How does health insurance work in Australia?

Private health insurance funds typically offer two types of coverage: hospital and extras cover. Hospital cover covers you for situations when you’re admitted into a hospital. Extras cover is also known as general treatment or ancillary cover. This type of policy insures you for out-of-hospital care like dental, optical, and physiotherapy.

You might choose to have only one or the other, but some people have both types of coverage. You can arrange hospital cover with one provider and have another provider for extras.

Government incentives and penalties

Government incentives and penalties apply only to hospital cover. If you don’t have hospital cover, you might need to pay the Medicare Levy Surcharge. You might need to pay the Lifetime Health Cover (LHC) loading at some point if you take out hospital insurance after you turn 31. The LHC could be as much as 70% of your private hospital cover premiums.

If you have hospital cover, the Private Health Insurance Rebate might subsidise your private health insurance. This is depending on your age and income.


Who needs health insurance in Australia?

While health insurance isn’t compulsory, millions of Australians choose to have it. So why do they have it if they don’t technically need to have it? For some, it makes financial sense to have it given rebates and the LHC loading, as well as the benefits paid for services they know they will use, like dental and optical. These aren’t covered by Medicare.

Private health insurance can protect people against unexpected healthcare costs and bills, giving you more control over you and your family’s healthcare. If you’re getting elective surgery in a public hospital, note the median waiting time is double the wait time for private hospitals. The option to choose your own doctors and hospitals could be another motivating factor.

Benefits of health insurance

So what benefits should you expect from having health insurance? Think of your policy as an investment and safety net for now and the future. Properly matched to you and your family’s current needs and priorities, it can let you save money on expensive dental, optical, and other extras health services.

Having it can help you avoid government penalties now and in the future and take advantage of subsidies now. With private health insurance, you could get the treatment you need in a timely manner and focus on recovering rather than worrying about unexpected out-of-pocket costs or waiting lists.

Why would you get health insurance over Medicare?

Medicare guarantees low or no-cost public hospital treatment along with subsidies for certain out-of-hospital healthcare, but it doesn’t offer coverage for private hospital costs, ambulance services, and some extras-related services like dental costs. In addition, you might face much longer waiting lists for non-urgent treatment, which could set back your recovery.

So while Australia’s public health system offers good healthcare for emergency situations, you probably won’t want to rely on it for surgeries and services that mightn’t be urgent but dramatically impact your quality of life. Having private health insurance could let you avoid the long waiting times and see the healthcare providers you want in the facilities you prefer.

How much does health insurance cost?

So how much health insurance costs could depend on your circumstances – including family health history and health status – and your life situation or stage. These affect how much coverage you might need.

  • Single AdultsOnce you stop becoming a dependent, you’re no longer covered under your family’s policy and so you need your own policy.
  • CouplesCouples insurance might or might not be cheaper than two separate singles policies, but it can offer you comprehensive cover and the convenience of one policy and one periodic payment.
  • FamilyFamily health insurance could cover you for family planning treatments like IVF and pregnancy service. You can add your newborn baby and children to the same policy, usually at no extra charge.
  • RetirementWhen you enter retirement, your healthcare needs might start changing significantly. You might decide to switch to a higher level of cover to match these changing requirements.

How do you choose between health insurance providers?

A good starting point is to decide on the coverage you need and compare each provider’s offerings in that tier. In addition to cost after any rebates, you’ll want to consider key factors like what’s covered, excess, exclusions, waiting period, and claim limits. Consider any perks, discounts, and sign-up offers.

Comparing health insurance policies and provider can feel like a complicated exercise, but using online comparison tools can make it easier. These give you quotes and help you view similar policies across multiple providers side by side, so you can compare policies at a glance.