Benefits and Disadvantages of Private Health Insurance in Australia
What private health insurance can offer beyond Medicare
In Australia, one of the key reasons people consider private health insurance is access to options and medical services beyond what’s covered by Medicare, the public healthcare system. Depending on your policy, private cover can allow you to be treated as a private patient, choose certain healthcare providers, use private hospitals, and potentially access elective surgery and specialist consultations more quickly.
Private health insurance is often discussed in two main parts: Hospital cover and Extras cover. Extras can be purchased as a standalone policy or combined with Hospital cover. Extras is designed to help pay for services Medicare generally doesn’t cover, such as dental, optical, and physiotherapy, which may reduce out-of-pocket costs for those services.
Benefits of private health insurance
More choice and control over your care
Private health insurance may allow you to choose your doctor, specialist, and hospital. It can also enable treatment as a private patient in a private hospital, which some people associate with a more personalised experience.
Extras cover for everyday health services
Extras cover can contribute to the cost of services not covered by Medicare. This can include dental care, optical services, physiotherapy, and chiropractic treatments, helping reduce out-of-pocket expenses where benefits are available under your policy.
Potentially shorter waiting times for elective procedures
Private cover is commonly linked with shorter waiting times for certain treatments and surgeries, particularly elective procedures. Waiting times can be significant in the public system. For example, the Australian Institute of Health and Welfare reported that in 2022–23 the waiting times for common elective surgeries were 175 days for total hip replacement and 283 days for myringoplasty/tympanoplasty (eardrum surgery).
Possible tax savings through avoiding the Medicare Levy Surcharge (MLS)
Hospital cover may help higher-income earners avoid paying the Medicare Levy Surcharge. For the 2023–24 financial year, there is no MLS surcharge for individuals earning $97,000 or less and for families earning $194,000 or less. Above those levels, the MLS is tiered based on income thresholds and ranges from 1% to 1.5% (as outlined by the Australian Taxation Office).
Government rebates and age-based discounts may reduce premiums
Many Australians with private health insurance receive the Private Health Insurance Rebate, which is based on income and age. The rebate can reduce premiums by between 8.095% and 32.385% for individuals earning less than $158,001, or up to $316,000 for families.
Discounts for younger adults
Insurers can offer discounts of up to 10% on hospital premiums for people aged 18 to 29. The age-based discount is 2% for each year under 30, up to a maximum of 10% for those aged 18 to 25. The discount remains until age 41 and is then gradually phased out.
Avoiding the Lifetime Health Cover (LHC) loading by joining earlier
Taking out health insurance before age 31 can help you avoid the LHC loading, which adds 2% to premiums for each year you go without Hospital cover after turning 31.
Peace of mind
Some people value the security of knowing they may have more timely access to care, more provider choice, and treatment in private settings, depending on the policy.
Disadvantages of private health insurance
Premiums can be expensive, and costs vary widely
Cost is a major barrier for many people. Premium prices can depend on the type of cover (Hospital, Extras, or both), whether it’s a singles, couple, family, or single-parent family policy, as well as your age, where you live, and your household income (which can affect rebate eligibility). Premiums also typically increase each year on April 1.Indicative monthly premium ranges may still be significant
Analysis referenced in the extracted content indicates Extras cover can range from $20 to $295 per month; Hospital cover from $80 to $550 per month; and combined Hospital and Extras cover from $90 to $850 per month.Out-of-pocket costs can still apply
Even with insurance, you may still pay costs such as co-payments and excess fees. A co-payment is a fixed amount paid out-of-pocket for certain services in addition to what the insurer covers; hospital co-payments are commonly stated as ranging from $50 to $100 per night. An excess is an amount you agree to pay when you make a claim before the insurer pays the rest. For example, with a $750 excess on a $3,000 surgery, you would pay $750 and the insurer would pay $2,250. Choosing a higher excess can reduce premiums, while a lower excess can increase premiums.Policies can be complex and easy to misunderstand
Policy fine print can be difficult to interpret, and it’s possible to miss exclusions or waiting periods. Each policy includes a Product Disclosure Statement (PDS), typically two to 10 pages, outlining what is and isn’t covered, plus co-payments, excesses, and waiting periods. Comparing multiple policies can be overwhelming.Restrictions and limited cover may not match expectations
Some policies have restrictions, particularly at basic levels of cover. For example, a Basic Tier Hospital policy may list some treatments as “restricted cover” only, which could mean only shared-room accommodation in a public hospital is covered. If you receive treatment in a private hospital or choose a private room in a public hospital under restricted cover, you may face significant out-of-pocket costs.Waiting periods can delay when you can claim
Hospital cover commonly includes waiting periods of up to two months for most services, and up to 12 months for pre-existing conditions and pregnancy and birth-related cover. Extras cover can also have waiting periods, such as six months for optical and 12 months for major dental. Some providers may offer no waiting period on selected Extras, but this varies by policy.Breaks in cover can affect LHC loading
If you don’t maintain continuous Hospital cover, you may face higher premiums later due to the LHC loading. Guidance referenced in the extracted content states you can drop Hospital cover for a total of up to two years and 364 days across your life without affecting your loading; beyond that, the loading increases by 2% for each additional year without cover.Provider agreements may affect costs and choice
Some funds require you to use specific hospitals or providers to receive full benefits. If your insurer does not have an agreement with a particular private hospital or practice, you may face higher costs. This can be especially challenging in regional areas with fewer options.
What private health insurance may cover (and what to check)
What you’re covered for depends on your specific policy. Depending on your level of cover, a provider may cover some or all private patient hospital costs, including accommodation. Medicare covers part of doctors’ fees, with the health insurer covering the remaining costs.
Ambulance and emergency transport arrangements differ by state. The extracted content notes Queensland and Tasmania are the only states that provide coverage for emergency transport costs, while other states and territories have different eligibility requirements for ambulance cover.
Some policies can cover some costs associated with pregnancy, birth, and miscarriage. Some Hospital cover policies may allow a private room (depending on availability) and may allow you to choose a private hospital and obstetrician. Some Extras policies may pay a benefit towards services such as postnatal care.
How to decide if it’s worth it for you
Whether private health insurance is worth it depends on your healthcare needs, financial situation, and lifestyle. If you frequently use medical services, have specific health concerns, or want flexibility to choose providers, private cover may be useful—particularly for some age groups, including seniors.
However, it may not be necessary for everyone. If you’re generally healthy and rarely need medical care, premiums may outweigh the value you receive. It’s also important to consider that premiums typically rise each year on April 1; the extracted content cites an average increase of 3.03% in 2024.
Finally, consider tax implications (including MLS and rebate eligibility), and treat discounts or sign-up deals carefully. Incentives such as free cover for a period, waived waiting periods for Extras, or cashback may be offered, but they may not always offset the overall cost compared with a cheaper policy. Regularly reviewing your cover can help ensure it still fits your needs and provides value.