Second-tier default benefits

Page last updated: 30 June 2020

What are second-tier default benefits?

Second-tier default benefits provide patients treated in an eligible hospital, that does not have a negotiated agreement with the patient’s insurer, access to higher benefits than those that would otherwise be payable.

Second-tier default benefits are an amount no less than 85% of the average charge for the equivalent episode of hospital treatment. (Under an insurer’s negotiated agreements in force on 1 August of a given year with all comparable private hospitals in the same state as the hospital in which treatment occurs.) Comparable hospitals are those hospitals in the same second-tier hospital category with negotiated rates for equivalent episodes of care.

To facilitate calculation of second-tier default benefits by insurers, from 1 January 2019, the Department will categorise all declared private hospitals into the following categories:

  1. private hospitals that provide psychiatric care, including treatment of addictions, for at least 50% of the episodes of hospital treatment, and do not fall into category (g);
  2. private hospitals that provide rehabilitation care for at least 50% of the episodes of hospital treatment, and do not fall into categories (a) or (g);
  3. private hospitals that do not fall into categories (a), (b) or (g), with up to and including 50 licensed beds;
  4. private hospitals that do not fall into categories (a), (b) or (g), with more than 50 licensed beds and up to and including 100 licensed beds;
  5. private hospitals that do not fall into categories (a), (b) or (g), with more than 100 licensed beds, without an accident and emergency unit or a specialised cardiac care unit or an intensive care unit;
  6. private hospitals that do not fall into categories (a), (b) or (g), with more than 100 licensed beds, with either (or any combination of) an accident and emergency unit or a specialised cardiac care unit or an intensive care unit;
  7. private hospitals that provide episodes of hospital treatment only for periods of not more than 24 hours.

The legislative framework underpinning second-tier arrangements is:

  • The Private Health Insurance Act 2007- Sections 121-8A to 121-8D
  • The Private Health Insurance (Benefit Requirements) Rules 2011- Schedule 5
  • The Private Health Insurance (Health Insurance Business) Rules 2018 - Part 2A.

How to apply for second-tier default benefits eligibility

The Department of Health commenced accepting applications for second-tier default benefits eligibility from 1 January 2019.

Applying for second-tier default benefits eligibility is optional for private hospitals. To be considered for second-tier default benefits eligibility, a hospital must:

  • complete the application form;
  • submit the completed form and all required attachments to phisecondtier@health.gov.au; and
  • pay an application fee of $895 (GST not applicable).

Applications may be submitted at any time of year, but hospitals approaching the end of their current eligibility status should submit an application at least 60 days prior to their second-tier expiry date. A separate application and fee is required for each hospital seeking eligibility.

The Department will assess applications against the following assessment criteria:

That a hospital must:

  • be a private hospital;
  • be accredited;
  • not bill patients directly for the minimum benefit payable by the patient’s insurer;
  • make provision for informed financial consent; and
  • submit Hospital Casemix Protocol Data to health insurers electronically with every claim for second-tier default benefits.

Hospitals may apply for second-tier default benefits eligibility at the same time as seeking declaration as a private hospital.

The Department will invoice applicants once all relevant information for the application has been received. Hospitals will be notified of the outcome of their application within 60 calendar days of the Department receiving a complete application, including payment of the application fee.

Hospitals that meet the assessment criteria will be awarded second-tier default benefits eligibility, effective from the day of approval until 60 calendar days after the day that the hospital’s accreditation expires.

It is recommended that you read the second-tier benefits guidelines before you submit your application.

Annual Hospital Categorisation Review Consultation

The Department of Health administers the second tier default benefits eligibility. Private hospitals apply directly to the Department for recognition that they are eligible for second tier default benefits and categorisation.

The Department annually reviews and publishes the list of all private hospitals grouped by second tier hospital category. Health insurers use this list to calculate second tier default benefits rates for each second tier hospital category in each state and to determine the second tier default benefits payable to individual hospitals.

As part of the formal consultation round with private hospitals, the Department encourages all private hospitals to review the list (regardless if they have applied for second-tier default benefits eligibility) and confirm that they are correctly categorised or to provide evidence to support and alternative categorisation (e.g. a copy of the hospital’s current state/territory licence).

Feedback and questions about this consultation should be emailed to phisecondtier@health.gov.au by COB 29 June 2020.

Draft Private Hospital Categorisation 2020 for Second-tier Default Benefits – Consultation (Excel 54 KB)

Please note that inclusion on this list does not mean that a hospital has second-tier eligibility status, it only categorises all private hospitals.

To check a hospital’s second-tier eligibility status/category, including all ongoing updates, please refer to the Commonwealth declared list with second-tier on the Department's Hospital web page.

Cost recovery

The Department is fully cost recovering its assessment of applications for second-tier default benefits eligibility and publishing of a list of hospitals and their second-tier eligibility status. The Department maintains a Cost Recovery Implementation Statement for this activity, which provides information about how the Department implements cost recovery for administration of second-tier default benefits.

2020-21

Cost Recovery Implementation Statement 1 July 2020 – 30 June 2021 (PDF 977 KB)
Cost Recovery Implementation Statement 1 July 2020 – 30 June 2021 (Word 52 KB)

2019-20

Cost Recovery Implementation Statement 1 July 2019 – 30 June 2020 (PDF 779 KB)
Cost Recovery Implementation Statement 1 July 2019 – 30 June 2020 (Word 52 KB)

2019

Declared Private Hospitals Grouped by Second-Tier Hospital Category as at 1 August 2019 (Excel 68 KB)

2018-19

Cost Recovery Implementation Statement 1 January 2019 – 30 June 2019 (PDF 181 KB)
Cost Recovery Implementation Statement 1 January 2019 – 30 June 2019 (Word 50 KB)

Links and downloads

Application Form (PDF 856 KB)
Application Form (Word 142 KB)

Second-tier Default Benefits Guidelines (PDF 878 KB)
Second-tier Default Benefits Guidelines (Word 219 KB)

Private Health Insurance (Health Insurance Business) Rules 2018
Private Health Insurance (Benefit Requirements) Rules 2011

Contact

Questions about second-tier default benefits should be emailed to phisecondtier@health.gov.au.