Private health insurance in Australia: understand before you choose
Private Health Insurance (PHI) in Australia does not replace Medicare — it supplements it. People who have Medicare can still choose to buy PHI for extra benefits Medicare does not cover, or to avoid certain additional taxes.
The two types of PHI
Hospital cover
Hospital cover lets you be treated as a private patient in hospital — rather than a public patient.
The main benefits:
- Choose your surgeon — you choose who performs your operation, rather than having the system assign one
- Private hospital — a private room or a less crowded one
- Shorter waits for non-urgent (elective) surgery — public hospital waiting lists can be long
Note: hospital cover comes in tiers (Bronze, Silver, Gold) — these determine which types of treatment are covered. Not all hospital cover is the same — read the list of covered treatments (clinical categories) carefully.
Extras cover
Extras cover includes health services that Medicare usually does not cover:
- Dental
- Glasses and eye exams (optical)
- Physiotherapy
- Chiropractic, psychology, acupuncture (depending on the policy)
- Ambulance (in some states)
Extras cover usually has an annual limit for each type of service — for example, a dental limit of $X per year. Check the actual limits before choosing a policy.
You can buy hospital cover and extras cover separately or combined.
Why do people buy PHI?
Medical reasons: Control over who treats you, shorter waits, access to services Medicare does not cover.
Tax reasons: People whose income is above a certain threshold and who do not have hospital cover must pay an extra Medicare Levy Surcharge (MLS) — an additional tax on top of income tax. In many cases, buying basic PHI hospital cover is cheaper than paying the MLS. The income thresholds and MLS rates are set by the ATO and updated periodically — check ato.gov.au for the current figures.
Lifetime Health Cover (LHC): The Australian government has a mechanism that encourages people to buy hospital cover early rather than waiting until they need it. People who buy hospital cover for the first time after a certain age (check the current rules at privatehealth.gov.au) pay a higher premium. This rule encourages healthy younger people to join the PHI system early.
Important concepts
Waiting period: When you first buy PHI or upgrade a policy, there is a waiting period before you can use certain benefits. The waiting periods set by the government differ by type of treatment — for example, the waiting period for pre-existing conditions is usually longer.
Gap payment: PHI does not pay the full cost of private hospital care. There may still be a gap between the private doctor’s fee and the portion that PHI plus Medicare cover. Ask your doctor and your insurer before you have a procedure.
Hospital cover tiers: The Australian government defines 4 tiers (Bronze, Silver, Gold, Basic) for hospital cover — setting the minimum that must be covered for each tier. Check the standards at privatehealth.gov.au.
Comparing and choosing a policy
privatehealth.gov.au is the government website that lets you compare all PHI products in Australia — this is the most neutral tool for comparison. Enter your needs and income to get a suitable list.
There are also commercial comparison sites (iSelect, Finder, Compare the Market) — useful, but they may earn a commission from insurers.
What newcomers should do
If you are not eligible for Medicare (a temporary visa): Check whether your visa requires health insurance. Overseas Student Health Cover (OSHC) and Overseas Visitors Health Cover (OVHC) are products for people without Medicare.
If you are eligible for Medicare (PR, citizen): PHI is voluntary in your first year. Prioritise getting your finances settled first; then assess whether to buy PHI based on your income and your actual health needs.
There is no need to rush the decision in your first week of settling in.