Basic Hospital Cover is an entry-level form of private health insurance in Australia that provides restricted access to specific hospital services. It is the most affordable tier of hospital cover, but it offers limited benefits and should be chosen carefully based on your health needs. According to Australian government regulations, all Basic Hospital policies must include restricted coverage for the following treatments:

• Rehabilitation
• Hospital psychiatric services
• Palliative care

Restricted cover means that while these services are technically covered, the provided benefits will be limited. Simply put, if you have basic hospital coverage and need palliative care, the health fund will cover only a portion of the expense, and the rest will be out-of-pocket. Furthermore, in some states like New South Wales and the ACT, it is a requirement for health funds to offer emergency ambulance services in the most Basic Hospital policies.

The Basic Hospital Cover is, therefore, most suitable for Australians who wish to avoid tax penalties like the Medicare Levy Surcharge (MLS) and avoid Lifetime Health Cover (LHC) loading by meeting their minimum eligibility requirements. This type of cover is ideal for generally healthy and active individuals who want to be covered only in case of accidents. Conversely, this cover may not suit individuals who require comprehensive medical attention and treatments, such as major surgeries or ongoing care for chronic diseases.

A Basic Hospital Cover in Australia includes restricted access to three essential services: rehabilitation, hospital psychiatric services, and palliative care, as well as emergency ambulance services in some states. Understanding what “restricted access” can mean for you and your health is important. The basic hospital cover differs extensively from the full coverage of diseases and treatments that are offered in higher-tier plans like Bronze, Silver, or Gold.

When a service is covered on a restricted basis, it is said to have restricted access. In this case, the insurer only pays a limited benefit, which is usually the same as what you would get as a public patient in a public hospital. If you choose to be treated in a private hospital, the restricted benefit may only cover a small portion of the cost, leaving you with considerable out-of-pocket expenses.

A basic hospital cover offers restricted cover for three key services in the following way:

• • Rehabilitation: You may only get coverage in a public hospital or receive very limited payment for private rehabilitation services with restricted access. In case you choose private rehabilitation, the cover’s restricted benefit may only cover a small portion of the total cost, and you’ll be out of pocket for the balance.
  • Hospital Psychiatric Services: For psychiatric care, restricted access means that if you need mental health treatment in a private hospital, the benefit may not cover the full cost. So, you could be out of pocket for private psychiatric services, although public hospital treatment may be more affordable under this cover.
  • Palliative Care: For those requiring end-of-life care, restricted palliative care coverage may only provide limited benefits if you’re treated in a private hospital. Private palliative services can be expensive, and restricted benefits will only cover a portion of the fees; you’ll be out of pocket for the balance.

As basic cover is entry-level insurance or a minimum hospital cover, a lot of treatments are not covered in this tier. Following is a list of hospital treatments not covered under Basic Hospital cover but may be covered by Bronze, Silver, or Gold tier covers:

• Brain and nervous system
• Eye (not cataracts)
• Ear, nose and throat
• Tonsils, adenoids and grommets
• Bone, joint and muscle
• Joint reconstructions
• Kidney and bladder
• Male reproductive system
• Digestive system
• Hernia and appendix
• Gastrointestinal endoscopy
• Gynaecology
• Miscarriage and termination of pregnancy
• Chemotherapy, radiotherapy & immunotherapy for cancer
• Pain management
• Skin
• Breast surgery (medically necessary)
• Diabetes management (excluding insulin pumps)
• Heart and vascular system
• Lung and chest
• Blood
• Back, neck and spine
• Plastic and reconstructive surgery (medically necessary)
• Dental surgery
• Podiatric surgery (provided by a registered podiatric surgeon)
• Implantation of hearing devices
• Cataracts
• Joint replacements
• Dialysis for chronic kidney failure
• Pregnancy and Birth
• Assisted reproductive services
• Weight loss surgery
• Insulin pumps
• Pain management with a device
• Sleep studies

These medical treatments are all basic hospital cover exclusions and can only be covered under the other tiers.

What is Basic Plus Cover?

