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Top 5 things to know about health insurance

Save at tax time if you’re single and earn over $93K

Avoid the Medicare Levy Surcharge (MLS) if you earn over the relevant threshold by taking out an eligible private hospital insurance policy for the entire tax year.

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Get rewarded for taking out hospital insurance before 30

The longer you leave it to take our private hospital insurance for the first time, the more it could cost you.

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Choose from two types of cover

There are two types of health insurance to choose from: private hospital cover and extras cover. You can choose the one that suits you best, or both!

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Avoid public waiting lists

With private hospital insurance, you could avoid potentially lengthy public waiting lists, and choose your own available hospital and doctors.

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Reduce your costs for services Medicare doesn’t cover

Extras cover can help reduce out of pocket costs for healthcare that Medicare doesn’t pay a benefit towards, such as dental, physio and optical.

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Health insurance

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A guide to health insurance

Last updated 31/10/2023

Joshua Malin
Written by Joshua Malin

Lana Hambilton, Head of Health Insurance
Reviewed by Lana Hambilton

Health insurance explained

Learn more about private health insurance with Dr Ginni Mansberg.

Expert tips for finding the right health insurance for you

Our health insurance expert, Lana Hambilton, has some helpful tips for finding the right health insurance policy for you.

Flexibility is key

Flexibility is one of the key benefits of private health insurance. For example, any waiting periods for treatments like physio or dental check-ups that you have already served will be recognised by your new fund if you switch to the same or lower level of cover.

Buy for your current needs

When selecting your coverage, make sure you’re across the waiting periods and don’t pay for things you don’t need right now or in the near future. In Hospital cover, most waiting periods are only 2 months, excluding pregnancy and birth and most pre-existing conditions.

Get the right level of cover

When comparing health insurance, deciding on the right level of cover can be vital. It could mean the difference between being covered or leaving yourself out of pocket. Some choose to take out hospital cover alone, whilst others consider extras only.

Find out more about health insurance

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Extras cover helps you pay for services that aren’t covered by Medicare, like dental treatment and physiotherapy.

What is private health insurance?

Private health insurance gives you with more choice in your healthcare. Private hospital insurance covers medically necessary treatment as an in-patient in hospital and lets you avoid public waiting lists, choose your own doctor and have your own private room (on availability). Extras cover pays a contribution towards many out-of-hospital medical treatments like physiotherapy or dental care. For the benefits of both types of cover you can take out a combined cover policy.

Why should I take out private health insurance?

Whether you should take out private health insurance will depend on your circumstances. However, you might want to consider it if you value having more choice when it comes to your healthcare. With private health insurance you can:

  • Avoid public waiting lists for elective surgeries. When you’re treated through the private system, you’re able to avoid often lengthy public hospital waiting lists. Once you’ve served your waiting periods, you could receive treatment in a matter of days or weeks.
  • Choose your own doctor and stay in a private room. Depending on availability, you may be able to choose your own treating doctor and recover in a private room when you’re admitted to a private hospital.
  • Get cover for out-of-hospital treatment. With an extras cover policy, you can be covered for treatment out-of-hospital that Medicare doesn’t cover. This includes services like dental, physio and chiro.

How does private health insurance work?

You can purchase private health cover in a few different forms. Private hospital cover gives you the option of being treated as a private patient, so you can choose your own available doctor, stay in a private room (when available) and avoid public hospital waiting lists, among other perks. Extras cover helps pay for the treatment you receive out of hospital that Medicare doesn’t cover. When you receive treatment as a private patient, Medicare in combination with your private hospital insurance will cover you for 100% of the Medicare Benefit Schedule (MBS) fee. You may still have a gap payment, which is the difference between the MBS fee and what your medical treatment costs.

For out-of-hospital treatments listed on your extras policy, your insurance provider will pay either a percentage of the total costs or a set dollar amount. The amount you can claim may be subject to lifetime, annual or sub limits.

If you had a medical issue before taking out your policy, it may be considered a pre-existing condition. Luckily, you won’t have to pay any more for your policy than someone without a medical history would, although you may have increased waiting times for treatment relating to your condition.

Always check your policy brochure before claiming as limits, exclusions and waiting periods will apply.

What does private health insurance cover that Medicare doesn’t?

The public and private healthcare systems complement each other. When you have hospital cover and are treated in a private hospital, both Medicare and your health fund can contribute to the cost. When you have extras cover, your health fund helps you pay for out-of-hospital services that aren’t covered by Medicare such as dental, optical and physio.

