Health insurance extras: why it’s wise to check your cover now

Extras is a popular and unusual form of insurance, and members are being urged to do their sums to avoid wasting money.

Health insurance extras cover is growing in popularity and policies appear more flexible than ever, but consumers are being urged to check if it’s worth having.

Government data shows 14.3 million Australians had extras – also known as general treatment or ancillary cover – in 2022, almost two million more people than a decade earlier.

Unlike hospital cover which is necessary for many people wanting to avoid Medicare Levy surcharges or Lifetime Health Cover loadings, extras has no tax penalties if you ditch it.

If you’re paying hundreds of dollars a year and not using the dental, physio, optical, chiropractic and other services extras helps pay for, it may be time to reconsider your cover. However, those who regularly use the services will benefit financially.

Cost differences can be huge – from less than $50 a month for basic cover to around $400 a month for top-level extras.

CONFUSING CHOICES

Comparison website iSelect spokeswoman Sophie Ryan says the choices, variation and flexibility can be confusing.

“The trick is to understand what you pay in premiums against what you get back in benefits, and make sure you’re getting more out of your extras cover than what you’re forking out for it,” Ryan says.

iSelect’s Sophie Ryan says consider paying your policy upfront. Picture: Supplied

“With most insurance products you generally don’t want to make a claim, but with extras cover, you often want to get as much value back from your policy as possible.”

Extras policies rarely cover the full cost of treatment. They typically offer set benefits or a percentage benefit where a proportion of the bill is paid – often 50 to 75 per cent. There are annual limits on how much money you can get back, and these reset every January 1.

“Waiting periods on extras policies vary, but generally they’re between two to six months for things like general dental, optical and physiotherapy, and up to 12 months for more expensive services like orthodontics or hearing aids,” Ryan says.

“If you can afford to, consider prepaying your annual premium upfront for a full year, or pay by direct debit. Many health funds may give you a discount for doing this.”

Key benefits of extras can include:

• Emergency ambulance cover, which many people wrongly think is covered by state governments or their hospital insurance.

• Around $250 towards glasses and contact lenses each year for each family member who needs them.

• Money paid towards gym memberships and other wellbeing services.

• Flexible policies where you can combine separate limits into one overall annual limit to use across different services.

BIGGEST CLAIMS

Major health insurer Bupa says dental is the most popular service used by its customers, with four times more claims than number two service physiotherapy.

Chiropractic, optical, remedial massage and podiatry round out Bupa’s top six. It says one member claimed more than $20,000 in ambulance cover after requiring the Flying Doctor Service in an emergency.

Bupa Health Insurance managing director Chris Carroll says it is good to take stock of your health needs now.

Australians use Extras insurance to reduce dental costs more than anything else. Photo: iStock

“Reviewing policies to ensure they still meet your health and wellbeing needs is a good first step to help get the best value” he says.

Insurer ExtrasJar says people should do an audit on what they are spending. It says the average Australian with extras is losing $514 a year because they get less than 50 per cent of their premiums back in benefit payments.

CEO Reece Frazier says his firm has launched a product where extras benefits never expire and the money paid in accumulates in people’s accounts.

“With traditional extras cover you pay twice; first there’s the cost of the premium, and then there’s the out-of-cost expense you must pay in order to receive your benefit,” he says.

Consumer group Choice describes extras as like “a book of discount vouchers”.

It says you should not expect it to cover your whole bill, it does not have to be with the same insurer as your hospital cover, and cheaper policies are often easier to get value from – because if you are spending more on premiums than you are paying, it’s a bad purchase.

MEDIAN ANNUAL EXTRAS LIMITS

• General dental $700

• Optical (glasses and contact lenses) $250

• Physiotherapy $450

• Chiropractic $400

• Massage $350

Source: Choice.com.au

Originally published as Health insurance extras: why it’s wise to check your cover now