year or twice for family policies, which means you may not need to pay your excess for subsequent hospital visits throughout the year.
When don’t I have to pay my health insurance excess?
You may not have to pay your health insurance excess in a few different cases:
- If your hospitalisation is due to an accident
- If you have a family policy and one of your children or dependents under the age of 25 is hospitalised
- If your hospitalisation is for day surgery only
- If you’ve already made enough excess payments for the year.
When should you choose a higher health insurance excess?
You may consider a higher health insurance excess amount if:
- You’re young and in good health
- You believe it’s unlikely that you’ll require hospitalisation
- You can comfortably cover the higher excess amount upfront if you need to make a claim.
When should you choose a lower health insurance excess?
You may consider a lower health insurance excess amount if:
- You have a history of health concerns that may require hospitalisation
- You’ve made multiple previous claims for hospital services
- You anticipate that you may need hospitalisation in the future
- A higher excess amount would be too much of a financial burden to pay upfront if you need to make a claim.
What’s the difference between a health insurance excess and a co-payment?
Both excess and co-payment options are designed to lower your health insurance premium. A co-payment, however, is an amount of money you agree to pay for each day that you’re in hospital, up to an agreed amount. Your policy may include both an excess and co-payment, so it can be important to check your policy’s Private Health Information Statement (PHIS).
What health insurance excess do I need to avoid the Medicare Levy Surcharge and Lifetime Health Cover loading?
A hospital policy that has a maximum excess of $750 for singles and $1,500 for couples or families can help you avoid the Medicare Levy Surcharge (MLS) and Lifetime Health Cover (LHC) loading.
The MLS is a means tested surcharge of up to 1.5% of your taxable earnings charged by the Australian Taxation Office (ATO), while the LHC refers to a loading (up to 70%) on the price of your health insurance premiums if you don’t take out private health insurance before the age of 31.
