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Choice is important to Aussies, and the desire to choose the best care for our health is an excellent motivator to opt into a private health insurance policy.
Despite the tremendous work Medicare does, it doesn’t cover everything. Therefore, ensuring that you understand how private health insurance works, what it insures, and where it can benefit you and your family, will best equip you to keep yourself and the ones you love in tip-top shape.
What is Private Health Insurance?
Private health insurance offers Australians the opportunity to access cover for a range of health services and benefits beyond the scope of Medicare, such as treatment in a private hospital, rebates for dental and optical, and elective surgery. With various levels of cover for every walk of life, private health insurance can help keep you at your healthiest.
Not only do private health insurers offer their customers more affordable access to dental and orthodontics, therapy, home nursing, and ambulance costs, they also offer Australians more choice. Choice regarding the doctor, specialist, or hospital they use; the option of faster, more convenient treatment; and the chance to maximise tax rebates.
There are many registered private health insurance providers in Australia, and a wide range of customisable products under these insurers, enabling you to choose the cover that meets your needs. Private health insurance functions, in addition to your Medicare assistance, and is incentivised by government rebates.
Private Health Cover vs Public
Medicare is Australia’s public health insurance scheme, and it offers all Australian citizens and permanent residents free hospital cover in the case of emergencies as well as access to GPs in the form of bulk-billing. Medicare is usually reserved for seeing a general practitioner or specialist, but it also covers most surgeries, tests and scans, and some medications. While extremely helpful to most Australians, Medicare has its limits and only covers treatment in public hospitals and clinics.
If you are seeking cover for services outside of the Medicare umbrella or you wish to be treated in a private hospital, you will need to consider private health insurance. Private insurance caters to a broad list of hospital, ambulance, and extras and allows customers to access private health institutions.
Keep in mind that a public hospital caters to everyone. Regardless of whether you have public or private cover, if you have a medical emergency, public hospitals can be better equipped to cater to you and should be the first point of call.
What Is the Private Health Insurance Premium?
As with other insurance, private health insurance requires policy holders to pay a monthly premium. There is no one set premium for every Australian; rather, your premium is based on a handful of factors, such as your policy type and tier, age, health needs, income, and location.
It is imperative that you compare the market when applying for a new policy. MoneySmart recommends that you consider what you can afford, who the policy will cover, and what extras you need, rather than defaulting to the cheapest premium on offer.
Your premium is subject to potential change, as private health insurers receive one opportunity each year to apply to the government to increase their policy premiums. Insurance providers must be able to justify any proposed changes based on their forecasted contribution outcomes. Approved changes typically take effect on the first of April each year.
You can read more in our guide to the Best Private Health Insurance Providers for Australians
Types of Private Health Insurance
Private health insurance is typically split into three categories: hospital cover, ambulance cover, and extras. Depending on your circumstances and where you live, one option may be more useful than another. Alternatively, you might find value in a policy that can do it all.
Hospital cover
As the name suggests, hospital cover can assist you with costs from a private hospital stay. Not only can hospital cover provide you with access to private hospitals, but it also has the potential to cover services Medicare can’t within a public hospital, reducing the financial stress of your stay.
Extras
Services that are deemed ‘extras’ are any insured support outside of a hospital. This typically includes things such as rehabilitation and physiotherapy, or other necessities such as dental and new prescription glasses.
Hospital and extras
If you choose a combined hospital and extras insurance policy, you receive cover for all the above to varying extents. Hospital and extras can be useful if you require a trip to the hospital and follow-up therapy to get you back to your best self.
Ambulance Cover
Ambulance cover necessity will vary depending on the state you live in, as ambulances are not a free service in every state. Only the Queensland and Tasmanian governments offer to cover their citizens’ ambulance fees. Therefore, with the maximum charge of an ambulance trip sitting around $6,600, ‘ambulance cover’ might be highly beneficial to residents of Victoria, New South Wales, South Australia, Western Australia, Northern Territory, and the ACT.
You will likely have the option of standalone ambulance cover, however, you can also find insurance providers who wrap this up within certain policies.
Regardless of the type of cover you have, the capabilities of your policy will depend on your coverage level. Therefore, it is necessary to keep the inclusions of your policy in mind, rather than assuming all services are insured.
Levels of Hospital Coverage Explained
Since 2019, Australia has been operating on a four-tier system for hospital coverage: basic, bronze, silver, and gold. This was designed to reduce the cost and complexity of health insurance policies, with all tiers covering specific minimum treatment standards. Each tier builds on the offerings of the tiers below, with basic being the cheapest and gold being the most expensive.
To help illustrate this, we have outlined some of the services each tier encompasses, below.
Basic
- Palliative Care
- Rehabilitation
- Hospital psychiatric services
Bronze
- Cancer treatments
- Joint reconstructions
- Gynaecology
- Pain management
- Diabetes management
Silver
- Dental surgery
- Medically necessary plastic and reconstructive surgery
- Implantation of hearing devices
- Podiatric surgery
Gold
- Pregnancy and birth
- Weight loss surgery
- Assisted reproductive services.
- Sleep studies
- Joint replacements
You will find many more products on offer through private health insurance. Some policies are customisable, and opting for a higher tier is likely to enable more flexibility for the policy holder. Of course, these higher tiers are more expensive.
Frequently Asked Questions (FAQs)
Does private health insurance cover ambulance transport?
Most private health insurers will cover the fees attached to ambulance transportation. Some private insurers also offer ‘ambulance-only’ cover for those who don’t want private health insurance but would like the peace of mind, should an emergency occur.
Am I required to have private health insurance in Australia?
No, there is no requirement for any Australian citizen to have private health insurance. If you feel that Medicare is beneficial enough or decide you do not wish to pay for private health, this is perfectly acceptable. However, it is encouraged that you weigh the pros and cons of each to make an informed decision.
What is the difference between private health and Medicare?
Private health insurance covers you beyond Medicare’s limits, allowing you access to private hospitals, surgeries, and clinics.
Medicare offers all Australian citizens and permanent residents free hospital cover in a public hospital, as well as access to bulk-billing GPs. If you are seeking cover for extras such as dental and optometry, therapy, or ambulance costs you will need to consider private health insurance.
Does private health insurance influence how you pay tax?
Yes, the government aims to incentivise private health insurance by allowing private health holders to:
- Avoid paying the Medicare levy surcharge (MLS), and to
- Take advantage of a private health insurance rebate.
The MLS is an additional tax applicable to Australians who earn above $90,000 (single income) or $180,000 (combined income), and don’t have a certain level of private cover. This surcharge can be up to 1.5% of your income, and is designed to encourage high-income earning tax-payers to take out private cover.
The government’s income rebate is a contribution made to the cost of your private insurance premiums. This rebate is based on your income, with aid decreasing as your income increases and vice versa. It also calculates based on your age—offering a larger rebate to the elderly – and your family situation, providing the potential to cover up-to a third of your annual private health premium.