Private health insurance buying guide

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For more information, see the health insurance comparison article.

Types of private health insurance

Broadly speaking, you can choose hospital cover and extras/ancillary cover. These are available separately or combined.

Hospital cover pays:

  • Some of the doctors' fees.
  • A benefit for accommodation.
  • Some treatment costs in hospitals the fund has an agreement with.

It may not include cover for other costs such as phone calls or television sets.

Extras/ancillary cover contributes to:

  • The cost of non-hospital treatments that aren’t covered by Medicare. This usually includes dental or physiotherapy treatment and products like glasses and contact lenses.
  • It may also include less common treatments such as acupuncture or podiatry.

The range of benefits paid varies between funds, and the payout is unlikely to cover the whole cost of the treatment.

Please note: this information was current as of January 2009 but is still a useful guide to today's market. For more recent information, see our Health insurance satisfaction survey 2012.

Hospital insurance

It's important to remember that, under Medicare, all Australians are entitled to free treatment in a public hospital, regardless of their insurance status. So what’s the benefit of private cover?

  • Access to a private hospital
  • Greater choice of doctor
  • Shorter waiting times for some forms of elective (non-urgent) surgery
  • Benefits for “extras” treatments such as glasses or physiotherapy

Another thing to consider is government incentives on hospital insurance:

Medicare levy surcharge: Once you earn more than $73,000 (single) or $146,000 (couples/families) you need to pay an extra 1% Medicare surcharge on top of the 1.5% Medicare levy most people pay. You can avoid this by taking out hospital insurance.

Lifetime health cover penalises people who take out hospital insurance later in life, by increasing their premiums. If you are aged 31 or more, and have not already signed up for health insurance, you'll pay higher premiums than someone who joined at age 30 or younger.

How to save $$$

You can save money by buying a policy:

  • With an excess (an amount of money you have to pay for a hospital stay before the private health fund starts paying). Be sure to check how may times the excess applies per year.
  • Where you pay a co-payment if you go into hospital (you pay an agreed amount each time a service is provided – usually a set amount per day). Be sure to check how may times the co-payment applies per year.
  • That excludes treatment for some conditions. But remember if you need them you’ll only be covered as a public patient in a public hospital – like someone without private health insurance.
  • That only covers you as a private patient in a public hospital for some or all conditions. As a general rule it's better to save money by choosing a product with a high excess/co-payment rather than choosing a product that excludes or limits treatment for some conditions.

Commonly limited and excluded treatments include:

  • Assisted reproduction, obstetrics and birth-related care
  • Bone marrow transplants
  • Cataract eye surgery
  • Coronary bypass and major heart surgery
  • Cosmetic and plastic surgery
  • Dialysis
  • Hip, knee and other joint replacements
  • Psychiatric care
  • Rehabilitation
  • If you specifically want coverage for any of these things, check and double check with your health fund to make sure they aren’t excluded or limited in any way.


Extras (ancillary) health insurance covers non-hospital treatments that aren’t covered by Medicare – for example, dental treatment, physiotherapy, glasses and contact lenses, acupuncture and podiatry. Some extras policies also cover complementary treatments like massage.

What to look for

It’s important to look at how much you’ll get back for a particular treatment, and the overall limit you can claim in a year.

  • Some funds restrict the overall amount by combining the maximum limits – for example, saying you can have $400 worth of physiotherapy and chiropractic in a year instead of $400 for each. This leads to very large differences in how much you’re covered for.
  • It’s also worth noting the difference between family limits and single limits. Some products limit the number of times a family can claim for some services.
  • Some funds list benefits as a percentage. Check if it's a percentage of the fee you actually get charged or of a "reasonable fee" set by the fund?

Many of the funds also have other features, ranging from their own dental or optical clinics that entitle you to a higher benefit, to ambulance cover included with extras cover, to cover for acupuncture or massage therapy. Wanting some particular features may help you decide which fund to choose. However, read the brochures carefully and check if the policy is more expensive.


  • There are no complex government rules affecting extras health insurance - you can take it out later in life without getting penalised. So it’s worth calculating how much money you got back from your claims in the past year and comparing it with the price of the policy. Are you getting value for money?
  • Some health funds reward long-term members with special bonuses such as a higher claims limit for extras treatments. If you're entitled to these bonuses with your old fund, some funds may match them if you ask.

How to switch

  • Get a detailed quote in writing, showing applicable government rebate, discounts and Lifetime Cover loading.
  • Apply for cover with the new fund.
  • Ask the new fund to commence its cover only when the old cover is cancelled.
  • Arrange the cancellation of your old cover yourself. Request a clearance certificate (shows membership level and Lifetime Cover status) and an itemised claims statement from your old fund.
  • The new fund may give you a request form to send to your old fund. Check back with your old fund if you haven't received an answer within one or two weeks.
  • Keep a copy of both statements and send them to the new fund.
  • Check your bank statement to make sure membership has commenced with the new fund and there's no overlap.
  • If you pay via direct debit, cancel this with the old fund and advise your bank of the cancellation.


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