Health Insurance, despite being held by about 50% of Australians, is one of the least understood forms of insurance. There are two parts of this discussion:
1. What are the costs for a given procedure; and
2. How does your insurance come into play.
Every procedure has three basic components to the fee:
- Hospital costs (including operating theatre fees, cost of overnight or inpatient stays, prostheses etc.)
- Anaesthetic costs, and
- The surgeon’s fee
Your insurance will (provided you have the correct level of cover) pay for your hospital costs, with most policies attracting an “excess” which you choose (the higher your excess, the lower your premiums), and this excess has to be paid only once in a calendar year. The way that your surgical and anaesthetic fees are covered is a little more complex.
We all know that if we insure our car, and we are in an accident, then our insurance will either cover the costs of repair or replacement of that car, perhaps with the requirement for an excess payment depending on fault. Simple. That makes sense to most of us, and the same goes for house insurance, contents insurance and so on.
So imagine for a moment that you have car insurance, and you have an accident. Obviously, you expect your insurance to take care of the costs of repair of your car. But when you take your car into a mechanic, and he gives you a quote for $10,000, your insurer says “no, sorry mate, we aren’t going to cover that cost. Instead, we’ll give you $1,000 for the body work (the surgeon), $1,000 for the paint job (the anaesthetist), and $2,000 for a new set of tyres (the hospital), but you will have to take care of the rest.” You think to yourself, hang on a second – what has been the point of paying for insurance for all this time only to find that when it comes to the crunch, the insurer decides not to cover your costs? I rather suspect that an insurance company like that wouldn’t last very long on the market.
But of course, that is exactly what happens with health insurance. When you need it, you may find that it comes up short.
When it comes to the surgeon’s fees, your insurer has what is referred to as a “schedule of fees” which is the amount they have decided they’ll cover for a given procedure. The “scheduled fee” for any procedure includes both what Medicare (ie. taxes used by the government to cover health expenditure, via the Medical benefits scheme) pays, as well as what the insurance company will pay. Rather problematically, that scheduled fee doesn’t reflect the actual cost of providing your care.
All insurance companies (with the exception of NIB) also operate what is called a “Gap Cover” or “Known Gap” scheme, which you may have heard of. These schemes, which your surgeon may or may not be part of, will ensure that your out of pocket costs are limited to a “known gap”, typically no more than $500. Whilst this sounds quite good (and not too different from the car insurance example above), there is a sting in the tail which requires some explaining.
Here is how it works:
You need a procedure (bear in mind this is only an example) – let’s say that the scheduled fee for that procedure is $1000. That scheduled fee might include a Medicare rebate of perhaps $600, and the insurance company pays the other $400. Now, let’s say that the actual cost of that surgery is $1200 (your surgeon’s fee). That leaves a $200 difference which is your out of pocket cost with the remaining $1000 being paid by your insurance. That makes sense, right? $200 out of pocket doesn’t sound too bad at all. And often this is how things will work…but now it gets complicated.
Let’s say your procedure actually costs $1,600. Because the difference between the actual cost, and the scheduled fee of $1,000 is $600, this exceeds the $500 “known gap” rule. Now comes the sting. What your insurance company will do when the “known gap” is exceeded, is to refuse to cover their own scheduled fee! Instead, they will now cover no more than the Medicare fee, which in this example is only $600. So the out of pocket cost to you the patient, is now $1,600-$600 = $1,000.
Does that make sense? No, I didn’t think so.
For a surgical fee of $1,200, your out of pocket will be $200.
For a surgical fee of $1,600, your out of pocket will be $1000.
Same level of cover, same insurer, same procedure.
Most surgeons do everything they can to work within the “known gap” schemes to ensure that their patients receive the maximum benefit from their insurance. And the reality is that surgeons working within those known gap schemes will often take a bit of a hit as the cost of providing a procedure (and the required post-operative care) is not being adequately covered. Having said that, at Losa our philosophy is to offer “known gap” cover for all Reconstructive procedures.