If you’re admitted to a private hospital as a private patient, Medicare will pay 75% of the Medicare Benefits Schedule (MBS) fee for your procedure. Your private health insurance pays the other 25%, as well as covering accommodation costs and theatre fees. There may be a ‘gap’ between the MBS fee and the total cost of your procedure. You may have to pay this gap, or your health fund may cover some or all of it.

Extras cover

Extras cover helps you pay for services that aren’t covered by Medicare, like dental treatment and physiotherapy. In some areas, such as optical treatment, Medicare and private health insurance work together. Medicare pays for your eye check and consultation with the optometrist, while your private health insurance helps you pay for your prescription glasses or contact lenses.

Combined health and extras cover

A combined health insurance policy includes hospital and extras cover. It can subsidise a wide range of your expenses both in and out of the hospital.

Ambulances

Medicare does not pay for ambulance services. You can get cover for ambulances from some private health insurers. People in Queensland and Tasmania have ambulances covered by their state governments. If you are a Department of Veteran’s Affairs (cardholder) you are covered throughout Australia.

Some ambulance services offer memberships to cover the costs of transport and treatment. Many health funds offer ambulance cover that you can buy on its own, or there may be some ambulance cover included on your health insurance policy.

Pregnancy

Cover for pregnancy and birth-related services is included in Gold hospital insurance policies and some ‘plus’ policies (like Silver Plus). Hospital cover for pregnancy and birth has a 12-month waiting period, so you need to have it before you get pregnant.

Private hospital insurance with pregnancy cover can help you to pay for private pregnancy, labour and post-natal care; C-sections; in-patient obstetrician care and a private hospital room (if it’s available).

Some private hospital policies also cover assisted reproduction services, such as infertility testing, in-vitro fertilisation (IVF) and gamete intro-fallopian transfer (GIFT). However, hospital insurance only covers in-patient care, that is, the treatment you receive as a patient admitted in the hospital.

Dental

Dental cover is usually only available through extras cover (although private hospital policies can help pay for dental treatment and operations you have in hospital). Exactly what is covered depends on your level of cover, but generally dental check-ups are standard.

Your health insurance provider will usually set annual limits on how much you can claim for dental. You can check this in your policy documents.

Optical

Optical services and products can be covered by either hospital or extras policies. Treatments you get in hospital will come under hospital cover, while extras cover can help pay for eyewear.

Your health insurance provider will usually set annual limits on how much you can claim for optical. You can check this in your policy documents.

Other medical and allied health services

Your extras health insurance might help you pay for other services such as psychology, physiotherapy, gym memberships, remedial massages, occupational therapy, podiatry, dieticians, chiropractic services and natural remedies. You’ll have to choose a policy that includes the services you want.

Your health insurance provider will usually set annual limits on how much you can claim for different types of medical treatment. You can check this in your policy documents.

Which health insurance is the best?

The best fund for you will depend on your unique circumstances. Thanks to our handy private health insurance comparison service, we make it even easier to find health insurance. With our free tool, it takes only minutes to compare policies side-by-side to find great-value cover that suits your family’s needs. Our partner funds are:

We do not compare all health funds in the market, or all policies from our partner funds, and at times certain funds or products might be unavailable. Learn more.

Private health insurers in Australia

Below is a list of all registered health funds in Australia. Policies are sometimes sold under secondary brand names or by another company, which aren’t included in this list.

  • ACA Health Benefits Fund
  • ahm health insurance
  • AIA Health Insurance Pty Ltd
  • Australian Unity Health Limited
  • Bupa HI Pty Ltd
  • CBHS Corporate Health Pty Ltd
  • CBHS Health Fund Limited
  • CDH Benefits Fund
  • CUA Health
  • Defence Health Limited
  • Doctors’ Health Fund
  • GMHBA Limited
  • GU Health
  • HBF Health Limited
  • HCF
  • HCi
  • Health Insurance Fund of Australia Limited
  • Health Partners
  • Latrobe Health Services
  • Medibank Private Limited
  • Mildura Health Fund
  • National Health Benefits Australia Pty Ltd (onemedifund)
  • Navy Health Ltd
  • nib Health Funds Ltd.
  • Peoplecare Health Insurance
  • Phoenix Health Fund Limited
  • Police Health
  • Queensland Country Health Fund Ltd
  • Reserve Bank Health Society Ltd
  • rt health – a division of The Hospitals Contribution Fund
  • Lukes Health
  • Teachers Health
  • Transport Health – a division of The Hospitals Contribution Fund
  • TUH Health Fund
  • Westfund Limited

The information provided is current as of July 2023 and sourced from the Private Health Insurance Ombudsman. This list is subject to change.

