What is excess in health insurance?

What is a hospital insurance policy excess?

A hospital excess is a payment you need to make when you're admitted to hospital. You'll be required to pay this amount upfront when you go to hospital – they will then bill your insurer for the remaining costs.

Some insurers require you to pay an excess every time you're admitted to hospital, while others others cap the amount at a maximum limit per year.

Pros and cons of a higher excess

When don't you need to pay an excess?

Day Surgery

Many funds don't charge an excess if you need to go to hospital for just day surgery.

Accidental injury

If you're hospitalised because of an accident, most insurers will waive the excess requirement.

Child dependants

Most health funds waive the excess for kids being treated in hospital as an incentive for taking out family cover, and they'll continue to provide cover for dependent children until they reach the age of at least 21.

Excess vs gap payments

Hospital insurance doesn't cover every cost you'll have to pay in the private system. Suck, we know. What's worse is the excess is only one of the out-of-pocket costs most commonly associated with private hospital cover. The other big one is the gap payment.

In short, the gap payment is the different between the cost of a medial procedure and the amount that you are compensated for it by both your insurance fund and Medicare. For most treatments, Medicare will pay a little bit, and your insurance fund will pay the bulk of what's left. However, the final amount the cover can vary by A LOT. Some procedures can be fully covered, while others will leave you literally thousands of dollars out of pocket.

The government has a great website called Medical Costs Finder that can help you estimate how much a particular procedure might cost you. You can also call your health fund directly to get a more specific estimate.

Frequently asked questions

• When do you pay excess on health insurance?

  You'll be required to pay an excess before you're admitted by the hospital, who will then bill your insurer for the remaining costs.

• What excess options are available for private health insurance?

  There is a range of different excess options for hospital cover, but the most common amounts are $250, $500 and $750.

• Do you pay hospital excess for same-day surgery?

  Many insurers won't charge a health insurance excess if you attend hospital for day surgery only. It's also common for health funds to waive excesses for accident-related treatment, same-day admissions or if any kids are on your cover.

• Do you have to pay excess on extras?

  No. An excess is only applicable to hospital cover, as extras benefits are normally paid as a percentage of a service provider's fee or as a set number of visits per year.

• Does your hospital cover excess affect your tax?

  If your excess is too high, it might be a problem for your taxes, but in reality it hardly ever happens. If you earn above $97,000 a year ($194,000 for couples) you'll be hit with the Medicare Levy Surcharge unless you get eligible hospital cover. To be eligible, that policy has to have an excess of no more than $750 ($1,500 for couples). Truth is, basically every policy available has a maximum excess of $750 per person, so it's probably not a massive issue for you.

To make sure you get accurate and helpful information, this guide has been edited by Tim Bennett as part of our fact-checking process.

Written by

Gary Ross Hunter

Journalist

Gary Ross Hunter has over 6 years of expertise writing about insurance, including life, health, home, and car insurance. Having reviewed hundreds of product disclosure statements and published over 800 articles, he loves simplifying complex insurance topics for everyday readers. Gary has contributed to major outlets like Yahoo Finance, The Sydney Morning Herald, and news.com.au, and holds a Bachelor of Arts (Honours) in English Literature from the University of Glasgow, along with a Tier 2 General Advice certification, ensuring his work adheres to ASIC’s RG146 standards. See full bio

Gary Ross's expertise

Gary Ross has written 626 Finder guides across topics including:

• Health, home, life, car, pet and travel insurance
• Managing the cost of living