What is Private Health Insurance in Australia?
Discover what it is, its benefits, and how it can provide peace of mind for your health and wellbeing.
Private health insurance can seem complex, but the basics are simple. We’ve broken down the essentials in this beginner guide to give you a better understanding of private health insurance in Australia.
Defining private health insurance
In Australia, we have a comprehensive public healthcare system funded through the state and federal governments and Medicare. The private system is funded between the individual via their health insurer (based on service inclusions) and Medicare, and is designed to complement the public health system. These two branches of healthcare work together to support one another and give Australians greater choice in their care.
Private health insurance in Australia consists of hospital cover and extras.
You can choose to buy a hospital or extras product separately or mix and match to combine the two.
Why get health insurance?
Some people choose to have private health insurance just in case they need it in the future, knowing that it will give them more choices in their care when they need it most.
If you need to access specific health care services more frequently, such as prescription glasses, physio or chiro, extras health insurance is a great way to get the most out of your cover.
If you’re a high-income earner there may be benefits at tax time for having hospital cover, such as avoiding the Medicare Levy Surcharge (MLS).
Same premium regardless of lifestyle, health status or previous claims
Private health insurance is community rated, which means everyone pays the same base premiums (before any rebate, loading or discount) for their level of cover (within the same state), regardless of their health, claims history or individual lifestyle factors.
The GMHBA difference
GMHBA are a not-for-profit private health insurer with 90 years’ experience in helping Australians get cover for the life they choose, and the one they don’t. We’re here every step of the way to help you navigate your health and insurance needs.
Understanding the different types of private health insurance
Hospital cover contributes to the cost of both medical and hospital fees when you’re admitted to hospital as a private patient.
Hospital benefits help pay for the cost of accommodation, operating theatres, and surgically implanted prostheses, up to the approved benefits on the Government’s Prostheses List.
Medical benefits contribute toward the cost of receiving inpatient medical treatment or services, such as doctor and surgeon’s fees, anaesthetic, imaging, and pathology services.
Extras products help to cover the cost of allied health services, also known as ‘ancillaries’, that are not generally funded by Medicare.
These are services like prescription glasses or contacts, dental, orthodontics, physiotherapy, and chiropractic.
The level of extras cover you choose will determine what you're covered for, as well as how much you’ll get back in benefits.
Why choose hospital cover?
More choices in your healthcare, such as the flexibility to choose your own surgeon/specialist.
Holding hospital cover gives you more choice as to when and where you are admitted to hospital. Wait times are potentially shorter if you are being admitted to a private hospital as a private patient, than if you were to go to hospital as a public patient. If you choose to be a private patient in a public hospital, public hospital waiting lists may apply.
If you earn over the base tier income threshold set by the Federal Government, you may be required to pay the MLS. Taking out hospital cover can help you avoid the Medicare Levy Surcharge if you are a high-income earner.
You can avoid paying Lifetime Health Cover (LHC) loading if you take out (and keep) eligible hospital cover before 1 July following your 31st birthday.
GMHBA offer a 2% discount on hospital premiums for each year that a person is aged under 30 when they purchase eligible hospital cover. The highest age-based discount that can be applied is 10% for 18 to 25 year olds.
Structured health programs are available for eligible GMHBA members to support their journey at different life stages.
Other things to consider when choosing hospital cover
Life stage and lifestyle factors are often a big motivator for choosing a higher level of hospital cover. These might include considerations for:
- growing families and pregnancy needs,
- common respiratory treatments for children such as tonsils, adenoids or grommets surgery,
- joint replacements for active or aging bodies,
- inpatient psychiatric treatment options for those with hospital cover*, or
- waiting periods; 2 month (palliative care, psychiatric, rehabilitation services & other treatments included in your cover that are not pre-existing conditions) and 12 month waiting periods (pre-existing conditions (PEC), ailments or illnesses and obstetric and IVF) apply.
*A once in a lifetime Mental Health Waiver is available for members upgrading their hospital cover, provided the initial two-month waiting periods have been served. Introduced as part of private health insurance reforms in April 2018, the Mental Health Waiver makes it easier for policyholders to access psychiatric services when they need it.
It’s good to consider your future needs as well as what you need now when choosing the right cover for you.
Hospital key terms explained
An excess is the amount you pay when you are admitted into hospital (if your cover includes an excess). An excess only needs to be paid once per calendar year, per person (if applicable). Excess fees allow us to keep your premium lower.
You receive inpatient care when you are formally admitted to hospital to be treated or receive care. This is usually through a pre-booked admission or a visit to emergency where you are then admitted. You can be treated as an inpatient for both day and overnight stay procedures.
