Australia’s universal healthcare system, Medicare, is a vital and valuable service, providing free emergency medical care and treatment for all Australians, regardless of income. In addition to treating patients in public hospitals, Medicare funds a range of common diagnostic and community tests, such as x-rays, blood tests and free annual eye check-ups.
However, Medicare isn’t all-encompassing. It excludes certain medical services, such as allied health treatments and procedures for non-life-threatening conditions, and there is no cover for the cost of glasses, contact lenses, hearing aids, remedial physiotherapy, or acupuncture.
Receiving treatment in a public hospital via Medicare for high-demand services, such as knee replacements, involves lengthy waiting lists. Public dental waiting lists via Medicare are also overblown, with low-income earners in certain states waiting many months— sometimes more than a year—to see a dentist.
This is where private health insurance comes in.
For those who can afford it, private health insurance allows Australians to skip these queues while offering them greater choice over how and when they are treated. Private health patients can often choose their doctor or surgeon—as well as when they are admitted—whereas public patients are assigned a doctor and usually have little say as to the time frame in which they are treated.
Types of Health Insurance
Broadly speaking, there are two main types of health insurance: hospital and extras. Australians will select between these two or bundle into a mix-and-match policy, which is a combination of both.
Hospital
Hospital coverage ensures a broad range of choice when admitted to hospital, as well as extensive coverage for the cost of various treatments—from specialists’ fees to expensive diagnostics testing. You may receive a private room—subject to availability—and can decide where and when you are admitted with your doctor.
There are four kinds of hospital cover: Gold, Silver, Bronze and Basic. As you would expect, the Gold tier is the most expensive hospital cover and the most comprehensive. In addition to the basics of rehabilitation services, chemotherapy and heart and lung treatment, it covers weight-loss surgery, pregnancy and assisted reproductive services, such as IVF.
At the other end of the spectrum, Basic cover is exactly what it says on the tin, covering just the basics of care, such as rehabilitation and palliative service. Of course, even if you only have Bronze or Basic cover, it doesn’t mean that you cannot access the services provided on higher tiers, but you will need to pay out of your own pocket or wait in line.
As consumer group CHOICE points out, Basic policies may suit those who live in regional areas where there are no private hospitals, so you can at least choose who treats you once admitted.
Many insurers will add premium features to each tier, creating an in-between category that is denoted with a ‘plus’ symbol. For example, Silver+ hospital coverage offers greater coverage than the standard Silver tier but slightly fewer benefits than Gold. Check your insurer’s category breakdown to determine what each tier covers within your health fund.
Each clinical category is marked as either ‘restricted’ or ‘unrestricted’, with the former requiring insurers to pay only a limited amount for private hospital costs, while unrestricted refers to more generous coverage with few, if any, out-of-pocket costs for consumers.
Extras
Extras cover is for the allied health costs that mount up across the space of the year: dental fillings and cleans, new glasses for reading, or physiotherapy treatments for the sports injury you can’t shake.
While many Australians combine their extras and hospital cover into one policy, younger Australians in their 20s will often take out extras-only insurance until they’re older and, therefore, more likely to need hospital coverage.
You can choose from entry-level extras, which usually at least cover dental and optical, to comprehensive extras that cover a wide range of health services, from travel vaccinations and hearing aids to acupuncture and audiology services.
Each service is covered up to a set annual sub-limit depending on whether you have basic or more comprehensive extras. For example, GMHBA’s ‘Mid Extras Policy’—a mid-tier offering—costs $15.45 per week and offers an annual dental limit of $1,500 per year. Most extras policies will only cover you up to a certain amount, too—usually between 65% and 90% of the cost of the treatment, depending on your level of cover and your insurer.
How Popular Is Health Insurance?
According to the most recent figures from the Australian Prudential Regulation Authority (APRA), as of late 2024, 15 million people had health insurance, a slight increase on mid-2024.
Some 45% of those with health insurance have hospital insurance, while 54% have extras cover. Interestingly, most insured Australians have a combination of hospital and extras.
Australians can choose from more than 30 health insurers, although a handful—Medibank, HCF, and Bupa—dominate the market.
Under Australian law, health insurers cannot refuse cover, nor can they charge different premiums for those deemed high-risk. Everyone pays the same amount for the same policy, no matter your age or health status. Insurers can, however, change the policy and cover limits, although they must give the consumer fair warning.
Consumers pay a monthly premium based on the tier of cover they choose, with premiums limited to annual rises and subject to government sign-off.
Government Intervention: The Stick-and-Carrot Approach
As Australia’s population ages, the cost of administering Medicare also increases. For this reason, the Federal Government wants high-income earners—those who can afford it—to take out private health insurance to ease the burden on the public purse. It uses various incentives and penalties to encourage uptake.
