What is private health insurance?

Private health insurance is optional cover that pays for healthcare costs beyond what Medicare covers, from hospital stays to dental, physio and optical.

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Nicola Middlemiss

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Key takeaways

  • Private health insurance covers healthcare costs beyond Medicare.
  • There are two types: hospital cover (for in-patient care) and extras cover (for everyday services like dental and physio).
  • Take out hospital cover by 1 July following your 31st birthday to avoid the Lifetime Health Cover loading on premiums.
  • Higher income earners may pay a Medicare Levy Surcharge without adequate private hospital insurance.

What exactly is private health insurance in Australia?

Private health insurance in Australia is optional cover you pay for on top of Medicare. In return, you get reimbursements for everyday healthcare costs, such as dental, optical and physio. It also provides faster, more flexible access to in-hospital care, including the choice of your own doctor.

There are two types of health insurance - extras and hospital - which offer different benefits:

Extras: Get reimbursed for everyday healthcare costs such as dentistry, optometry, and physio.
Hospital: Skip hospital waiting lists, choose your preferred surgeon, and stay in a private room.

Public vs. private healthcare

Public healthcare: Medicare is Australia's public healthcare system. It covers or helps lower the cost of hospital care, doctor visits, mental health care, tests and scans, and certain prescription medications. However, there are often long waitlists for non-urgent procedures, dental care is not covered for adults, and ambulance transport is not included.

Who it's good for: Low income earners, people who only require basic medical care, and people who are willing to wait for non-urgent procedures.

Private health insurance: Private health insurance helps supplement the coverage offered by Medicare. It can be used to claim reimbursements for a range of everyday healthcare services including dentistry, optometry, and chiropractic care. It can also be used to access specialist healthcare services without a referral, skip hospital waiting lists, and choose your own doctor.

Who it's good for: People who want quick access to healthcare, who regularly pay for everyday healthcare throughout the year, and people who want more choice over their care.

What does private health insurance cover?

The cover offered by private health insurance depends on the type of policy you get, and the level of cover you get. Some examples of benefits that are typically covered include:

Extras: Dental check-ups and services, eye tests and prescription glasses, physiotherapy sessions, some pharmacy costs, remedial massages, and emergency ambulance transport.

Hospital: Quicker and more convenient in-hospital healthcare, including joint reconstructions, hernias, appendix removals, and chemotherapy, as well as ambulance transport.

Remember, the level of cover depends on which policy you choose, so always check the PDS carefully to fully understand what protection you have.

There are also some elements of healthcare that are never, or very rarely, covered by private health insurance, such as:

  • Cosmetic surgery or services: Cosmetic surgeries including breast augmentation or skin removal surgery, unless they are deemed medically necessary.
  • Services within the waiting period: Some benefits cannot be claimed within a waiting period. For example, it is common to have to wait 2 months before claiming for joint reconstruction.
  • Overseas services: Any healthcare services received overseas.
  • Pre-existing conditions: Any pre-existing conditions are not covered in the first 12 months.
  • Unrecognised providers: Any healthcare treatment or service delivered by a provider not recognised by your health fund.
  • Charges above the MBS: For hospital treatments, insurance will only cover the amount stipulated by the Medicare Benefits Schedule. If your doctor charges above that amount, and doesn't participate in gap cover, you'll have to pay the difference.

How much does private health insurance cost?

The cost of private health insurance varies significantly depending on the company offering coverage, level of cover chosen, the size of your excess (that's the amount you have to pay before your health insurance will kick in), your income, and at what age you first purchased private health insurance.

Extras cover: Typically starts from around $15 a month for a basic policy through to around $100 a month for an extremely high level of cover.

Hospital cover: Hospital cover comes in four main tiers - basic, bronze, silver and gold.

  1. Basic: Starts from around $75 a month with an average cost of around $85 a month.
  2. Bronze: Starts from around $90 a month with an average cost of around $105 a month.
  3. Silver: Starts from around $115 a month with an average cost of around $160 a month.
  4. Gold: Starts from around $200 a month with an average cost of around $285 a month.

How the cost of cover is affected

If you choose a higher excess, the average cost of your policy will reduce. There are also government incentives - or rebates - available to help cover the cost of private health insurance. However, these rebates are only available to people in certain income brackets.

If you didn't take out hospital cover by 1 July following your 31st birthday, it's also possible that you will have to pay an extra fee called the Lifetime Health Cover loading. This adds 2% to the price of your hospital cover premium for every year over the age of 30 that you didn't have hospital insurance. Once you have had continuous cover for 10 years, the loading charge is removed. We go into more detail about this below.

Government rebates and incentives

There are several government incentives that are designed to encourage people to take out private hospital insurance. These include:

  • The Medicare levy surcharge: For the 2026-27 financial year, singles who earn over $105,000, and do not have an adequate level of private health insurance, will be required to pay between 1% and 1.5% of their income, as an additional tax. For a family or couple with a combined income, the threshold is $210,000, increasing by $1,500 for each dependent child after the first. However, it is possible to get adequate private insurance for less than the price of this tax.
  • The private health insurance rebate: The private health insurance rebate is a government contribution which lowers the cost of private health insurance. You can claim this as reduced premiums throughout the year, or as a refund when you lodge your tax return. However, if you earn over $164,000 as a single, or over $328,000 as a couple or family, you may not be eligible in 2026-27.
  • Lifetime Health Cover (LHC) loading: LHC loading is an additional charge applied to your health insurance premiums if you don't take out hospital cover by 1 July following your 31st birthday. For each year over the age of 30 that you did not hold hospital cover, you are charged an additional 2% of your hospital premium, up to a maximum of 70%. This charge remains in place until you have held continuous cover for 10 years. This is why many people take out a low-cost policy when they reach 30, to avoid paying significantly higher prices further down the track.

Rebecca is a teacher who loves to play tennis. Unfortunately, she has been experiencing significant pain in her knee and has been unable to stand for long periods in the classroom, or pursue her favourite hobby. She visits the doctor, who tells her she needs a knee replacement. The average waiting list for a knee replacement in the public system is around 9 months.

Thankfully, Rebecca has private health insurance which covers knee replacements. She schedules the operation for two weeks' time, chooses a surgeon who participates in gap cover, and looks forward to recovering in a private room.

When the surgery comes, Rebecca pays her $500 excess and the rest of the fee is handled by her health insurer. When she gets out of hospital, Medicare covers 5 physio appointments but Rebecca uses her extras health insurance to help pay for an additional 5 sessions.

This is a fictional case study for demonstrative purposes only.

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Our expert says

"Waiting months for a health condition to be resolved can have a significant impact on your ability to work, your lifestyle and your overall wellbeing. Private hospital cover can help you get back to feeling your best, faster. For a lot of people, that's worth the investment."

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Nicola Middlemiss is a journalist with nearly a decade of experience in personal finance and insurance. She has contributed to Domain, Yahoo Finance, Money Magazine and Insurance Business Australia, offering in-depth insights into commercial insurance in the Australian market. Nicola holds a Bachelor’s degree in English from the University of Leeds and a Tier 1 General Insurance (General Advice) certification, which complies with ASIC standards. See full bio

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Nicola has written 170 Finder guides across topics including:
  • Personal finance
  • Personal insurance, including car, health, home, life, pet and travel insurance
  • Commercial business insurance
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