What are health insurance gap fees and can they be avoided?

Even if you have the best private health insurance for your circumstances, the threat of gap payments can turn what should be a regular medical treatment into an expensive headache. Essentially, these are the out-of-pocket costs after your health insurance has paid its share – and you’re probably on the hook for the bill.

So how can you get on top of (or even avoid) health insurance gap payments? We’ve put together all the most important information so you can get back to living your best life.

Gap payments in health insurance are just the difference between what your health insurance pays and what your healthcare provider charges for a medical service. This ‘gap’ is a thing because private health insurance policies in general don’t cover the entire cost of treatments. Unfortunately, this leaves everyday Australians with the remainder to pay.

Let’s zoom out and take a look at the Australian healthcare system more broadly. There are two areas you need to focus on first: Medicare and private health insurance. Medicare covers a portion of your medical costs, while private health insurance covers additional expenses. However, even with private health insurance, you will often still receive gap payment notices. These costs can include anything from your doctor’s fees to hospital charges or other ancillary services that exceed your insurance policy’s benefits.

Take, for example, a doctor who charges you $500 for a procedure. Medicare covers $300 and your private health insurance covers an extra $150 on top of that. But it hasn’t quite covered the full $500 fee. The remaining $50 is your gap payment, and you need to cover it yourself – out of pocket. Bear in mind that gap payments can fluctuate widely depending on the type of medical service you need, your healthcare provider, your insurance policy and of course your insurer.

It’s not exactly easy to avoid gap payments, but there are some strategies you can implement to help minimise them:

Some health insurance providers in Australia will have no-gap cover, which means the full cost of medical services are covered by them, without leaving you with out-of-pocket expenses. As you can probably imagine, these policies often come with much higher premiums, but they can save you money in the long run if you need lots of medical care.

Many health insurers have agreements with certain healthcare providers who agree to charge fees within the insurance cover’s limits. By choosing these participating providers rather than your preferred doctor or surgeon, for example, you can reduce or even avoid gap payments entirely.

Before undergoing any medical procedure, it’s always a good idea to ask your healthcare provider for a written estimate of all costs involved. This can help you understand the potential gap payment and speak to your insurer about whether there will be anything out of pocket.

There’s no harm in trying your luck, so don’t hesitate to negotiate fees with your healthcare provider. Some doctors may be willing to lower their fees or help you out with a payment plan to manage costs.

Some health insurers have ‘gap cover schemes’ that are in place to cover the difference between what Medicare and your health insurance pay.

This is a program that’s been designed to greatly reduce (and hopefully eliminate) gap payments for patients. It’s a way for doctors and specialists to charge fees that are within the limits set by health insurers, thereby lowering out-of-pocket costs for patients.

Under this scheme, participating doctors will agree to charge fees that are within the financial limits of Access Gap Cover. If your doctor is part of this scheme, your insurer will cover a large portion of the costs and you’ll be left with little to no gap payment.

In order to benefit from this scheme, you’ll need to check with your current health insurer to see which doctors and specialists are part of their Access Gap Cover network. You’ll be able to find out more on your insurer’s website or by giving them a call to get the lay of the land.

“No gap” and “known gap” are two terms used to describe the different types of gap cover arrangements in health insurance:

• No gap: This means there are no out-of-pocket expenses for you. Your insurer will cover the full cost of the medical service, and your healthcare provider will agree to charge within the insurer’s limits. In other words, it eliminates the chance of any financial surprises after the fact.
• Known gap: This involves a predetermined out-of-pocket expense that you will have to pay – but at least you’ll know about it beforehand! Your healthcare provider will give you all the specifics about the gap payment, and it will generally be lower than what it would be without any gap cover. The known gap amount is agreed upon between your insurer and healthcare provider.

Calculating your gap payment involves just a few simple steps:

• Get a cost estimate: Ask your healthcare provider for an itemised quote what they expect your treatment will cost. Keep this breakdown in case there are any changes once you get the bill.
• Check your insurance cover: Review your health insurance policy to see exactly how much of the costs will be covered by your insurer.
• Calculate Medicare benefits: See if Medicare will cover any portion of the treatment. You’ll be able to find this information in the Medicare Benefits Schedule (MBS).
• Subtract insurance and Medicare benefits: Time for a little maths. Subtract the amounts covered by Medicare and your insurer from the total cost given by your healthcare provider. The remaining amount is your gap payment.

For example, if your surgery costs $1,000, and Medicare covers $400 while your insurance covers $500, your gap payment would be $100.

There’s no getting away from the fact that health insurance gap payments are a headache for many Australians. The good news, however, is that there are ways you can manage and even eliminate them entirely. So do your research, compare health insurance policies and find one that fits best into your lifestyle.