The Medicare Levy Surcharge
If you are single, earn between $97,000 and $113,000 and don’t have at least basic hospital insurance, you face a 1% charge on your annual income, which amounts to between roughly $970 and $1,130 a year. This is what is known as the Medicare Levy Surcharge (MLS).
The higher your income, the more you’ll pay in MLS. If you earn between $113,000 and $151,000, and don’t take out private health insurance, you will be slugged 1.25% of your income, roughly $1,412 to $1,887. If you earn $151,000 or more, then it climbs to 1.5% of your income, or $2,265 and above.
If you’re a couple, family or single parent without insurance, you won’t be penalised until you earn more than $194,000.
Lifetime Health Cover Loading
Lifetime Health Cover (LUC) loading is designed to encourage younger people to take up—and maintain— private health cover. Under the scheme, young Australians have until they are 31 to take out some form of basic hospital cover or face a financial penalty.
If you still have no health insurance after the beginning of the financial year following your 31st birthday, a 2% loading will be added to the hospital cover premium for every year you fail to join a fund.
This means a 32-year-old starting their health cover for the first time will receive a loading of 4% (making their premiums 4% more expensive), whereas a 38-year-old will pay 16% more in their loading by the time they join.
LHC loading is capped at 70% and is removed after 10 years of continuous hospital cover.
Federal Government Private Health Rebate
If you’re on a lower or middle income, chances are you’re entitled to a government rebate to help offset some of the costs of your private health insurance. The rebate covers hospital and extras cover, and can be claimed at tax time through a rebate or annually via your health fund.
For example, if you are under 65 and earn less than $97,000 (Tier One), the government will rebate 24.608% of your annual premium costs per year. For more information on rebate tiers, visit the Australian Tax Office (ATO) page.
How Much Does Health Insurance Cost?
The cost of health insurance varies widely between the type of policy you take out—Basic hospital cover is far cheaper than Gold—as well as your insurer.
As a rough guide, expect to pay around $70 a month for basic hospital insurance and up to $200 for gold cover.
The good news is that Australia has strict laws governing any increase in insurance premiums, which is capped annually. At the end of each calendar year, health funds submit requests for price rises to the government which, if accepted, come into effect on April 1 each year.
Premiums rose by an average of 3.03% in 2024, but health insurers argue that costs have risen between 8% and 10%, and the 2025 price increase should reflect this.
However, federal health minister, Mark Butler, has rejected health insurers’ requests for price rises, claiming they are too high, whereas Private Healthcare Australia’s Ben Harris said funds could not keep absorbing higher costs forever.
What Is the Gap?
You may have heard your insurer or physician mention a payment gap. This refers to the difference between what your insurance provider will cover and what the physician or specialist charges.
Some specialists will charge only what is covered by the insurer, which means no gap is payable, whereas others will charge a slightly higher fee that is passed on to the consumer.
What Are Waiting Periods?
Once you take out health insurance, you will usually need to wait before you can start claiming.
The length of wait time depends on the service. For example, general dental, optical and physiotherapy include wait periods up between two and six months, and are set by the insurer.
When it comes to hospital treatments, the government sets maximum wait periods that insurers must abide by. These include a maximum of 12 months’ waiting for pre-existing conditions, as well as pregnancy and birth.
In the case of mental health treatments, rehabilitation or palliative care, the waiting period is capped at two months, even for pre-existing conditions.
What To Look For in a Health Fund
When researching the best health insurance fund for your needs, pay attention to the following:
- Whether the fund offers the right cover for your needs. For example, if you’re after extras only, then you would want to find a fund that offers a wide range of extras policies. You also need to make sure the extras policy is tailored to your personal circumstances. If you have perfect vision, for example, then generous optometry benefits will be of little value.
- Whether you can extend your policy to include family members or your partner, and, if so, at what cost.
- The cost of monthly premiums and whether or not this includes LHC loading.
- What the waiting periods will be for services you are likely to claim on.
Is Health Insurance Necessary?
Whether health insurance is necessary depends on factors such as your age, health needs and income.
Once you turn 31, there are compelling reasons to join a health fund as the government starts adding a 2% loading for every year after this age that you fail to join.
Also, if you earn more than $97,000 it may make sense to have some level of hospital cover if only to avoid paying the Medicare Levy Surcharge. If you’re getting older, you may join a health insurance fund for the simple reason that you’re likely to use it as you age.
But if you’re in your 20s, and are not a high-income earner, you may decide to wait until 31 to join. Rather than pay health insurance premiums each month, you can simply put aside the money that would have otherwise gone on premiums in a savings account to help cover the cost of common services, such as the dentist, optometrist or physiotherapist.
Alternatively, if you’re on a low income, you may prefer to take out health insurance and then receive a generous rebate from the federal government at tax time.
As you can see, there is no one-size-fits-all answer. Before you decide, be sure that you understand how the federal government’s various incentives and penalties work, and compare a few funds and their premiums before signing up.
