What Is An Excess In Health Insurance?

Find out about health insurance policy excess amounts here with Savvy. 

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, updated on July 10th, 2023       

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An excess is an amount you're required to pay if you make a claim on an insurance policy. When it comes to private health insurance hospital cover, you will be required to pay an excess if you are admitted to hospital and wish to make a claim on your health insurance policy. 

However, it’s not quite as simple as that, as health insurers all have different rules about when and why excess payments are required. You can find out all about health insurance excesses here with Savvy, and learn more about how to choose the right excess and how it can affect the cost of your policy. 

What is an excess in private health insurance?

In the context of health insurance, an excess refers to the amount that you agree to pay out-of-pocket before your health insurance provider covers the remaining costs of your hospital treatment. In other words, it's the portion of the bill that you're responsible for paying before your insurance kicks in. Excesses only apply to hospital cover policies, not extras policies. 

As part of your private health insurance hospital cover purchase, you’ll be given a choice as to what amount your excess is, usually between $250 and $750. While you can set the excess as high as $750 for a singles policy, or $1,500 for a family policy, most insurers will allow you to choose a lower amount, or even to not have any excess at all. 

When might I have to pay an excess?

The rules around when an excess must be paid vary from insurer to insurer: 

  • They most often apply to planned surgery or treatment involving an overnight stay which is carried out in a private hospital 
  • Most insurers don’t require an excess payment if you are hospitalised as a result of a serious accident 
  • Many insurers will waive the excess for children on a family health insurance policy 
  • Many health funds do not charge the excess for day surgery which does not require an overnight stay 

Some insurers require the excess to be paid each time you are hospitalised and wish to make a claim. Other policies only require you to pay the excess once a year, or have an annual cap on the excess you’re required to pay, regardless of the number of hospital admissions you need in that year. 

These differences in the way that excess payments are charged can be extremely important if you have a condition which requires frequent hospital stays, such as if you’re living with unstable Type 1 diabetes or a serious form of cancer.  

For this reason, it’s important to compare health insurance policies and look for one with an excess you can afford and which fits in with your budget and medical needs. 

How much are hospital cover excess amounts?

When choosing a hospital cover policy, you’ll be given a choice of excess. A hospital cover policy can have an excess ranging from zero to a maximum of $750 for singles, as mentioned, and $1,500 for family policies.  The most common excess amounts are $250, $500 and $750.  

The excess that a health insurance fund can charge is regulated by the Australian Government. Health insurance legislation states that in order to avoid paying the Medicare Levy Surcharge, Australians must hold an adequate level of hospital cover insurance, which is defined as having an excess of no more than $750 for singles and $1,500 for families. 

How will the excess I choose affect my health insurance premium price?

The higher the excess you choose, the less your monthly premiums will cost in most cases. This is because insurers are often willing to reward those who take on a greater portion of the cost of treatment with discounted premiums. 

For example, these are hospital cover policy quotes from one major health fund. All quotes are current as of April 2023 and are for a Silver Plus singles policy for a person aged over 30 living in Victoria (with no age-related discounts or Lifetime Health Cover loading applied):  

  • $250 excess – $152.51 per month 
  • $500 excess – $132.91 per month 
  • $750 excess – $128.05 per month 

When deciding which excess amount to choose, you’ll have to decide if you wish to pay a higher excess if you do make a claim and pay lower monthly premiums, or choose a lower excess and pay higher premiums. 

Frequently asked questions about health insurance excesses

Why do health funds have an excess on hospital cover policies?

Health funds require people to pay an excess as a way of sharing the cost of healthcare. This helps them keep premiums lower for all policyholders by reducing their overall costs. It also encourages policyholders to use healthcare services wisely and to avoid unnecessary or excessive claims.  

Can I change the excess amount during my health insurance policy term?

Yes – you can choose to change your excess amount and swap to a policy with a higher or lower excess. However, this may involve cancelling your existing health insurance policy and buying a new one, which may have implications for your annual benefit limits and waiting periods. It would be best to consult with your health fund if you wish to change your excess so you understand any implications of making the switch. 

If I need to be re-admitted to hospital for a second time after my initial treatment, will I have to pay the excess again?

You likely won’t have to pay the excess a second time for the same condition in one financial year, as many policies have annual caps on how much excess you have to pay. Once you’ve paid the excess for a particular admission, you generally don't have to pay it again for the same treatment or admission within the same policy year. 

What will happen if I can’t afford to pay the excess amount?

Most health insurers will require you to pay the excess amount before you receive treatment as a private patient, so you'll have to pay your excess immediately out-of-pocket when you are admitted to hospital. If you are unable to afford the excess, you won’t be able to make a claim on your hospital cover policy. However, many health funds do have hardship provisions which may assist customers who are unable to afford to pay the full amount of their excess.   

Does a hospital excess apply to all policyholders?

No – some health funds will waive the excess payment for children on a single parent or family policy, and possibly also for some adult dependents on a family policy. Each health fund has its own rules about waiving the excess payment, so you should check with your health fund to see what their specific rules are. 

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