Premiums, charges and tax breaks

How much does health insurance cost?

The cost of private health insurance in Australia depends on:

  • The type of policy
  • Your level or cover or tier
  • The State or Territory where you live
  • The rebates and discounts you receive based on your age or income
  • Your Lifetime Health Cover (LHC) loading.

Private health insurance in Australia is community rated, meaning that you’ll never be charged a higher base premium than someone else for the same policy based on risk factors such as race, gender, pre-existing conditions or any other reason. However, there are several factors that can still affect how much you pay in premiums or for premium increases, such as your level of cover, state of residence, rebates, discounts and Lifetime health cover loading.

For hospital cover, policies are divided into four tiers (Basic, Bronze, Silver and Gold) which are priced accordingly. Taking out a higher level of hospital cover will naturally cost you more, although you can often reduce your premiums by agreeing to a higher excess instead. Extras cover levels are decided by the insurer and aren’t regulated by the government like hospital cover is.

Age based savings and other discounts

Your premiums will also be influenced by your eligibility for an age-based discount, the Australian Government’s rebate and Lifetime health cover (LHC) loading.

  • Age-based discount. Some insurers will offer an age-based discount of up to 10% if you take out a policy before you turn 25. The discount you may be entitled to reduces by 2% for each year after your 25th birthday that you don’t take out a policy. By holding continuous hospital cover with a policy that lets you retain your aged-based discount, you can enjoy the discount until the age of 41. After you turn 41, the discount is phased out by 2% each year until it reaches zero.
  • Government rebate. If you qualify, the Australian Government’s private health insurance rebate helps reduce the cost of your premiums depending on your age and income. For example, if you qualify for the highest tier of the rebate, you can potentially receive a premium refund of 32.812%.
  • LHC loading. If you don’t take out hospital insurance before the July following your 31st birthday, you may have to pay an increased premium due to the LHC loading. This is to encourage Australians to take out a policy earlier in life to reduce the strain on the public system.

What is a health insurance excess?

When you’re admitted to hospital as a private patient, you may have to pay a lump sum of money to your private health insurer, which is known as the excess. This could be in the form of a payment per hospital admission but may only be for the first admission of the calendar, financial or membership year depending on your insurance provider. Choosing a higher excess may allow you to pay lower premiums.

You may also have to pay a co-payment, which is a set amount you’re required to pay each day you’re in hospital. This is typically capped to a certain number of days per stay.

What does ‘no gap’ mean in health insurance?

Each eligible hospital treatment has a Medicare Benefits Schedule (MBS) fee, a price the government believes is fair. Medicare pays 75% of this fee, while your health insurer pays the remaining 25%. If your specialist charges this exact schedule fee, you won’t incur any out-of-pocket expenses, or ‘no gap’.

If your specialist charges above this fee, you’ll have to pay the extra amount not covered by Medicare and your private health insurance. For extras services, gap cover simply means that the health care provider doesn’t charge above your extras benefits limit which results in no out-of-pocket costs. Your insurer may have agreements with certain providers to eliminate out-of-pocket expenses. Be sure to check with your insurer before seeking treatment to understand what costs you may incur.

For more information check out our page explaining gap payments.

Is private health insurance tax deductible?

While not tax deductible, private health insurance can still have an impact on your tax.

Firstly, the private health insurance rebate is available to anyone within the eligible income threshold with a hospital, extras or combined health insurance policy, and it can be claimed each year via your tax return, whether or not you have an ABN. Alternatively, you can also choose to claim the rebate as a discount on your premiums instead.

Also, if you earn more than $93,000 as a single or $186,000 as a couple or family and don’t hold sufficient private hospital insurance, you could incur the Medicare Levy Surcharge (MLS). The MLS is a government surcharge levied on the taxable income of high-income earners who don’t hold private hospital cover. It is applied as a percentage of your annual income (e.g. 1.5%), which you’ll need to pay for the number of days in the financial year that you didn’t hold hospital coverage.

The cost for Australia’s top surgeries

patient after surgery
When you receive an elective surgery listed on your hospital insurance policy as a private inpatient, Medicare will pay 75% of the Medicare benefit schedule (MBS) fee for the cost of your procedure, while your private hospital insurance will pay the remaining 25%.