Basic Plus Hospital Cover is the enhanced version of the standard Basic Hospital Cover offered by most health funds. Normally, this type of cover includes the basic three restricted services—rehabilitation, psychiatric services, and palliative care—which are mandatory for Basic plans. However, in the “Plus” cover, the policy includes at least one additional clinical category from the higher tiers (Bronze, Silver, or Gold). This provides more flexibility and coverage for those who want some additional protection beyond the minimum requirements but don’t need comprehensive coverage.

All Basic Plus Policies Are NOT Equal

It is very important to understand that not all Basic Plus policies are equal. Each health insurer has the freedom to choose which additional services they want to include in their “Plus” plans, so coverage can vary significantly between providers. In any policy, the number of additional services and the extent of coverage for each clinical category differ greatly.

For example, take nib’s Basic Essential Hospital Plus policy:

• This plan covers 7 clinical categories with full private hospital coverage, including:
  • Dental surgery
  • Joint reconstructions
  • Gastrointestinal endoscopy
  • Miscarriage and termination of pregnancy
  • Gynaecology
  • Tonsils, adenoids, and grommets
  • Hernia and appendix

On the other hand, Medibank’s Basic Plus Healthy Start policy offers full private coverage for only 3 clinical categories:

• Dental surgery
• Joint reconstructions
• Hernia and appendix

Choosing the Right Basic Plus Policy

The differences between Basic Plus policies mean that simply selecting one based on the “Plus” label isn’t enough. It’s essential to compare different insurers and their specific offerings to ensure that the policy aligns with your healthcare needs. For instance, if you need services like Gastrointestinal endoscopy or Gynaecology, you may want to plan ahead and include these services in your full private cover so that when you use them in the near future, your out-of-pocket costs are significantly lower. We recommend that you always review the Product Disclosure Statement (PDS) carefully to get the details on coverage and out-of-pocket expenses before selecting a policy.

Basic hospital cover is best for young and healthy Australians who want to avoid paying the Medicare Levy Surcharge or Lifetime Health Cover loading and for those who are comfortable with the public system for most health treatments. As the Basic cover is a private entry-level health fund, you will only have access to a private hospital in case of an accidental emergency.

Benefits of Basic Hospital Cover

Basic Hospital Cover offers a range of benefits that may be of great importance to younger Australians. Here are some key advantages:

Exemption from Medicare Levy Surcharge (MLS)

The Medicare Levy Surcharge (MLS) is an additional tax for Australians who earn above a certain income threshold and do not hold private hospital insurance. By taking out Basic Hospital Cover, you can avoid paying this surcharge, which can range between 1% and 1.5% of your taxable income.

Avoiding Lifetime Health Cover (LHC) Loading

Lifetime Health Cover (LHC) Loading is a financial penalty that applies if you take out hospital cover after the age of 31. For each year you delay beyond 30, you pay an additional 2% on your hospital premiums for a maximum of 10 years. Taking out Basic Hospital Cover before your 31st birthday helps you avoid LHC loading, potentially saving you thousands of dollars in the long run.

Access to Limited Private Hospital Services

Basic Hospital Cover provides access to certain private hospital services, albeit in a limited capacity. While this may not offer the comprehensive benefits of higher-tier policies (like Silver or Gold), it does allow you to choose your own doctor and be treated in a private hospital under certain conditions, which can be useful for unexpected health situations.

Limitations of Basic Hospital Cover

While Basic Hospital Cover is affordable for many, significant drawbacks make it unsuitable for individuals with more complex health needs. Here are some key limitations to consider:

1. Subject to Public Waiting Lists

One of the biggest drawbacks of Basic Hospital Cover is that, in many cases, you will still have to wait to get treatment according to the public hospital waiting lists. This is because, on a basic hospital cover, your cover is restricted on most treatments so in case you want to visit a private hospital for treatment, you will need to pay considerable out-of-pocket costs. This means that for non-urgent procedures, even though you have private health insurance, you may still face long wait times for treatment like you would in the public health system.

