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Hospital insurance buying guide

We explain the benefits of the different levels of private hospital insurance.

doctor visiting patient in hospital

Should you get hospital insurance?

All Australians who are permanent residents already have health insurance – it's called Medicare, and it entitles you to free or subsidised treatment in a public hospital.

But the government doesn't like us using the public hospital system too much so offers a range of financial incentives to coax us into the private system, as well as the promise of shorter waiting times for elective surgery.

We take a look at why you might want to take out hospital insurance.

The benefits of private hospital insurance

Here are the advantages of private hospital insurance:

  • If you're a single person earning over $90k or a couple or family earning over $180k a year and you have private hospital insurance, you won't have to pay the Medicare levy surcharge (MLS), a surcharge the federal government charges 'high income earners' at tax time.
  • If you've had private health insurance since 1 July 2000 or 1 July following your 31st birthday (or were born before 1 July 1934), you won't pay the Lifetime Health Cover (LHC) loading on private health insurance. The LHC loading is a government levy designed to get people to take out private health insurance early in life, and to keep it.
  • If you're a single person earning $140k or less, or a couple or family earning $280k or less, then the government will subsidise your private hospital and extras insurance.
  • Shorter waiting lists for elective surgery.
  • Choose your own doctor.
  • Go to a private hospital (which some believe have better conditions and service).

Although elective surgery is for conditions that aren't life threatening, it can still be very uncomfortable waiting for surgery and your quality of life can be limited. You may be having trouble walking because you're waiting for a hip replacement, for example, or you're losing your sight waiting for cataract surgery.

What level of private hospital insurance do I need?

In a bid to simplify health insurance, the government is introducing a system of tiers so consumers know what they're covered for when they purchase a particular policy. The first new policies will be available from 1 April 2019, and by 1 April 2020 all policies will have a new classification.

Not sure what hospital insurance you need? Take our Do I need Gold, Silver or Bronze hospital insurance quiz.

All hospital-based treatments have been organised into 38 categories, based around different body systems (such as 'Ear, nose and throat' and 'Bone, joint and muscle').

Each new hospital policy will fall under one of four product tiers – Gold, Silver, Bronze and Basic – with each product tier covering a specific number of categories:

  • Gold: All 38 categories of services.
  • Silver: 26 categories of services.
  • Bronze: 18 categories of services.
  • Basic policies will provide very little – if any – cover in private hospital. 
  • Policies that cover more than the minimum requirement can be called a 'Plus' policy: Basic Plus, Bronze Plus or Silver Plus.

You'll receive a letter from your health fund telling you what they're going to do with your policy. We can help you understand the letter from your fund.

What's covered by Gold, Silver and Bronze?


Basic policies can be suitable for you:

  • if you want health insurance mainly for avoiding tax and surcharges 
  • if you live in a regional area and do not have access to a private hospital but want to choose your own doctor in a public hospital consider basic cover policies that provide only cover in public hospital.

See the cheapest Basic policies in your state


Bronze policies can be suitable for you:

  • if you want health insurance mainly for avoiding tax and surcharges
  • if you're healthy but want to be covered just in case for broken bones, flu and diabetes treatment (insulin pumps are only covered in Gold cover).

See which Bronze hospital policies we recommend. 


Silver policies can be suitable for you:

  • if you don't have any chronic or major health issues
  • if you don't need cover for pregnancy
  • if you want to be covered for a heart attack, cancer surgery and plastic surgery needed after a burn or accident.

See which Silver hospital policies we recommend. 


Gold policies can be suitable for you:

  • if you're planning to have a baby
  • if you need a hip or knee replacement or cataract eye surgery
  • if you have chronic health issues and may need pain management with a device, insulin pumps, dialysis or gastric banding surgery.

See which Gold hospital policies we recommend.

What's not covered by hospital insurance?

You're usually not covered for treatments outside hospital, for example, your appointments with your specialist or obstetrician. Also, tests and imaging like blood tests, X-rays and ultrasounds that are performed outside hospital are usually not covered by health insurance. Medicare does cover part of the costs for appointments and tests.

