Private health insurance in Australia helps pay for medical treatment when you’re admitted to hospital as a private patient, or for many treatments received out of hospital that aren’t covered by Medicare. Health insurance policies can be split into three different types:
Only covers yourself.
Health insurance coverage tailored to you, no matter your stage of life.
Covers you and your partner.
You’ll both be covered for the same services and only have to pay one set of premiums
Covers your whole family. Dependants under a certain age may be added at no cost.
Dependants are usually covered on this policy until they’re 21 or 25 depending on their studying status.
Covers both you and your dependants.
Similar to family policies, but may be cheaper as they only provide cover for one adult.
Service | Is it covered? | |
Hospital cover | Extras cover | |
| Heart surgery | ✓ | ✗ |
| Pregnancy and birth | ✓ | ✗ |
| Joint reconstruction | ✓ | ✗ |
| Dental surgery | ✓ | ✗ |
| Dental check-ups | ✗ | ✓ |
| Physiotherapy | ✗ | ✓ |
| Optical | ✗ | ✓ |
| Psychology | ✗ | ✓ |
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Private hospital insurance is split into tiers according to the clinical categories covered by your policy. These tiers are Gold, Silver, Bronze and Basic. Some policies will have a ‘plus’ modifier, meaning they cover all the clinical categories in their tier and some from a tier above.
Waiting periods are the amount of time you must wait before you can claim your health insurance benefits. Hospital cover waiting times are regulated by the Australian Government, while extras waiting times are decided by the insurer.
Extras cover is for the health services we use outside of the hospital. You can use extras cover for some health care appointments, hearing aids, chiro and much more.
Some policies will contribute towards the health services that you use regularly to maintain a healthy lifestyle. This may include nutritionist consultations, programs to quit smoking or even a gym membership.
Obstetrics cover is a benefit of Gold or some ‘plus’ tiered private hospital policies. While the public system does offer good quality pregnancy and birth-related services, many expecting mothers may prefer the comfort of choosing their own obstetrician to be there with them during the birth.
Lifetime Health Cover loading is a system that encourages Australians to take out private hospital cover earlier in life. If you don’t take out complying hospital cover before 1 July following your 31st birthday, your premiums will incur a 2% loading for ever year you don’t hold cover (when you eventually take out a policy). Loading is capped at 70%.
In Australia, private health insurance gives you access to private healthcare services that might be prohibitively expensive otherwise. In exchange, you pay your health fund a fortnightly, monthly or annual fee called a premium. There are several health funds available in Australia so you can shop around for a policy that best meets your needs. Private health insurance in Australia is also community rated, meaning that a health fund can’t refuse to insure any Australian citizen or permanent resident based on things like pre-existing medical conditions, and must provide everyone with the same level of cover for the same premiums.
Overseas visitors that aren’t eligible for Medicare are often required to take out a separate type of insurance called Overseas Visitor Health Cover (OVHC) to ensure they have access to hospital treatment during their stay.
The cost of private health insurance will depend on the level of cover you take out and the health fund you choose. Depending on your income, you may also qualify for the Australian Government rebate or an age based discount which will reduce your premiums. You can also lower your premiums by agreeing to an excess on a nil excess policy or by agreeing to a higher excess. The excess is an upfront payment you agree to make on admission to hospital (typically only payable once per person, per year).
If you didn’t take out health insurance by 1 July following your 31st birthday you may also need to pay the Lifetime Health Cover (LHC) loading which is added as a percentage of your premiums.
While there is no way to avoid the Medicare levy, which everyone must pay, If you’re a high-income earner, you may also need to pay the Medicare Levy Surcharge (MLS) which can be avoided by taking out a hospital cover policy. Keep in mind, an extras cover policy won’t help you avoid the MLS. However, even the lowest level of hospital cover will exempt you from having to pay the MLS.
Even if you have private health insurance, you may still face some out-of-pocket costs. When you’re treated in a hospital as a private patient, Medicare will pay for 75% of the Medicare Benefits Schedule (MBS) fee, and your insurer will cover the last 25% as well as any accommodation and theatre fees. However, some doctors will charge above the scheduled fee, and this difference in fees is referred to as the gap payment.
You can sometimes avoid or lessen the gap as many health funds have gap cover arrangements with certain hospitals and doctors. Be sure to check with your health fund before going in for treatment to see if there’s a suitable doctor with a gap cover arrangement.
Legally, all health funds must provide coverage for those with pre-existing medical conditions. However, you can expect longer waiting periods for treatment relating to your pre-exiting condition of up to 12 months, while cover for psychiatric, rehabilitative or palliative care is usually limited to only 2 months.
Remember that you don’t need a diagnosis for an illness to be considered pre-existing. A pre-existing condition is any ailment, illness or condition, the signs or symptoms of which, in the opinion of a medical practitioner appointed by the health insurer, existed at any time during the six months prior to taking out hospital cover or upgrading to a higher level of cover.
Whether you should take out hospital cover or an extras policy is entirely dependent on your personal needs and circumstances. Some people like the peace of mind of choosing their own doctor and having a private room during a hospital stay (if available), while others prefer to take advantage of out-of-hospital services to maintain their health. For the best of both worlds, you can take out a combined policy to meet all your needs.
Keep in mind that extras cover won’t count towards LHC loading, so you might want to consider taking out hospital cover before 1 July following your 31st birthday.
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.
