What does ‘excess’ mean in health insurance?

  • November 11, 2020 12:25 AM AEDT
  • Edita Ivancevic
    Journalist Edita Ivancevic
    212 Posts

    Edita is a young journalist who graduated in 2019 from the Faculty of Political Science in Zagreb, Croatia, specialising in Television and Public Relations. Since the teenage years, Edita gained knowledge of news reporting and analysing complex curre...

What does ‘excess’ mean in health insurance?

Summary

  • Excess is an out-of-pocket cost that one needs to pay to get admission in a hospital if one arrives as a private patient. The health fund will cover all other expenses that were previously agreed under the policy contract.
  • Singles can choose the policy that offers a maximum of A$750 per person, while the limit for families and couples is A$1,500.
  • In most situations, excess needs to be paid once a year per patient admitted to the hospital. On some occasions, the health fund will ask for two excess payments towards the hospital bill.
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FAQs about private healthcare insurance may cause headaches due to its complexity. It is essential to understand how private policies work because conditions that at first seem irrelevant may show otherwise when individuals need to get admitted to the hospital.

ALSO READ: What are the different types of health insurance available in Australia?

With private insurance, some costs need to be paid even if people pay for weekly or monthly premiums. Excess is one of those costs, which we will cover in the article.

What is excess?

Insurance excess is the sum that individuals need to pay before getting admitted to a hospital. Additional excess only applies if the same individuals had previously signed up for private health insurance. So, excess is paid on top of insurance premiums.

All private insurers offer different private healthcare packages with two or three option for excess fees. In Australia, one can choose to pay up to A$750 per person, depending on their requirements. The maximum sum of excess for a family or couples is now A$1,500 in Australia.

In layman terms, excess could be understood as a deal between clients and private insurers to cover for some of the hospital costs in exchange for lower premiums. Sometimes, excess is also called the frond-end deductible.

DO READ: What factors can impact your health insurance premiums?

When is excess paid?

When patients have a private status (i.e. they are coming on their private insurance policy) in a hospital, they would need to pay for excess.

Excess is not paid in any other circumstance indicating that people will continue to pay lower monthly premiums without the annual excess payment if they have not gone to the hospital.

Once excess is paid upfront, the rest of the hospital expenses will be paid through Medicare or will be claimed on the private insurer, depending on what cover individuals pay for. However, some doctors may ask for additional out-of-pocket costs as a fee for their service, which is not covered by private insurers.

RELATED: How much does private health insurance cost?

How often does excess need to be paid for?

Depending on the private insurer you are with, there are numerous combinations about how excess will be paid for. However, as mentioned on the above, excess needs to be paid only when patients need hospital attention.

The most common way of excess payments is once a calendar year per person. In some circumstances, excess needs to be paid for twice during a calendar year – if admitted to hospital.

There is also a scenario when families do not need to pay for their dependents. In a position when children are aged 21 and younger, they do not need to pay for excess. However, those children would need to be included in a shared family cover for the whole family. It would also be a good idea to call the private insurer and double check terms and conditions for this matter.

Are there some exceptions when it comes to excess payments?

Most private insurance companies waived excess costs when individuals experience accidents and need to get urgent ER attention. In that case, there are no out-of-pocket costs for excess for persons that get admitted as private patients.

INTERESTING READ: Basics of Health Insurance: Here is what you should know

Does excess equal to the co-payment?

Excess and co-payments are two different things that define a couple of expenses going towards the hospital.

As described earlier, people pay for excess before agreeing to stay in a hospital, no matter for how many days they will be admitted.

On the other hand, co-payments describe hospital fees that are paid for each day spent in the hospital, as per the agreement with the private insurer. After the contract is signed, the health fund agrees to pay for the days the patient needs to stay in the hospital.

How to choose the right amount of excess?

As private insurance companies offer a wide range of hospital coverage, one should pick a package that meets their requirements.

DID YOU READ: What is an ambulance cover, and is it for you?

For example, some people may need to get surgeries on an annual basis. In that case, individuals might consider paying for lower excess and higher premiums, depending on the surgery type. It could be a big mistake to choose higher excess in case people need to frequently visit the hospital, as it will not be cost-effective in the long term.

On the other hand, younger people whose immune system is strong and are generally not suffering from pre-existing conditions may choose higher excess and lower premiums. As mentioned earlier, excess will be paid only when being admitted to the hospital. When the situation is at minimal risk, lower premiums will be the only thing that money needs to be spent on.  

 

 


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