2019 Health Reforms: Basic health insurance policies
- One of the major components of the 2019 health insurance reforms will be introduced on 1 April 2019: product tiers for hospital cover.
- The new system breaks policies into tiers with minimum requirements, making comparison easier.
- Basic health insurance is generally cheaper and less comprehensive than policies in the other three tiers.
Under the current health cover system, insurers are able to determine which benefits to include and exclude across all of their policies. This leads to inconsistencies between funds; two policies may have similar names, but very different benefits.
A solution is on the way. As part of the 2019 health insurance reforms, health insurance product tiers will be introduced. From 1 April 2019, insurers will begin to classify their policies into Basic, Bronze, Silver, and Gold tiers.
In this guide, we’ll take a look at the first health insurance policy tier: Basic. But first, let’s get an overall understanding of the new system:
What is the new health insurance tier system?
The new health insurance policy tiers will help people gain a clear understanding of what’s covered by their policy, making it easier to choose. The new system achieves this by breaking health insurance policies into tiers: Basic, Bronze, Silver, and Gold.
Each tier has minimum coverage requirements that health funds need to meet. This will make it much easier to compare health insurance since you’ll be comparing Bronze to Bronze, Silver to Silver, or Gold to Gold.
Insurers will also have the option to offer in-between policies, identified by the word ‘Plus’ or a ‘+’ symbol: Basic Plus, Bronze Plus, and Silver Plus. These policies will meet the minimum requirements of their main tier, but also include some extra benefits from higher levels.
The product tiers only apply to hospital policies, not extras cover.
What is Basic tier health insurance?
Basic health insurance policies, as the name suggests, offer the lowest level of cover. In turn, they also have the lowest premiums. Health funds are only required to provide restricted coverage for rehabilitation, hospital psychiatric services, and palliative care.
Restricted cover means that insurers are able to determine the level of benefits they offer; it does not affect the category of benefits covered.
Basic health insurance is the minimum level of hospital cover you can get through private health insurance. It allows people to enter the private health insurance market without paying too much.
As you can see, all of the tiers build on the baseline cover offered by Basic policies. Bronze coverage offers many additional benefits, but you’ll also be paying a higher premium.
You will likely also see health funds offering some benefits that go above the minimum requirements we outlined above.
The new system allows health funds to offer partial or restricted coverage for anything under their Basic policy, and insurance providers are likely to do so. These can be marketed as Basic Plus plans.
Health funds can attract customers to a Basic policy by offering more coverage than the competition. Make sure to compare health providers to find the best level of Basic coverage.
Who is Basic tier health insurance suited to?
Basic health insurance is the cheapest and least comprehensive tier under the new health insurance system.
These policies aren’t ideal for aging Australians, those who want to start a family, and people who want protection from common injuries or diagnoses.
Here’s who might benefit from a Basic level of coverage.
Those looking to avoid fees
Failing to purchase private health insurance in Australia can add up over time. You’ll face the Medicare Levy Surcharge on your taxes if you make over a certain amount of money each year.
Here’s a breakdown of the charges you’ll face by failing to purchase private hospital cover.
On top of the Medicare Levy Surcharge, if you don’t buy private health insurance by 1 July following your 31st birthday, you will also face Lifetime Health Cover loading fees when you do purchase cover.
You will face a 2% loading fee for each year you don’t hold private hospital insurance after you turn 31. These cumulative fees are added to your premium price when you do purchase private health insurance.
If you buy health cover for the first time at the age of 40, you’ll pay 20% more for the same policy as someone who has held cover since the age of 30.
With these charges in mind, Basic coverage is a way to avoid paying too much for health insurance.
Basic health cover is the bare minimum, so most people will choose this option to avoid paying the MLS and adding loading fees to their premiums.
Those looking to save on health insurance
Private health insurance can be expensive, especially if you’re looking at some of the higher-tier plans. Basic provides a bare-minimum option for those who are looking to save money on health insurance.
Instead of relying on Medicare and possibly facing the loading fees and surcharges we outlined above, you can secure Basic hospital coverage for a low monthly fee.
Basic policies can work for people on a budget who want to avoid fees, get basic cover, and upgrade to more extensive cover in future.
Do you want to look for a Basic health insurance policy under the new system? Take a look at our comparison tool below.
Disclaimer: The above information is correct and current at the time of publication
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