Private health Insurance Consumer Fact Sheet

Page last updated: 02 November 2015

What is private health insurance?

In Australia, Medicare provides universal health insurance that delivers affordable, accessible and high-quality health care for citizens and permanent residents. However, consumers can also choose to take out private health insurance to provide more health care options and to cover some items which are not subsidised by Medicare.

Types of private health insurance

Type of health insurance


General treatment coverProvides benefits to cover the costs of some services not covered by Medicare (e.g. dental and optical).

There is a large variation in the services covered and the benefits provided by different health insurers.
Hospital treatment coverProvides benefits to cover some or all of the costs associated with being treated as a private patient in public or private hospitals. Coverage levels vary depending on the policy, but generally provide some form of benefit to meet the cost of shared-ward accommodation in public hospitals, private hospital accommodation and medical costs incurred above the Medicare rebate.
Combined coverProvides combined cover for both general and hospital treatment.
Excess and co-paymentsThese are options within the above types of insurance.
Co-payments require members to contribute to the cost of each service e.g. $50 per day admitted to hospital.

Excess policies require an up-front excess to be paid when a hospital stay is claimed.
Some private health insurance policies have “exclusions” or “restrictions”. This means that particular services are not covered by those policies. For example, some policies do not cover services like heart surgery, knee and hip replacements, eye surgery or pregnancy and birth related services.

Private health insurance does not cover medical services that are provided out-of-hospital and which are covered by Medicare. These services include GP visits, consultations with specialists (in their rooms) and diagnostic images and tests.

Private health insurance may not cover the total cost of the doctors’ services provided to policy holders in hospital which in turn may lead to an out-of-pocket expense which is commonly referred to as a “gap”. Some insurance policies cover policy holders for all or part of the gap.

What’s the benefit of private health insurance?

Private health insurance allows you to be treated as a private patient in a public or private hospital. This means that you may be able to choose the doctor and hospital you are treated in at a time that suits you.

Private health insurance also provides cover for some services not covered by Medicare such as physiotherapy, optometry, general dental and podiatry services. Many people rely on private health insurance to access services they would otherwise be unable to afford.

What Government incentives are in place for private health insurance?

There are three major Australian Government incentives in place to encourage take-up of private health insurance:
  • the Private Health Insurance Rebate subsidises private health insurance premiums. Most people with private health insurance receive a rebate. Australian Government expenditure on the Rebate will be over $6 billion in 2015-16;
  • the Medicare Levy Surcharge is an additional tax on higher income earners who do not hold appropriate hospital insurance; and
  • the Lifetime Health Cover loading encourages people to take out hospital insurance by the age of 30 and maintain it.

Can I still access Medicare if I have private health insurance?

Yes. If you have private health insurance you are able to access the free public hospital system through Medicare by electing to be treated as a public patient in a public hospital. You can also access certain subsidised or free out-of-hospital medical services.
It is important to note that you cannot access Medicare for procedures that are not considered clinically relevant by a doctor.

What is community rating?

A key feature of Australia’s private health insurance industry is community rating. This is different to many other forms of insurance, which are generally risk rated. Community rating prohibits insurers from discriminating on the basis of past or likely future health or risk factors such as age, pre-existing condition, gender, race or lifestyle in the premiums that they charge. Community rating means that everyone pays the same premium for the same product and that insurers must provide cover to anybody who seeks it. People who are older or sicker do not have to pay higher premiums, based on their risk or health status. People who have fewer risks or better health pay higher premiums than they would if insurance was not community rated.

Why does private health insurance in Australia need to change?

In common with public health funding, private health insurance sustainability is being impacted by:
  • the growth in chronic disease;
  • increasing patient expectations about access to services;
  • the number and range of health services provided;
  • the increasing cost of those services; and
  • an ageing population.
Patient needs are changing and private health insurance needs to change with them.

Private health insurance should be affordable and provide good value for money, so it can continue to support consumers and Medicare into the future.

What do these consultations aim to achieve?

Private health insurance underpins Australia’s private health and hospital system which, in turn, works with the public health system.

These consultations have consumer benefit at their heart and will consider ways to:
  • enhance the value of private health insurance to consumers;
  • encourage increased efficiency of private health insurance;
  • increase the effectiveness of Government incentives for private health insurance; and
  • improve the sustainability of the private health insurance industry.

More information and how to contribute

For more information on private health insurance visit the Private Health website (

An online survey has been developed to collect the views of consumers and is expected to be open from mid-November 2015 to mid-December 2015. To access the survey or for more information on the consultations visit the consultation page on the Department's website or email: PHI Consultations 2015-16 .

Private Health Insurance Key facts and figures

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