You’ll be considered an outpatient if you receive medical treatment in a doctors’ surgery, hospital or emergency department but have not been admitted to hospital. By law, health funds are unable to pay benefits towards these services.
Medical gap fees are also known as out-of-pocket costs and are the difference between the amount a doctor charges for their service and what GMHBA and Medicare can pay.
A pre-existing condition is where signs or symptoms of your ailment, illness or condition, in the opinion of a medical advisor, existed at any time during the six months before you took out your current level of hospital cover or upgraded to a higher level of hospital cover.
Why choose extras cover?
Extras perks for GMHBA members
We have partnered with smile.com.au to make dental care more affordable and accessible for our members across Australia, with access to 15-40% off* dental treatments at a smile.com.au dentist with a wide range of participating providers.
*Savings may vary between dentists. It is recommended that members obtain a quote prior to treatment.
Members receive optical discounts at selected optical providers including OPSM, SpecSavers and more.
Exclusive discounts are also available for members at GMHBA Eye Care and GMHBA Dental Care to ensure you get the most out of your cover.
Other things to consider when choosing extras cover
Having extras is a great way to take a proactive approach to managing your everyday health and keep on top of things like your dental check-ups or optometry needs. Extras don’t follow the same tiered classification system as hospital covers, and what is and isn’t covered will vary between health insurers.
Extras benefits often have an annual limit and sublimits that apply for each individual on the policy, or the membership. Once this annual per person or membership limit has been reached, you’ll need to wait for the start of the new year for your extras benefits to reset to be able to continue claiming. GMHBA annual limits reset at the beginning of the calendar year.
What will I get back from my extras?
You can choose to receive set benefits, or a percentage back towards certain services, depending on the level of cover you choose.
Using GMHBA Mid Extras as an example, there are two options for cover at this level.
- With Mid Extras Set Benefits, you will have set benefits paid* on eligible services.
- With Mid Extras 65%, instead of a set benefit, you will receive 65% back* on eligible services.
*Up to your sub and annual limit
Who Can Get Private Health Insurance?
Anyone with a valid full or interim Australian Medicare Card can hold private health insurance regardless of their age, health status, or income.
Unlike other insurance industries, private health insurance in Australia operates on a system of community rating which prevents insurers discriminating against members or charging higher premiums based on an individual’s health circumstances and/or previous claims.
Age considerations
There are incentives to encourage young people to take out and keep hospital cover. Many health insurers offer an age-based discount for new members joining while they are under 30.
GMHBA offer a discount of 2-10% off the cost of hospital premiums for members aged 18-29 years. The highest discount of 10% is applied if you are aged between 18 and 25 when you first take out hospital cover.
Unsure about why you might need hospital cover? To avoid Lifetime Health Cover loading (LHC) you need to hold hospital cover by 1 July following your 31st birthday.
If you miss this date, you’re not excluded from taking out hospital cover forever. It simply means that an extra 2% will be added to your hospital cover premiums for each year after your 31st birthday you didn’t have cover. This loading is capped at 70% and will be removed after you’ve held continuous hospital cover for 10 years.
Navigating the maze: choosing the right private health insurance cover
Let’s explore the coverage you get with hospital and extras, in more detail, and how to tailor this to your health needs.
Choose a level of hospital cover most appropriate to your needs, life stage and budget.
- Hospital products often have exclusions (things you’re not covered for) to help keep the cost down, so you’re only paying for what you need.
- Starting a family? Consider pregnancy and obstetrics. These come at a cost, so only select them if you might need them. Remember; pregnancy and fertility services have a 12-month waiting period before you’re able to claim.
- If you’re a high-income earner and only taking out hospital cover to avoid the Medicare Levy Surcharge (if eligible), you may prefer to select a more affordable hospital cover.
- Your financial circumstances will also determine your entitlement for the Australian Government Rebate on private health insurance.
Select your cover based on the services you and your family use.
- Extras cover has a variety of levels and included services.
- Many extras services are included on all covers but the benefits and limits (sub and annual) vary depending on the level of cover you hold.
- Mid and high-level extras covers tend to offer a broader range of benefits and limits (sub and annual).
Private health insurance: a coordinated approach
Private health insurance and Medicare are not mutually exclusive – in most cases they work hand in hand to fund the cost of your treatment.
What does Medicare cover?
Medicare subsidises the cost of services delivered in public and private hospitals, including tests, imaging, and scans.
Medicare doesn’t provide cover for private patient hospital costs (such as theatre fees or accommodation).
The Pharmaceutical Benefits Scheme (PBS) subsidises medicines for people with a Medicare card.