2. High Out-of-Pocket Costs for Private Treatment

If you choose to receive care in a private hospital for treatments that are only covered on a restricted basis, you may be left with significant out-of-pocket expenses. For example, restricted cover may only pay a fraction of the cost, leaving you responsible for the remainder. This can make it costly to opt for private treatment, even though you’re paying for private insurance. These out-of-pocket costs can add up quickly for those requiring regular hospital care or specialized services.

3. Excludes Coverage for Dozens of Clinical Categories

Basic Hospital Cover excludes coverage for numerous important clinical categories such as:

• Joint replacements
• Cataracts
• Heart surgery
• Chemotherapy, radiotherapy, and immunotherapy for cancer
• Back, neck, and spine
• Pregnancy and Birth

If you need treatment for any of these conditions, you’ll have to either pay entirely out of pocket or rely on the public healthcare system.

4. Long Waiting Periods for Adding Services

Upgrading your policy to include a more comprehensive cover isn’t an immediate fix either. If you decide to move up to a higher tier like Bronze or Silver, there are 12-month waiting periods for treatments related to pre-existing conditions. This means that if you need immediate coverage for a condition or procedure, upgrading your plan won’t offer an instant solution. You will still face significant delays before you can access the clinical category you need.

5. Not Suitable for People with Specific Medical Needs

Basic Hospital Coverage is unsuitable for people looking for comprehensive coverage for specific or ongoing medical conditions. We recommend that you have at least some services fully covered rather than listed as restricted or excluded. For example, joint replacements or cancer treatments are expensive procedures, and relying on restricted cover can leave you with large out-of-pocket expenses. If you have a history of medical conditions or anticipate needing certain treatments, a higher tier of coverage (Bronze, Silver, or Gold) is typically a safer and more cost-effective choice.

6. Better Suited for Avoiding Tax Penalties or Low-Risk Individuals

Basic Hospital Cover is also best suited for young individuals who want to avoid tax penalties such as the Medicare Levy Surcharge (MLS) or Lifetime Health Cover (LHC) loading. It’s a low-cost option, but the drawback is significantly less coverage.

Basic Hospital Cover is, therefore, a basic insurance option that will help you avoid tax penalties and offer limited protection in an accidental emergency. However, if you are someone who needs extensive coverage for a major health issue or just needs overall peace of mind with coverage, it’s often worth considering a higher-tier policy.

Understanding the different types of costs is crucial when choosing basic hospital cover. Premiums are the primary cost and represent your regular payments to maintain your coverage. These can be paid fortnightly, monthly, quarterly, or yearly, depending on your preference and budget. The amount you pay will depend on factors such as the insurance provider, the services covered, and the excess level you choose (a higher excess often results in lower premiums).

It’s worth noting that if you stop paying your premiums, your coverage will cease, leaving you without protection. Many health funds offer discounts if you pay your premiums annually or set up direct debit payments, so be sure to ask about these options when signing up to take advantage of possible savings.

In Australia, Basic Hospital Cover comes with a standard 2-month waiting period for Rehabilitation, Hospital Psychiatric Services, and Palliative Care, even when these services are related to pre-existing conditions. This is a unique feature, as most pre-existing conditions in private health insurance require a 12-month waiting period, but these specific services adhere to a 2-month rule.

Upgrading to Basic Plus or Higher

If you upgrade your hospital cover to Basic Plus, Bronze, or a higher-tier cover, you’ll have immediate access to restricted benefits (assuming you’ve already served the initial 2-month waiting period). However, for full private cover (allowing full treatment in private hospitals without significant out-of-pocket expenses), the waiting periods are:

• 2 months for new conditions.
• 12 months for pre-existing conditions.
• 2 months for full private cover on Rehabilitation, Hospital Psychiatric Services, and Palliative Care.

Mental Health Upgrade Rule (Since 1 April 2018)

According to the mental health upgrade rule that came into action on 1 April 2018, Australians can upgrade their Hospital Psychiatric Services to full cover without having to serve the waiting period again once in their lifetime. This rule applies and benefits anyone who has already held any private hospital cover for at least two months. This policy change was introduced to provide easier access to mental health services, allowing quicker treatment for those who may require psychiatric care but previously held lower-level hospital cover.