Because private specialists are allowed to set their own fees, there may be a difference between the MBS fee and the actual cost you end up paying, known as ‘the gap’. Depending on your policy and treating doctors, this gap may be partially or fully paid by your health fund through their gap cover scheme.

There are also various hospital fees associated with private treatment, like accommodation, theatre fees and medical devices. These hospital fees can get quite expensive; luckily, your health insurance can also cover some or all of these fees, although you may have to pay an excess or co-payment.

Below are some of Australia’s most common elective surgeries1 and their typical costs in a private setting with private health coverage in 2021-22. 2 Keep in mind that these are averages and your own personal costs will vary.

The cost for Australia’s top surgeries

Cataract extraction

  • The average specialists’ fee for this procedure was $2,000
  • 54% of patients had no out-of-pocket costs for their doctors
  • Those with an out-of-pocket cost for their doctors paid $370 on average
  • The typical hospital fee for this procedure was $2,400

Cystoscopy

  • The average specialists’ fee for this procedure was $1,700
  • 52% of patients had no out-of-pocket costs for their doctors
  • Those with an out-of-pocket cost for their doctors paid $300 on average
  • The typical hospital fee for this procedure was $1,700

Cholecystectomy

  • The average specialists’ fee for this procedure was $2,800
  • 35% of patients had no out-of-pocket costs for their doctors
  • Those with an out-of-pocket cost for their doctors paid $400 on average
  • The typical hospital fee for this procedure was $4,500

Total knee replacement (single)

  • The average specialists’ fee for this procedure was $4,800
  • 32% of patients had no out-of-pocket costs for their doctors
  • Those with an out-of-pocket cost for their doctors paid $680 on average
  • The typical hospital fee for this procedure was $18,000

Inguinal herniorrhaphy

  • The average specialists’ fee for this procedure was $2,000
  • 43% of patients had no out-of-pocket costs for their doctors
  • Those with an out-of-pocket cost for their doctors paid $400 on average
  • The typical hospital fee for this procedure was $3,600

Total hip replacement (single)

  • The average specialists’ fee for this procedure was $5,000
  • 29% of patients had no out-of-pocket costs for their doctors
  • Those with an out-of-pocket cost for their doctors paid $690 on average
  • The typical hospital fee for this procedure was $20,000

Abdominal hysterectomy

  • The average specialists’ fee for this procedure was $2,800
  • 42% of patients had no out-of-pocket costs for their doctors
  • Those with an out-of-pocket cost for their doctors paid $500 on average
  • The typical hospital fee for this procedure was $6,800

Prostatectomy

  • The average specialists’ fee for this procedure was $3,000
  • 37% of patients had no out-of-pocket costs for their doctors
  • Those with an out-of-pocket cost for their doctors paid $500 on average
  • The typical hospital fee for this procedure was $4,700

Septoplasty

  • The average specialists’ fee for this procedure was $2,500
  • 22% of patients had no out-of-pocket costs for their doctors
  • Those with an out-of-pocket cost for their doctors paid $620 on average
  • The typical hospital fee for this procedure was $2,900

Myringotomy

  • The average specialists’ fee for this procedure was $1,500
  • 31% of patients had no out-of-pocket costs for their doctors
  • Those with an out-of-pocket cost for their doctors paid $490 on average
  • The typical hospital fee for this procedure was $1,200

 
Sources
1 Australian Institute of Health and Welfare – Elective surgery waiting times, 2021-22. Accessed September 2023
2 Australian Department of Health and Aged Care – Medical Cost Finder, 2021-22. Accessed September 2023

Why compare health insurance?

With so many health insurance providers and policies available, it can be hard to know which one is right for you. At Compare the Market, we can help you on your journey to find the best health insurance for you. You can compare health insurance through our free comparison service in minutes, or if you prefer a more personal approach, you can talk to someone at our expert run call centre to discuss your options.

Lana Hambilton, Head of Health Insurance

Meet our health insurance expert, Lana Hambilton

As Head of Health, Life, and Income Protection Insurance at Compare the Market, Lana Hambilton is passionate about simplifying the comparison process and educating Australians about the value and benefits Private Health Insurance can offer and the critical role it plays in our medical system. She firmly believes that health insurance provides choice in one of the most important aspects of life – our health – and has experienced countless cases over the years where peace of mind comes through the ability to choose when, where, and who will treat you.

Lana has 15 years’ experience in the health insurance and insurance comparison industries. She’s also a Board Member of the Private Health Insurance Intermediaries Association.

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