Most dental services, physiotherapy, occupational therapy, speech therapy, eye therapy, chiropractic services, podiatry or psychology services are not funded by Medicare, unless specified under the Child Dental Benefits Schedule, Chronic Disease Management Plan, Enhanced Primary Care program, or Cleft Lip Palate Scheme.
If you are admitted as a private patient for a procedure that is included on your hospital cover, your health fund will contribute towards your hospital and medical costs.
Hospital costs include things such as:
- hospital accommodation and meals
- operating theatre fees
- dressings and bandages received whilst admitted
- prostheses (including medical devices)
Medical costs relate to your treatment while admitted to hospital and can include:
- doctor’s fees
- anaesthetist’s and other treating specialist’s fees
- pathology and other diagnostic tests
Medical costs, in more detail
If you have hospital cover and are admitted as a private patient to either a public or private hospital, for a procedure that is included on your cover, Medicare will pay 75% of the Medical Benefits Schedule (MBS) fee for the medical services received, and your health fund will pay the remaining 25% (as well as your hospital accommodation and theatre costs).
If the treating doctor charges no more than the ‘scheduled fee’ for the medical service obtained, you will have no out-of-pocket costs.
If the doctor charges more than the scheduled fee, there will be a ‘medical gap’ that the patient is responsible for paying.
You can search the fees and costs of common medical services in Australia via the Medical Costs Finder.
GMHBA participates in the Access Gap Cover scheme as part of the Australian Health Services Alliance (AHSA) to help reduce or eliminate the medical gap (or out-of-pocket costs) for members receiving inpatient treatment.
Participating specialists can choose to apply Access Gap Cover on a case-by-case basis.
Empowering healthcare choices with GMHBA
To recap, private health insurance in Australia is set up to support and complement the public healthcare system. While it is not essential to have hospital or extras cover, there are plenty of benefits in having one or both types of cover, including peace of mind for you and your family and more choices for the care you may need in your lifetime.
There are a range of hospital and extras products available, and it is important to understand your level of cover – what is and isn’t included – and to regularly review this if your circumstances or health needs change.
Why get covered with GMHBA?
GMHBA has been operating for 90 years and is one of Australia’s largest regionally based private health insurers.
We’re for people, not for profit and will be here to support you and your family when you need it most.
New member? If you change your mind within 60 days, we’ll refund any premiums paid, provided you haven’t made any claims.
FAQs about private health insurance
Not necessarily. In Australia, if we’re eligible for Medicare, we’re lucky enough to have access to public healthcare regardless of our level of insurance.
Hospital cover can give you peace of mind and provide greater flexibility and choice in your health care. With hospital cover, you’re able to choose a cover that offers benefits for the medical conditions or services that you’d like cover for, to help you plan for your health and life stage.
If you’re a high-income earner and your taxable income is above the base tier threshold set by the Australian Government, hospital cover can also help you avoid the Medicare Levy Surcharge (MLS).
Extras cover can be a financial support for people who regularly use allied health services such as dental or physiotherapy and who like to stay proactive with their check-ups.
For many under 30s, private health insurance might not be necessary but the discount incentives for taking it out early are an added financial benefit long-term. Find out more about the age-based discount offered for 18 to 29 year olds.
Private health insurance cannot be claimed directly on tax, but how much you earn and if you have hospital cover can have an impact for you at tax time.
If you‘re a high-income earner and don’t have an appropriate level of hospital cover, you may be subject to the Medicare Levy Surcharge (MLS) which is calculated as a percentage of your total income. The MLS is separate to the Medicare levy which is an amount you pay in addition to the tax you pay on your income.
Your income will also affect your entitlement for the Australian Government Rebate on private health insurance. This rebate can be either deducted from your premium payments throughout the year or processed as part of your tax return.
It’s best to speak with your tax adviser for further information.
If you don’t have hospital cover you can still elect to be treated as a private patient in a private hospital, but without an insurer to cover the hospital costs and pay benefits towards your medical services, this will be very expensive.
The Australian Government has also introduced incentives to encourage more Australians to take out (and keep) hospital cover and take the pressure of the public healthcare system. In addition to the Medicare Levy Surcharge (MLS), which impacts high-income earners, there is also the Lifetime Health Cover (LHC) loading to consider if you’re aged 30 or older. LHC is an age-based initiative for people to take out hospital cover earlier in life – before 1 July following their 31st birthday – and avoid having to pay a loading on their hospital cover premiums at a rate of 2% for every year after this point (capped at 70%).
Your health insurance can only pay on services provided by doctors and specialists who treat you while you are admitted to hospital as a private patient. You may be able to claim Medicare benefits towards some outpatient fees. Always speak to your provider before consultation or treatment to understand costs and coverage.