Health insurance helps pay for the cost of your treatment as either a private patient in a public or private hospital, or for out-of-hospital services (e.g. dentists). With it, you could avoid public waiting lists for important medical procedures, get subsidised physio sessions, eliminate ambulance costs and much more.
You can purchase health insurance in a few different forms.
Private hospital cover helps pay for your treatment as an in-patient, while extras cover helps pay for services outside the hospital. Or, you can combine the two into one product and enjoy cover in more circumstances!Compare health insurance
Private health cover works by helping to pay for your care (or covering the entire cost) when you’re either treated as a private patient in a hospital, or out of the hospital for certain services (e.g. dental, optical and therapies such as physiotherapy or remedial massages). In exchange, you pay fortnightly/monthly/annual premiums to maintain your cover.
Health insurance can cost roughly $2,499 per annum for private hospital cover, $1,060 for extras-only policies and $3,450 for a combined policy – according to IPSOS in 2019*, based on responses from thousands of surveyed Australians. However, policies can cost more or less, depending on your coverage and choice of insurer.
While many of the surveyed Aussies cited above said that their policy was ‘good value for money’ (roughly 73%), it’s important to note the following:
* Source: IPSOS survey of thousands of Australians between 2018-19. Average prices do not include the Australian Government Rebate.
On the hunt for a health insurance policy? We’ve compiled a list of every health fund in Australia. For some of the best health insurance in Australia, either for yourself or your loved ones with a family policy, take a look at the list below.
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. While we don’t compare every health fund on the market, you can find policies from some of Australia’s top providers.
Note: We don’t compare every health fund on the market. Our partners in the list below appear in bold.
The information provided is current as of April 2020 and sourced from the Private Health Insurance Ombudsman. This list is subject to change.
Medicare does not cover rides in an ambulance, or any other emergency transportation costs (e.g. helicopter evacuations). In Queensland and Tasmania, this cost is borne through homeowners’ council rates. For everyone else, you must take out ambulance cover through a standalone policy or membership, or through private health insurance.
Medicare and private health insurance are designed to compliment each other.
When you’re admitted to a private hospital, Medicare will pay up to 75% of your treatment’s schedule fee as a private patient. Your private health insurance contributes the additional 25% of the scheduled fee as well as covering your accommodation costs and theatre fees for the procedure, and in some instances additional gap cover where your doctor chooses to charge over the scheduled fee.
For out-of-hospital treatments though, extra coverage is designed to contribute towards those services where Medicare does not pay a benefit, like dentist treatments or physiotherapy sessions. Optical is a great example of how Medicare and private health insurance extras products can work together: Medicare pays for the eye check consultation with the optometrist, and your private health insurer provides coverage towards the prescription glasses or contact lenses that are prescribed.
Whilst not tax deductable, there are impacts on your tax from private health insurance.
Firstly, the Australian Government’s private health insurance rebate is available to anyone with a hospital, extras or combined health insurance policy, and it can be claimed each year via your tax return. Alternatively, many of our customers choose to claim the rebate instead as a discount on their premiums.
Also, there is another tax impact on high-income earners. If you earn more than $90,000 as a single, or $180,000 as a couple or family, and don’t hold a sufficient private hospital insurance, you could incur the Medicare Levy Surcharge (MLS). This is applied as a percentage of your annualised income (e.g. 1.5%), which you’ll need to pay for the number of days in the financial year that you did not hold the coverage.
In relation to hospital products: Each hospital treatment has a Schedule Fee – a price the government believes is fair. Medicare pays 75% of this, while your health insurer pays 25%. If your specialist only charges this Schedule Fee, you won’t incur any out-of-pocket expenses – or ‘no gap’.
If instead your specialist charges above this fee, you’ll have to pay the extra amount not covered by Medicare and your private health insurance.
In relation to extras products, this is where the provider doesn’t charge of the available extras benefit for the service paid by the fund, resulting in no out-of-pocket expenses for the customer.
When you’re admitted to hospital as a private patient, you will have to pay a lump sum of money to your private health insurer. This could be owed once per admission, or once per calendar or membership year. Choose a more expensive excess, and your premiums will be cheaper (and vice versa).
Hospital insurance can (depending on the level of cover) cover your treatment as a private patient for birth-related services. These can include pregnancy, labour, post-natal care, C-sections, in-patient obstetrician care and private room accommodation (should it be available). You must hold cover for 12 months before you can claim on these services.
Importantly, not all private hospital insurance policies cover birth-related services. Gold policies, as well as some with a ‘plus’ designation (e.g. Silver Plus), can include this coverage.
A private hospital policy may cover assisted reproduction services to a limited degree for services where the patient is treated as an in-patient (i.e. you must be admitted to a hospital) or is admitted for day surgeries. This could include infertility tests, IVF and GIFT (e.g. egg collection or embryo transfer).
Pensioners can get enormous value from health insurance, especially since Australians aged 65 and over accounted for 43% of hospitalisations in 2018-19.1
However, it’s not as simple as saying ‘all pensioners need cover’, so much as they should all consider cover. For anyone thinking about taking out private health insurance, questions should be asked:
Whether pensioners need private cover or not, it will never cost them more to be insured because of their age. The only price differences come from the choice of policy, state and whether a government rebate, loading or discount applies (in addition to the base premiums).
1 Australian Institute of Health and Welfare – Admitted patients. Accessed July 2020.
Whether private health insurance is worth it will depend a lot on who you are and your priorities. If you’re at a stage of your life where you could do with a little bit of peace of mind and prefer to have options and choice about how you’ll be treated in hospital, private cover is well worth considering.
As General Manager for Health Insurance and Life Insurance at Compare the Market, Anthony Fleming is passionate about helping people better understand insurance and unlock the value in their policies. He firmly believes in the benefits of having cover, like avoiding public waiting lists, accessing a private room and choosing your own doctor (if available).
Anthony has more than 17 years’ experience in the insurance industry. He’s also a Board Member of the Private Health Insurance Intermediaries Association and appears on television and in the press dispelling myths and educating Australians about their insurance needs.
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