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How do health funds work?

Not sure how health funds in Australia work? Find out more about the different types of cover, structures, how to claim and more.

Health care and medical treatment in Australia is covered by the public health system, Medicare, and a number of for- and not-for-profit private health funds.

Private health funds compliment Medicare by paying a benefit for procedures and treatments outside the scope of cover of the public health system, such as dental and optical treatments. Keep reading to find out more about how health funds works.

What are the different types of cover available?

There are four types of health cover available in Australia: hospital, extras, combined hospital and extras and ambulance-only cover.

Compare health insurance online or with help from an adviser

How are health funds structured?

Health funds can be either for-profit or not-for-profit.

Not-for-profit health funds are run to benefit members rather than shareholders. These types of private funds claim to provide their members with a wider scope of cover, lower premiums and greater benefits for covered items.

One way this can be achieved is through tax exemptions. For-profit funds are not eligible for the income tax assessment exemptions that not-for-profit funds are.

GMHBA and HIF are two of the many not-for-profit health funds available to the Australian public.

Typically, the differences between not-for-profit and for-profit health funds can include:

  • Ownership structure. For-profit health funds are owned by an institution such as a corporation or a union.
  • Size. Not-for-profit health funds generally operate on a national basis whereas for-profit health funds tend to be localised.
  • Membership. Not-for-profit funds are open to the general public.

How can you claim a benefit?

There are different processes to follow for claiming a hospital treatment or an extras treatment.

The way you make a hospital claim will depend on whether or not you’re being treated at one of your fund’s member hospitals.

If you’re in a member hospital, the bill will be sent straight through to your health fund. If you’re in a non-member hospital, you may get the bill sent to you, which you will then need to forward onto your fund. Your claim will also depend on whether or not your treating doctor is a part of your fund’s gap cover agreement.

This agreement between the doctor and your health fund ensures that your fund will cover any extra costs charged by your doctor above the Medicare Benefits Schedule (MBS). If your doctor is not part of this agreement, you will need to cover any out-of-pocket expenses.

You can view a list of member hospitals and gap-cover doctors specific to your health fund on your provider’s website. The biggest health funds have the largest number of member hospitals and gap-cover doctors in each state.

If you’re claiming for extras, most eligible providers will allow you to claim on the spot with HICAPS. If your provider does not support HICAPS you may be able to:

  • Claim online. Head to your fund’s website and submit your claim online.
  • Claim in person. Go into your fund’s local branch.
  • Claim by post, email or fax. Fill out the claim form and send it, along with the relevant documentation, to your health fund.

What are the membership requirements for Australian health funds?

Membership requirements vary amongst different health funds. Under the Private Health Insurance Act (2007), a health fund can register as an open or restricted fund.

Not-for-profit health funds offer open membership, meaning Australian citizens, permanent residents and temporary residents are eligible to apply to become a member and get cover.

For-profit health funds offer restricted membership, meaning only some people can become members. Membership may be restricted to a company or a union, for example, Commonwealth Bank operates a health fund for employees called CBHS and Teachers Health Fund provides health insurance for members of the education industry.

Membership is often extended to family members of eligible applicants as well as people who were previously a member of the company, union or group.

How do Australian health funds operate nationwide?

Health funds operate similarly on a national basis, however, there are slight differences in the cost of cover and access to facilities between states. For example, you’ll find residents in Victoria pay higher premiums than residents in other parts of the country.

The largest health funds in Australia by market share

On average, restricted member funds have a high member retention rate. However, this indicator is likely to be attributed to workplace arrangements.

Open Member Funds Restricted Member Funds


Frequently asked questions

Can a health fund refuse to give me private health insurance?

  • If you’re an Australian citizen, a health fund can’t refuse to give you insurance on account of your health or whether you’re likely to make a claim or not.
    It’s important to note that there’s a distinction between private health insurance and life, trauma and total and permanent disability (TPD) insurance. Private health insurance is community rated, the other types of insurance are risk rated.
    A community rated policy means you’re entitled to buy the same product as someone else, at the same price, and you’re guaranteed the right to have your policy renewed if you wish.

Can a fund change their premiums or policy rules?

  • Yes, your health fund can change the terms and conditions of your private health insurance policy, but they have to tell you first. Any changes must also be reflected in the Standard Information Statement.

Do I have to purchase private health insurance before my 31st birthday?

  • You don’t have to purchase private health insurance if you don’t want to. If you do purchase private cover after 1 July after your 31st birthday, you’ll pay the Life Health Cover loading fee. This is an additional fee on top of your health insurance premium of 2% for every year after your 30th birthday for the next ten years. This fee is capped at 70%.

Do I get a rebate if I take out private health cover?

  • The Australian Government Private Health Insurance Rebate makes private health insurance cheaper for everyday Australians. The government will help contribute to the cost of your private health insurance premiums by offering a tax rebate based on your income and your age. You can claim the rebate back at the end of the financial year or you can have the rebate deducted from your premiums upfront.

Compare your health insurance options online

Details Features
High 65 / 75 / 85% - $0/$250/$500 Excess
High 65 / 75 / 85% - $0/$250/$500 Excess
Combines High Hospital Cover with its highest level of extras cover.
  • Cover starting from $44.74 weekly
  • 12 month waiting period for pregnancy
  • 65% back on extras
  • Choice of $0, $250 and $500 excess
Enquire Now More info
Smart Combination
Smart Combination
Smart combination provides a high level of cover for both hospital and extras.
  • Claim up to $2725 back on extras
  • Hip and knee replacements
  • General and major dental
  • Physio
Enquire Now More info
Highest level of combined cover offered by CBHS. Includes the same benefits as Comprehensive Hospital and Top Extras plus more. Restricted fund: Only current or former staff (and their families) of Commonwealth Bank Group and their subsidiaries which include Aussie, Bankwest, Colonial First State and more can join.
  • No excess or co-payments on hospital cover
  • Non-student dependent under 25 can be kept on policy
  • Access to Chronic Disease Management Programs
  • Widest range of extras including orthodontics
Enquire Now More info
Bronze Hospital (no pregnancy) and Bronze Extras Set Benefits
Bronze Hospital (no pregnancy) and Bronze Extras Set Benefits
High level of hospital cover and extras cover for a range of popular services including knee and should reconstructions.
  • Most comprehensive hospital options
  • Cover for general and major dental
  • Shared or single room in a private hospital
  • Intensive and coronary care
Enquire Now More info
Premium Hospital and Silver Extras Cover
Premium Hospital and Silver Extras Cover
Comprehensive hospital cover including pregnancy cover. Also included affordable mid-level extras cover for dental, optical and therapies.
  • Cover from $39.50 per week
  • Pregnancy and birth-related services cover
  • Heart surgery cover
  • 100% cash back on two dental check per year
Enquire Now More info
Top Hospital with Top Extras
Top Hospital with Top Extras
Get comprehensive hospital and extras cover and tailor your policy to your needs.
  • Pregnancy and birth services cover
  • Back surgery cover
  • $1000 general dental annual limit
  • $600 physiotherapy annual limit
Enquire Now More info
Young Couples Combined Cover
Young Couples Combined Cover
Mid-level hospital and basic level Extras package with an excess for young, healthy couples that are not quite ready to start a family.
  • Emergency ambulance cover
  • Cancer-related surgery cover
  • 70% back on extras
  • $300 dental annual limit per person
Enquire Now More info

Picture: Shutterstock

Richard Laycock

Richard is the insurance editor at He is on a mission to make insurance easier to understand.

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