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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.
The longer you leave it to take our private hospital insurance for the first time, the more it could cost you.
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!
With private hospital insurance, you could avoid potentially lengthy public waiting lists, and choose your own available hospital and doctors.
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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Last updated 31/10/2023
Written by Joshua Malin
Reviewed by Lana Hambilton
Our health insurance expert, Lana Hambilton, has some helpful tips for finding the right health insurance policy for you.
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.
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.
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.
Extras cover helps you pay for services that aren’t covered by Medicare, like dental treatment and physiotherapy.
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.
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:
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.
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 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.
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.
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.
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 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 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.
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.
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.
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.
The information provided is current as of July 2023 and sourced from the Private Health Insurance Ombudsman. This list is subject to change.
The cost of private health insurance in Australia depends on:
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.
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.
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.
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.
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.
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.
Cataract extraction
Cystoscopy
Cholecystectomy
Total knee replacement (single)
Inguinal herniorrhaphy
Total hip replacement (single)
Abdominal hysterectomy
Prostatectomy
Septoplasty
Myringotomy
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
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.
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.
