Understanding Health Insurance Excess and How it Works
Health insurance can seem complex, with many terms and conditions to understand. One of the most important concepts is the 'excess'. This guide provides a clear explanation of what health insurance excess is, how it affects your premiums, and how to choose the right level for your needs.
1. What is Health Insurance Excess?
The excess is the amount you agree to pay upfront when you make a claim on your health insurance policy. Think of it as a contribution towards the cost of your hospital treatment or other covered services. It's a one-off payment per hospital admission (or sometimes per calendar year, depending on your policy).
For example, if your policy has an excess of $500 and you need to be admitted to hospital for surgery costing $10,000, you would pay the first $500, and your health fund would cover the remaining $9,500 (subject to any other policy limitations).
Types of Excess
Hospital Excess: This is the most common type of excess and applies to hospital admissions. It's a fixed amount you pay each time you're admitted to hospital.
Annual Excess: Some policies have an annual excess. This means you only pay the excess once per calendar year, regardless of how many times you're admitted to hospital. Once you've paid the annual excess, you won't have to pay it again for any subsequent hospital admissions within that year.
No Excess: Some policies offer a 'no excess' option, meaning you don't have to pay anything upfront when you make a claim. However, these policies usually have higher premiums.
Who Pays the Excess?
The excess is typically paid directly to the hospital when you're admitted. The hospital will then bill your health fund for the remaining costs.
2. How Excess Affects Premiums
The level of excess you choose has a direct impact on your health insurance premiums. Generally, the higher the excess, the lower your premiums will be, and vice versa. This is because you're taking on more of the financial risk yourself.
High Excess = Lower Premiums: By choosing a higher excess (e.g., $500 or $750), you're agreeing to pay more upfront if you need to make a claim. In return, your health fund rewards you with lower monthly or annual premiums. This option is often suitable for people who are generally healthy and don't anticipate needing to be hospitalised frequently.
Low Excess = Higher Premiums: Conversely, choosing a lower excess (e.g., $0 or $250) means you'll pay less upfront when you make a claim. However, your health fund will charge you higher premiums to compensate for the increased risk they're taking on. This option is often preferred by people who have pre-existing conditions, are planning a family, or simply want the peace of mind of knowing they won't have to pay a large sum upfront if they need hospital treatment.
Example:
Let's say you're comparing two health insurance policies with similar coverage:
Policy A: $750 excess, premium of $150 per month
Policy B: $0 excess, premium of $220 per month
Policy A has a lower monthly premium, but you'll need to pay $750 if you're admitted to hospital. Policy B has a higher premium, but you won't have to pay any excess.
Over a year, Policy A would cost you $1,800 in premiums (12 x $150). Policy B would cost you $2,640 in premiums (12 x $220). The difference is $840. If you don't need to go to hospital during the year, Policy A is the cheaper option. However, if you do need to be admitted, you'll need to factor in the $750 excess.
It's important to carefully consider your individual circumstances and weigh the potential savings on premiums against the risk of having to pay a higher excess.
3. Choosing the Right Excess Level
Choosing the right excess level is a personal decision that depends on your individual circumstances, health needs, and budget. Here are some factors to consider:
Your Health Status: If you're generally healthy and don't have any pre-existing conditions, a higher excess may be a suitable option. However, if you have a chronic condition or are planning a family, a lower excess may be more appropriate.
Your Budget: Consider how much you can comfortably afford to pay upfront if you need to be admitted to hospital. If you're on a tight budget, a lower excess may be a better option, even if it means paying higher premiums.
Your Risk Tolerance: Are you comfortable taking on more financial risk in exchange for lower premiums? If so, a higher excess may be a good choice. However, if you prefer the peace of mind of knowing you won't have to pay a large sum upfront, a lower excess may be more suitable.
Frequency of Hospital Visits: If you anticipate needing to be admitted to hospital frequently (e.g., for ongoing treatment or planned surgery), a lower excess may be more cost-effective in the long run.
Age: Younger individuals may opt for higher excess options as they are statistically less likely to require frequent hospitalisation. Older individuals, or those approaching retirement, may prefer lower excess options for greater peace of mind.
It's a good idea to compare different policies and excess levels to see which one offers the best value for your money. You can use online comparison tools or speak to a health insurance expert to get personalised advice. Consider what Health-insurance offers when comparing options.
4. When to Pay Your Excess
You typically pay your excess when you're admitted to hospital for treatment. The hospital will usually collect the excess payment from you before or during your admission. They will then bill your health fund for the remaining costs.
In some cases, you may be able to arrange a payment plan with the hospital to pay the excess in instalments. However, this is at the discretion of the hospital and may not always be possible. It is always best to check with the hospital beforehand to understand their payment policies.
It's important to note that you only pay the excess once per hospital admission (or once per calendar year if you have an annual excess). If you're readmitted to the same hospital for the same condition within a certain timeframe (usually 30 days), you may not have to pay the excess again. However, this depends on your policy terms and conditions, so it's always best to check with your health fund.
5. Excess vs. Co-payments
It's important to understand the difference between an excess and a co-payment. While both involve you paying a portion of the cost of your treatment, they work in different ways.
Excess: As explained above, the excess is a fixed amount you pay upfront when you make a claim. It's a one-off payment per hospital admission (or sometimes per calendar year).
Co-payment: A co-payment is a fixed amount you pay for each service you receive, such as a visit to a specialist or an allied health professional (e.g., physiotherapist, chiropractor). It's usually a smaller amount than the excess, but you may have to pay it multiple times if you receive multiple services. Co-payments are more common in extras cover.
Example:
Let's say you have a health insurance policy with a $500 excess and a $20 co-payment for physiotherapy visits.
If you're admitted to hospital for surgery, you'll pay the $500 excess upfront.
If you visit a physiotherapist for treatment, you'll pay a $20 co-payment for each visit.
Some policies may have both an excess and co-payments, while others may only have one or the other. It's important to carefully review your policy documents to understand what you'll be required to pay for different types of services. You can learn more about Health-insurance and the different types of cover available.
Understanding the health insurance excess is crucial for making informed decisions about your health cover. By carefully considering your individual circumstances and comparing different policies, you can choose an excess level that suits your needs and budget. Don't hesitate to contact your health fund or a health insurance expert if you have any questions or need help choosing the right policy. You can also consult frequently asked questions for more information.