Private health insurance

Private health insurance premiums are rising and consumers are finding their policies have hidden exclusions and high gaps.
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  • Updated:20 Sep 2007

01.Private health insurance

Stethoschope on top of money

The issue

  • Health insurance premiums are increasing but consumers are getting less for their money.
  • Consumers are being offered products that do not cover common surgical procedures.
  • Consumers are not always covered for what they think they are.
  • Many consumers face unexpected high gap payments when they attend a private hospital
  • Consumers sometimes face waiting periods if they change funds

Private health insurance premiums have increased 33% since 2001 even though the Government promised stable premiums when it introduced the 30% rebate and Lifetime health cover.


Some new policies exclude a whole range of procedures, such as major eye surgery and heart-related surgery. With exclusions like these it is difficult to see how they will relieve pressure on public hospitals – in fact they might do the exact opposite.

Gap charges

Consumers are facing significant out-of-pocket expenses that are not explained in advance. Recent research by the government showed this to be on average $720 per in-patient procedure. And 21% of people did not know they would be facing gap payments. In addition, 39% of those who faced gap payments also faced a fund excess, averaging $257.

Our view

The $3.6 billion (approx.) spent on the 30% private health insurance rebate is neither efficient nor equitable. That money would be much better spent in other ways – helping to fund Medicare and public hospitals, and allowing the government to buy cost-effective services directly from public hospitals.

Lifetime Health Cover has been an effective way to encourage healthy younger people to take out private health insurance, but it also traps people in health fund products they no longer want. The only fair and cost-effective mechanism for ensuring equitable health care is the tax system. Any system that does not ensure available resources are used to produce the greatest possible health benefit is ethically unacceptable.

What we've done

In 2003 CHOICE reiterated its opposition to the Lifetime health cover and 30% rebate policies.

Many health economists have criticised the government’s 30% insurance rebate as inefficient and inequitable, but alternative models for funding private hospitals have received little attention. In 2003 CHOICE wrote a paper advancing the discussion of these alternatives.

CHOICE wrote a submission to the review of this legislation on prosthetic devices in February 2005.

What we want

  • Policies that do not cover common surgical procedures should not be offered.
  • Informed financial consent where patients are to be charged more than the Medicare and health refund rebate.
  • Health funds should provide new and potential members with information explaining any exclusions in detail and a separate section in the membership application requiring the member’s acknowledgement of the restrictions or exclusions applying to the product.

What you can do

  • Review your health cover every year, especially if you have a policy with exclusions, limitations, a high excess or a co-payment.

More information

103 A wintry fleece (Consuming Interest, Autumn 2005)

Stress on public hospitals - why private insurance has made it worse, February 2004



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