If you’ve already completed the waiting periods with your previous insurer, you generally won’t need to re-serve these waiting periods when switching to a similar or upgraded policy. Always check with your insurance provider to ensure a smooth transition and to clarify any specific waiting period rules that may apply to your situation.

When deciding between Basic Hospital Coverage and relying solely on the public hospital system, it is important to understand what makes each unique in service, cost, and coverage so you can make an informed decision based on your individual health needs and financial situation.

Public Hospital System

Australia’s public hospital system operates under Medicare, which aims to provide extensive care to Australians but comes with some drawbacks:

• Longer Waiting Times: Public hospitals often have longer waiting times and service delays, especially for people looking to get non-urgent elective surgeries or specialist consultations. If time is a priority in your condition, public hospital waitlists can be a major disadvantage.
• Limited Doctor Choice: As a public hospital patient, you don’t get to select your doctor or specialist. The hospital administration allocates you to whoever is available, which means your treatment may vary depending on the provider assigned to you.

Basic Hospital Cover

In the case of a Basic Hospital Cover, there are some advantages over relying on the public care system, but it also comes with restrictions:

• Choice of Doctor (With Restrictions): Although your coverage is restricted, many private hospital policies allow you to select your doctor or specialist only for treatments within the covered services. However, this benefit is limited since most treatments are excluded or restricted.
• Restricted Access to Private Care: In contrast to higher-tier policies like Bronze or Gold, Basic Hospital Cover only offers limited coverage for services such as rehabilitation, psychiatric services, and palliative care. If you seek treatment in a private hospital, you may incur substantial out-of-pocket costs as the policy’s restricted benefits won’t cover the full expense. Additionally, you will not have guaranteed access to private rooms, and in many cases, you may be treated similarly to a public patient, especially in terms of accommodation and amenities.
• Tax Benefits: Holding even a Basic Hospital Cover can exempt you from paying the Medicare Levy Surcharge (MLS) if you fall into a higher income bracket. This makes it an attractive option for younger, healthy individuals seeking to avoid tax penalties while maintaining some level of coverage.

Basic Hospital Cover offers more flexibility than relying solely on the public system but is not suitable for individuals needing extensive medical care. It’s best for people looking to avoid tax penalties or those who want minimal coverage for accidents or emergencies. Upgrading to a higher tier is advisable for anyone needing ongoing treatment or major surgeries.

Switching to basic hospital coverage, especially with Health Deal, is super simple. Health Deal will handle the entire switching process for you, so you won’t have to lift a finger. When you sign up for a hospital cover insurance policy through Health Deal, they’ll ask you for information like your Medicare card number, your previous health fund member number, and payment details. Once you click submit on your application, the following will occur:

1. Health Deal will securely transmit all your information over to your new health fund.
2. You will receive a welcome email from Health Deal with your new health fund.
3. Your new health fund will send a transfer certificate request to your old health fund. This is the document that outlines all the waiting periods you have already served.
4. Your old health fund will cancel your ongoing direct debit and will refund you any money you have pre-paid them for the fortnight/month/quarter/year on a pro-rata basis (this takes about 10 working days to receive the refund).
5. Your new health fund will send you a card in the post, and you’ll receive an onboarding welcome call from someone in their customer service team.
6. All your payments will have been set during the signup process, so you can just sit back, relax, and enjoy your new health fund.

Remember, when switching health funds, you will not have to re-serve any wait periods you’ve already served, and any money you’ve pre-paid will be refunded to you.

The Australian Government’s rebate can reduce premiums based on the policyholder’s age and income and whether the policyholder is single or in a family. Please check out the page, and if you have any questions, please feel free to email us at enquiries@healthdeal.com.au.

