Do I Need Private Health Insurance In Australia?

In Australia, the national Medicare scheme covers the entire or partial costs of treatment for a public patient. In some cases, such as dentistry, treatment is not covered by the public Medicare system, so the public patient must pay 100% of the bill.

By contrast, a patient with private health insurance pays a monthly premium and has part or all of their medical treatment reimbursed by their insurance fund.

One of the standout aspects of Australia’s health insurance system is its fairness. It is ranked first among OECD nations for equity and healthcare outcomes. This includes equal access to care, regardless of income levels. Anyone with a medical emergency will be treated at the closest public hospital, as they have bigger emergency departments than private hospitals.

“In Australia, you do not need private health insurance for emergencies and accidents because it has excellent hospitals to take care of you,” says CHOICE health insurance expert, Uta Mihm.

In the United States, losing a job can mean losing access to medical treatment, as health insurance is often part of the salary package. America does not have a system of universal healthcare and a significant proportion of its population do not have private health insurance. A quarter of Americans had recently delayed medical treatment for a serious illness due to being unable to pay for it, according to a 2019 Gallup poll.

There are several reasons why so many Australians opt for private health insurance despite being able to rely on an adequate public healthcare system.

No Waiting in Lengthy Queues

Having private health insurance means receiving treatment more quickly for non-life-threatening procedures. Wait times have doubled since the Covid-19 pandemic began in 2020, because elective surgeries were cancelled for two years in order to divert health care resources to the pandemic response. In March 2022, elective surgery resumed; however, the backlog remains substantial.

“At the moment, people are opting for private insurance to avoid unprecedented public hospital wait lists,” says Kate Hoskin, the founder of Patient Advocacy Plus.

“People have literally been waiting years for elective surgery. Many endure chronic pain while they wait.”

Being able to have a surgical procedure more quickly is the main reason why people take out private health insurance, says Mihm.

“Many people take out private health insurance because they know that they will require surgery for a health issue,” she says.

“Surgery is considered elective if it isn’t immediately life-threatening, but to wait a year for something like a hip replacement can leave a person with greatly impaired mobility.”

Government Rules: The Carrot and Stick Approach

“The Australian government partially funds our national healthcare system by charging taxpayers a levy on top of their annual income tax. That is the Medicare levy,” notes Pina Sciarrone, CEO and managing director of AIA Financial Wellbeing.

For most eligible taxpayers, the Medicare Levy is charged at 2% of their taxable income.

The government also has tax incentives in place to encourage maximum take-up of private health insurance. This eases the burden on the public healthcare system.

Those who earn more than $90,000 as a single person or more than $180,000 as a couple or family per year will need to pay the Medicare levy surcharge (not to be confused with the Medicare Levy) if they don’t take out private health insurance. This is the “stick” part of the approach.

The cost of basic hospital insurance is likely to be less than the levy surcharge tax–so it makes sense for higher income earners to have private health insurance.

To avoid the surcharge, the government stipulates that singles must have an excess of $750 or less on their policy, and couples or families need to have an excess of $1,500 or less.

There is also a “carrot” provided in the form of private health insurance rebate: at the end of the financial year, the government contributes a portion of the cost of your private health insurance premiums. The rebate is income-tested and it decreases as income rises. In 2024, a single person who earned more than $151,001 or more,000 was not eligible for a rebate, and a couple or family who earned more than $302,001 were also not eligible for any rebate.

Private health insurance can provide peace of mind, however half of all policy holders in Australia are not confident they understand what their policy covers, and only one in four people found it easy to compare policies according to a survey by the Consumers’ Health Forum of Australia.

Paying for unnecessary extras or not realising that there are applicable exclusions result in dissatisfaction when the time comes to make a claim. The survey found that one in five policy holders had a claim denied and overall satisfaction with the purchased policy was at only 38%.

The cost of private health insurance depends on the fund, the policy, the number of people covered by the policy, and the state you live in.

Your age is also a factor. The private health lifetime loading is designed to encourage people to take out hospital cover sooner rather than later.

Under the loading, if you have not taken out and maintained private patient hospital cover from the age of 31, you will pay a 2% lifetime health cover (LHC) loading on top of your premium for every year you lack cover.

Private health insurance policies are divided into three types: extras only, hospital only and hospital and extra.

Extras are treatments such as dental, optical and physiotherapy that are not typically subsidised through Medicare. Extras policies can reduce the amount you would pay if you did not have private health insurance.

Hospital cover is available in four different tiers: Gold, Silver, Bronze and Basic. A policy with hospital cover helps with the costs of treatment as a private patient in hospital; this is also the policy required to avoid paying the government’s Medicare levy surcharge.

It’s important to compare the specific benefits that each policy offers, says Pina Sciarrone, CEO and Managing Director of AIA Financial Wellbeing.

“For example, some may offer extras such as dental and optical cover, while others may offer more comprehensive hospital cover,” Sciarrone says.

“You should also consider the reputation of the insurer, as well as their customer service record.”

The following factors should be considered when choosing a private health insurance policy, according to Sciarrone:

• The level of cover you need;
• The cost of the policy;
• The excess you will need to pay if you make a claim;
• The waiting periods for different treatments, such as optical and dental;
• Additional benefits, such as physical and mental wellbeing programs; and
• The restrictions and exclusions that apply to the policy.

Whether you need private health insurance depends on your personal circumstances. If you have a health condition or you are getting older, having private health insurance offers peace of mind and financial benefits.

For most people under the age of 30, it is not necessary to take out private health insurance–although many opt to take out extras-only cover to help pay for allied health treatments, such as optical and dental.

Do Children Need Private Health Insurance?

Australia’s public health system has exceptionally high standards of paediatric services, which means that private health insurance is not necessary for children.

“The main benefit for having private cover for your kids would be to expedite wait times on simple surgeries like tonsillectomy,” she says.

Always check the fine print of what the policy covers for children.

However, if you have private health insurance, it makes sense to cover your children too – because it is free. For children under the age of 21 in a two-parent household, private health insurance comes at no extra cost for the children under the parents’ plan. Cover is also available for single parents as a specific policy.