How to choose health insurance

Private health insurance is a scheme that exists to help Australians cover the costs associated with health care. While all eligible Australians are guaranteed access to a range of free publicly funded health services via Medicare, private health insurance can provide benefits above and beyond the public system.

There are two components to private health insurance – hospital and extras cover. The hospital component covers the cost of treatment in hospital by a doctor or specialist. It can potentially allow you to be treated by a doctor of your choice in a private facility, with some flexibility in scheduling your procedure. The extras component generally covers services that Medicare does not. For example, optical services, general and major dental treatments and physiotherapy may be covered.

If you’re weighing up the pros and cons of private health insurance, Canstar has a guide that may be able to help you make up your mind. If you have decided to sign up for private health insurance, but are unsure what kind of cover to take on, and whether you might want hospital and extras cover or just one or the other, you may be able to get a clearer picture of your needs by asking yourself some of these questions.

What should you look for when choosing health insurance?

When choosing health insurance, it is important to consider your health needs at your current stage of life, along with any future health needs you may foresee, along with the current and future needs of anyone else who may be covered along with you on the policy, such as your partner or your children.

While health insurance is a matter of individual choice based on your needs and circumstances, there are some specific questions you might ask, about topics such as what inclusions the cover has, what excess you’ll have to pay, whether or not you want extras cover, and whether you wish to avoid the Medicare Levy Surcharge (MLS).

The table below displays a snapshot of 5-Star hospital & extras policies on Canstar’s database with links to providers’ websites, sorted by provider name (alphabetically). Please note the results are based on a couple aged under 35 in NSW, with no pregnancy cover.

What inclusions does the cover have?

Private health insurance providers in Australia are required by law to categorise their hospital cover into one of four tiers – Gold, Silver, Bronze and Basic. These four categories are standardised across all health insurance providers. The Basic tier is the most limited in terms of its inclusions, while the Gold tier is the most comprehensive. If you want to know more, Canstar has a thorough breakdown of the four tiers of hospital cover and what they cover you for.

If you are young, single and healthy and do not plan on starting a family soon, then you may opt for one of the lower tiers, such as the Bronze or Silver tier, when choosing private hospital insurance. It is worth bearing in mind that the Basic tier tends to be extremely limited in terms of its inclusions, and insurance providers may well only offer a limited amount towards treatments.

If you and your partner plan on starting a family and want to be covered for pregnancy and birth-related services, you may like to consider taking out a Gold tier hospital policy.  Limited Silver tier policies also cover for some pregnancy and birth-related services. Gold tier health insurance policies may include cover for joint replacements and kidney dialysis, which may be priorities for some older people.

It is also worth keeping in mind that, whichever level of hospital cover you choose, you will need to serve the relevant waiting periods before being covered for all services. For example, if you and your partner are on a Bronze tier policy and wish to be covered for pregnancy and birth, you might switch to a higher tier, but you will also need to serve out the waiting period (generally 12 months).

What excess will you have to pay?

If you sign up for private hospital cover, you will also need to choose an excess – this is an amount that will be payable on your first hospital admission per calendar year, and it can be up to $750 per person per year (up to a maximum of $1,500 for a family).

When selecting hospital cover, the excess you choose will have an effect on the premiums you end up paying – a higher excess will mean you’ll pay less in premiums but more upfront if you are admitted to hospital, while a lower excess will mean the reverse.

When choosing private hospital cover, you might consider a higher excess if you are young and healthy and do not foresee yourself needing any hospital visits in the near future, or if you are happy to pay the upfront cost of a high excess, should you need a hospital admission.

Conversely, if you have a history of health concerns, have had multiple hospital admissions in the past and foresee that you may need more in the immediate future, then you might choose a lower excess.

Do you want extras cover?

The extras component of private health insurance can cover you for things that Medicare does not – this can include optometry services and products such as  new glasses, general and major dental treatments, physiotherapy and complementary therapies. Extras cover can be taken out in addition to hospital cover, or you can take out an extras insurance policy on its own.

Whether you choose extras cover will come down to your individual needs, and those of your partner and dependants if they’ll be on your policy too. For example, if you are young and active and feel you may wish to claim for physio visits, or if you have a family and you can foresee numerous optometrist and dentist visits each year, then you may find extras insurance to be cost-effective and represent good value for money.

It is also worth keeping in mind that, like hospital cover, there are different levels of extras cover. Some policies may cover you for major dental treatments such as crowns and root canals, while other policies from the same provider might only include coverage   for basic dental procedures like checkups and cleanings. As a general rule, the more comprehensive the cover, the more expensive it’s likely to be.

If you feel you would pay more in insurance premiums than you would actually claim in a calendar year, then you may decide that extras insurance is not cost-effective, and decide to forego it when choosing health insurance.

Do you want to avoid the Medicare Levy Surcharge?

If you are young and healthy and do not foresee any major health issues arising in the future, you may still wish to take out private health cover to avoid paying the Medicare Levy Surcharge (MLS) at tax time. Currently, if you earn more than $90,000 a year as a single or $180,000 a year as a couple, you will be required to pay a percentage of your taxable income if you do not have an appropriate level of private hospital cover.

The MLS is one strategy employed by the federal government to encourage young, healthy people to take out private hospital cover, and Lifetime Health Cover (LHC) loading is another. LHC loading means that, for every year after you turn 31 that you do not sign up for private hospital cover, a 2% loading will be put onto your premiums, up to a maximum of 70%.

In a bid to encourage young, healthy people to sign up, some private health insurance providers offer a discount to people aged 18–29. Similarly, the federal government offers a private health insurance rebate to eligible Australians to contribute towards the cost of health insurance premiums.



Cover image source: Fizkes Productions/

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This content was reviewed by Sub Editor Jacqueline Belesky and Finance and Lifestyle Editor Shay Waraker as part of our fact-checking process.

Alasdair has more than 15 years of experience as a journalist, and he specialises in property and lifestyle topics for Canstar. He has a Bachelor of Laws (Honours) from the University of Queensland and has lectured at QUT. His work has appeared in outlets including Pedestrian.TV, the ABC and Junkee.

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