Pros and cons of private health insurance

Public vs private health insurance: What’s the difference?

Private health insurance is designed to cover policyholders for certain hospital expenses where the patient chooses to be treated privately, or medical expenses that aren’t covered under Medicare, in Australia’s public health system.

There are some healthcare costs, such as a visit to your GP or an X-ray in hospital, which may be covered or partly covered by Medicare through the public health system, depending on your circumstances and the location you visit. But there are also certain healthcare costs that aren’t covered by Medicare at all. Private health insurance policies are designed to cover some or all of those out-of-pocket costs. It could also cover you for treatment in a private hospital, or if you decide to be treated as a private patient in a public hospital.

Private health insurance is generally divided into two main areas:

• hospital cover, and;

• general treatment (extras) cover.

Depending on which state or territory you live in, ambulance cover may also be available as a third type of private health insurance.

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Why do people take out private health insurance in Australia?

You may choose to take out private health insurance for the peace of mind that you can be treated in a private hospital and skip public waiting lists. You may also want to have hospital cover for tax reasons, or to avoid the Medicare levy surcharge.

Whatever the reason, around half of Australians have some form of private health insurance. According to Australian Prudential Regulation Authority (APRA) quarterly private health insurance statistics for March 2025, 45.3% of the population have hospital cover.

Potential advantages of private health insurance

1. Shorter waiting times

Holding private health insurance cover could mean having a shorter waiting period for certain hospital treatments, such as elective surgery (any surgeries that are not conducted as a result of an emergency presentation) but are still medically necessary and may even be required urgently. Elective surgery can include anything from cataract surgery to joint replacements.

Going through the public system for elective surgery often involves longer waiting times. According to the Australian Institute of Health and Welfare (AIHW), access to elective surgery is affected by demand for elective surgery, the availability of hospital staff and other resources, clinical factors such as how urgently the surgery is required, and patient factors such as where they live. AIHW statistics show that in 2023–24, the overall time within which 50% of patients were admitted (the median waiting time) was 46 days, and the time within which 90% of patients were admitted was 329 days.

In addition to waiting periods, priority patient order in the public system means that a patient’s operation may be pushed back so that the surgeon can operate on a more critical patient. In contrast, those with private health insurance generally have the security of being able to schedule a ‘locked-in-date’. This means that the operation is unlikely to be pushed back.

2. Private hospital rooms

In a public hospital, you are usually placed in a room to share with other admitted patients. Private health members are typically able to request a private room, which is usually subject to availability. If you’re expecting a baby, you may also have a better chance of getting a private room where your partner or family member can stay with you.

3. Dental covered by private health insurance

Going to the dentist is generally not covered by Medicare. Even the most basic treatments, such as a dental check-up or clean and scale, are generally not covered. There are some exceptions though, such as for public dental services and basic dental services for children that meet the eligibility requirements.

If you don’t have private health insurance that includes dental cover, you have two options: pay in full at a private dental clinic, or visit a state-run public dental clinic. Access to public dental clinics is generally limited, and eligibility may vary from state to state in Australia. Waiting lists for public dental treatment can also be lengthy, although certain groups may qualify for priority access.

If you have private health insurance, your policy may cover all or part of the dental treatment costs. This can include services and treatments from check ups through to major dental work like root canals or wisdom tooth extractions. Your policy’s exact level of cover will depend on your insurance provider, so it could be worth contacting your insurer or reading your policy documents, such as a Private Health insurance Statement (PHIS) if you’re unsure.

4. Claim money back on non-Medicare health services

Many people sign up for private health insurance to receive a rebate on ‘general’ health services that are not covered by Medicare. For example, extras cover often covers part or the whole cost for general health services such as dental, optical, chiropractic and physiotherapy.

In addition, private health insurance members have the option of adding pregnancy (obstetrics) to their hospital or extras cover. Depending on the premium, this would mean having access to certain pregnancy-related services which wouldn’t be available through Medicare. But keep in mind, there is generally a 12-month waiting period for pregnancy cover through a private health insurance policy.

