Is private health insurance worth it?

Private hospital insurance provides cover for inpatient procedures in Australian private hospitals. You can also choose to claim on your private hospital insurance when you are treated in a public hospital. This type of cover can contribute towards a wide range of procedures and elective surgeries, including joint reconstructions, rehabilitation and heart surgery.

What exactly your private hospital cover includes will depend on your level of cover. All hospital cover products in Australia fall into four private health insurance tiers: Basic, Bronze, Silver and Gold. Higher levels of cover provide more comprehensive insurance but are also more expensive.

Extras cover helps with expenses for out-of-hospital medical services and general treatments that are often not covered by Medicare. These services often help improve quality of life, such as physio. Without this type of private health cover, you’ll have higher out-of-pocket expenses. Some examples of what an extras policy can include are:

• Cover for various health services, including dental check-ups and physiotherapy
• Help with the cost of products, including prescription glasses and hearing aids
• Cover for some non-PBS pharmaceuticals

Ambulance Cover helps cover fees for ambulance services. Depending on where you live in Australia, you may have to pay fees should you need an ambulance. This could be a substantial out-of-pocket expense and how the fee is calculated varies depending on the state. Ambulance cover can vary in inclusions and exclusions, for example, some policies only cover emergency ambulance services.

Whether you’ll need ambulance cover will come down to where you live and the extent of your state government’s cover (e.g. whether they’ll cover ambulance costs interstate).

Medicare and private health insurance can both help pay for your medical costs. Medicare will pay 75% of your Medical Benefits Schedule (MBS) fee if you’re treated as a private patient. The remaining 25% will be covered by your health fund, along with expenses such as accommodation costs and theatre fees. Remember that there could be a ‘gap’ between your MBS fee and the procedure cost. Depending on your policy, your health fund may cover none, some or all of this gap payment. Any outstanding fees will need to be covered by the patient.

Medicare is an invaluable service for the Australian public; however, it doesn’t cover everything. One of the key reasons people take out health insurance is to help cover health services that Medicare doesn’t offer. Some of the non-Medicare services that can be covered by health insurance include:

• Dental cover (including major dental and orthodontics)
• Optical cover
• Ambulance cover
• Physiotherapy
• Laser eye surgery
• Chiropractic cover

Which services you’re covered for will depend on your policy. If you’re unsure what’s included on a policy, you can either check your policy documentation or have a chat with a health insurance expert.

Health insurance allows you to be treated as a private patient, which offers a range of benefits compared to being a public patient:

• Choice of specialist: Being treated as a private patient allows you to choose your specialist (depending on availability and the urgency of your condition).
• Ability to book specific times: Being treated through a private hospital allows you more say on when you have your surgery.
• Private rooms (subject to availability): As a private patient, you can avoid public hospital waiting lists by being treated in a private hospital.

While Medicare often covers procedures performed in public hospitals, there is a long waiting list for public healthcare services. Depending on the procedure, you may have to wait weeks or months to receive treatment. Where you live in Australia can also affect your waiting time.

As a private patient, you can choose to be treated in a private hospital or clinic and won’t have to wait on the public hospital waiting lists. This could lead to you receiving treatment sooner, minimising your time in discomfort and pain.

Private health insurance could save you money around tax time if you’re a higher-income earner. For singles who earn over $97,000 or couples who earn over $194,000 per financial year, the Medicare Levy Surcharge (MLS) can be imposed if they don’t have valid private hospital insurance (as of November 2024). This surcharge can be 1%, 1.25% or 1.5% of your taxable income. Depending on your earnings, this could be thousands of dollars in extra tax. In some cases, taking out some form of private hospital cover may be cheaper than paying the MLS, plus you get the benefits of health insurance.

For anyone under 31, purchasing private hospital cover for the first time is worth it for more than just the health benefits. Lifetime Health Cover (LHC) loading is an Australian Government initiative designed to encourage Australians to take out private health insurance at a younger age and minimise strain on the public healthcare system. If you don’t take out hospital insurance before the 1^st of July following your 31^st birthday, you may have to pay increased premiums if you take out a hospital insurance policy later. Keep in mind that standalone extras cover won’t exempt you from the LHC loading; you need to have hospital cover to avoid LHC.