Choosing the right Basic Hospital Cover is critical to ensure that, when needed, your policy can provide value by reducing or eliminating high hospital fees. Here are key factors to consider before selecting the right plan:

Assess Your Health Needs

Before settling on any hospital policy, evaluate your current and future health needs. Ask yourself:

• Do I currently need any ongoing medical services such as rehabilitation or mental health care?
• Am I at risk for any future medical treatments like surgeries or long-term hospital stays?
• How likely am I to need private care for an accident or emergency? Understanding your potential medical needs will help you determine whether Basic Hospital Cover will provide sufficient protection or if you should consider upgrading to a Basic Plus or higher-tier plan for better coverage.

Consider Your Risk Tolerance

Basic Hospital Cover offers limited benefits and may only cover restricted services such as rehabilitation, psychiatric care, and palliative care. It’s important to assess your risk tolerance:

• Are you willing to accept limited access to private hospital care for most treatments, knowing that you might rely on the public system for anything outside of the covered categories?
• Are you comfortable with the risk of paying substantial out-of-pocket costs if you need a service that’s not fully covered by the policy?

If you’re fit and healthy with minimal medical needs, Basic Hospital Coverage could be an affordable option to protect against unexpected emergencies. However, it might be worth exploring policies that offer more comprehensive coverage if you anticipate future health needs.

Budget Considerations

Your budget is a key factor in choosing the right plan. Basic policies tend to have lower premiums but offer limited coverage. Consider:

• How much can you afford to pay for insurance premiums—weekly, fortnightly, or monthly?
• What excess are you willing to pay should you need hospital treatment? Higher excess often leads to lower premiums, but it could mean higher upfront costs if you need to use your insurance.

Tools like Health Deal’s comparison tool can help you find the most cost-effective plan that meets your budget while offering the coverage you need.

Compare Policies from Different Providers

Don’t assume all Basic Plus Hospital Cover policies are the same. Different providers offer varying levels of coverage, restrictions, and benefits. It’s important to:

• Compare policy offerings from several health funds.
• Read each provider’s product disclosure statement (PDS) to understand any exclusions, restrictions, and additional costs.

A policy that works for someone else might not work for you, so take time to compare options using a reliable comparison tool.

Look for Additional Benefits

While Basic Hospital Cover is restricted in terms of the treatments it covers, some providers offer additional benefits such as:

• Access to preferred provider networks with no-gap arrangements for certain services.
• Ambulance cover, which can vary between providers.
• Discounts on other services, such as gym memberships or wellness programs.

These additional benefits can enhance the value of a policy and help you get more for your money.

What Does Basic Cover Include?

Under the minimum requirements set by the Australian government, Basic Hospital Cover provides restricted benefits for the following key treatments:

• Rehabilitation: Support for recovery from surgeries or injuries.
• Hospital Psychiatric Services: In-hospital care for mental health conditions.
• Palliative Care: Care for individuals with life-limiting illnesses.

It’s important to note that many Basic Hospital Cover plans may also offer ambulance services, though coverage varies between providers. However, all these services are restricted, meaning the insurer may only cover what a public patient would receive in a public hospital. If you opt for private hospital care, out-of-pocket costs could be substantial.

How Does Basic Cover Compare to Bronze Cover?

Bronze Hospital Cover builds on what Basic Cover offers, expanding the range of treatments covered. In addition to the services provided in Basic Cover, Bronze includes, among others:

• Bone, Joint, and Muscle Treatments
• Joint Reconstructions
• Kidney and Bladder Care
• Male Reproductive System Treatments
• Digestive System Treatments

While Bronze Cover is more comprehensive, it also comes with higher premiums compared to Basic Hospital Cover. If you require more coverage for everyday health needs, Bronze or higher tiers might be more appropriate, especially for families or individuals who anticipate needing a broader range of services.

Understanding Basic Hospital coverage and how it fits within Australia’s private health insurance tiers is essential for making an informed decision. While Basic Hospital Cover offers limited protection and is ideal for those seeking tax benefits or protection against accidents, it may not be suitable for those requiring broader or more frequent health services.

If you have more questions or need tailored advice, feel free to contact Health Deal. Our experts are available to help you find the right plan to suit your needs. Call us at 1300 369 399 or fill out our online form for personalised assistance. We’re here to help you make informed and confident decisions regarding your health insurance.

Compare now