5. Select your doctor, specialist or surgeon

In a public hospital, your doctor will be the one on duty at the time of your admission, treatment or operation. You do not get to decide who your doctor is.

Having a private health insurance policy generally allows you to select your preferred doctor, specialist or surgeon in a private medical setting (pending the availability of your preferred doctor or surgeon in the private system).

6. Avoid the Medicare Levy Surcharge

The Medicare Levy Surcharge was introduced to encourage those with higher levels of income to take out private health insurance policies and take pressure off the public health system.

According to the Australian Taxation Office (ATO) at the time of writing, if your income in 2024-2025 is over $97,000,/year as a single, or $194,000/year as a couple, you may be subject to a surcharge of at least 1% of your income on top of the basic Medicare Levy. The levy surcharge can rise to as high as 1.5% for people in the highest income bracket.

7. Save long-term with Lifetime Health Cover

Lifetime Health Cover (LHC) was introduced to encourage young people to purchase a private health insurance policy to ease the dependence on the public health system. Under the LHC, a loading charge of 2% is added to your private health insurance premium for every year you are aged over 30 and don’t have hospital cover, starting on 1 July following your 31st birthday.

For example, if you are 40 years old as of January this year, and have never taken out a private health insurance policy until now, your additional LHC loading would be an extra 20% each year (2% times 10 years). This hypothetical example is based on the Australian Government’s LHC calculator, and assumes Medicare coverage for a person who was not overseas on 1 July of their 31st birthday.

PrivateHealth.gov.au, managed by the Private Health Insurance Ombudsman, says you must hold onto your private hospital cover and pay the LHC loading for 10 continuous years before the LHC loading is removed. Having an appropriate private hospital insurance policy in place could help you eliminate or minimise the effect of the LHC loading.

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Potential disadvantages of private health insurance

1. The cost

Private health insurance can be expensive. Depending on the policy, an individual, couple or family could pay thousands of dollars in premiums each year, with costs typically increasing annually. Canstar research shows the average annual cost of combined hospital and extras health insurance for singles is $3,199 for young people, $3,719 for established people, and $4,176 for mature people.

Since 1 April 2019, health funds have had the option of offering discounts for younger customers, which may bring premiums down for those customers, separate to any interim cost savings for health insurance that may also apply.

2. Complex products

For some, the variety of health insurance options on offer and the range of policy inclusions can be overwhelming and challenging to understand. Health insurance reforms introduced in 2019 were aimed to simplify the products on offer. Private health insurance providers in Australia are now 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.

3. Excluded treatments

Depending on the policy, if you end up needing treatment in hospital, you might still not be covered. Some health insurance policies may have specific exclusions or terms and conditions for certain treatments. It’s a good idea to read the Private Health Information Statement provided to you, as well as any other important documentation, before signing up.

4. Out of pocket costs

A private health insurance policy may only cover part of the cost of a treatment or procedure. You could still end up having to pay a substantial amount as an excess or gap, though this would be less than you might pay without insurance in place. It’s often a good idea to ask for a quote from health providers and to talk this through with your health insurance provider, so you can more accurately estimate the costs.

Is private health insurance worth it?

The question of whether private health insurance is worth it will come down to your individual needs and circumstances. Having private hospital cover can offer peace of mind knowing that you can choose to be treated privately and skip public hospital waiting lists, but it can also be expensive, and premiums in Australia are on the rise. A 2024 survey into the insurance sector examined Aussies’ priorities when it comes to insurance, and found that as a nation, we are more likely to insure our vehicles than our health, and as cost of living pressures continue to bite, many of us may be tossing up whether to keep private health cover.

If you want to keep your private health insurance but cut costs, there are various ways to go about it. Reducing your level of cover may be one way to save, especially if you haven’t evaluated your health insurance in a while, and downgrading to a more basic silver or bronze cover could allow you to save on premiums and avoid the Medicare levy surcharge, as long as you are covered for everything you need. Likewise, if you have extras cover but you rarely claim and feel like you are not getting value for money, then cutting your extras and just maintaining hospital cover could be another way to save.

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