While Gold cover policies cover all treatments that are covered by Medicare (i.e. are listed on the Medicare Benefits Schedule, or MBS) and Basic policies cover little or no treatment in private hospital, Bronze or Silver policies exclude the following treatments.

Choose a Gold policy for:

  • Pregnancy and birth-related services If you're planning a family, you need to get insurance well ahead of time. Health funds impose a 12-month waiting period before you can claim for birth-related services. While public hospitals provide very good birth-related services, with private cover you can choose your own obstetrician and private hospital facilities can be more comfortable. Read more about health insurance for pregnancy.
  • Fertility treatment such as IVF. Fertility treatment is mostly available in private clinics. Read more about the cost of IVF.
  • Joint replacement Covers surgery and prosthesis for joint replacements such as knee and hip replacements. If you're young and fit you may think you don't need this, but it could be useful in case of an injury. Public hospital waiting lists can be up to a year. Joint reconstruction is also covered by Bronze and Silver policies.
  • Cataract eye surgery It could take up to a year to get cataract surgery in a public hospital.
  • Renal dialysis Very few people with indicators of chronic kidney disease will need dialysis, and when they do, it's usually only necessary at end-stage kidney disease. Renal patients can get high-quality care in a public hospital, but private hospital cover could give you greater flexibility of where and when you have your treatment.
  • Obesity surgery Gastric banding is the most common form of bariatric (obesity) surgery. Obesity surgery is mostly done in private hospitals and public hospital waiting lists can be several years. 
Other services excluded by Bronze and Silver policies are insulin pumps, pain management with a surgically implanted device, for example for managing pain from heart disease and sleep studies.

Choose a Silver policy for:

  • Heart surgery Coronary heart disease is the leading cause of death for Australians aged 45+, and the fourth leading cause for ages 25–44. Urgent heart surgery, such as for heart attacks, can be performed quickly in public hospitals. But you can encounter waiting lists of up to three months in a public hospital for some treatments, such as stent procedures, valve replacements and pacemaker implants.
  • Lung cancer surgery: According to the Cancer council, lung cancer is the leading cause of cancer death and the fifth most common cancer diagnosed in Australia.
  • Non-cosmetic medically necessary plastic surgery includes reconstructive surgery for medical reasons after an accident or cancer, for example.Cosmetic surgery is not covered by Medicare or private health insurance. Public hospital services are good for reconstructive plastic surgery (such as for burns), but waiting lists are up to five months. Also, plastic surgery is more readily available in the private system, and you might prefer a plastic surgeon over a general surgeon for some procedures to reduce the risk of scarring.
Other services excluded by Bronze but covered by Silver and Gold are: bone marrow transplants, investigation and treatment for back, neck and spine problems such as for sciatica and scoliosis, dental surgery (wisdom teeth and dental implants), implantation of hearing devices and accommodation in hospital for podiatry surgery.

For the following items, choose Gold for cover in a private hospital; Bronze and Silver provide cover in a public hospital only:

  • Psychiatry This is for in-hospital psychiatric care, such as for eating disorders, severe depression, post-natal depression, schizophrenia, drug and alcohol rehabilitation. It's difficult to predict if you'll need this cover, but it's good to have for peace of mind. Psychiatric services are available in public hospitals, but it can be hard to get a place depending on the condition you need treatment for. Read more about mental health and health insurance.
  • Rehabilitation You may need rehabilitation after an accident or stroke, for example. Rehabilitative services in a public hospital are good but can be overcrowded. Private hospital cover gives you greater access and flexibility of where and when you have your treatment.
  • Palliative care Covers services designed to help people who have a life-limiting or terminal illness live life as comfortably as possible. Can include home nursing and equipment hire. Public hospitals and community services and facilities also offer good palliative care, often fully funded by Medicare. Choose private hospital cover if you'd prefer the comforts and setting of a private hospital.

Waiting times

If you need treatment for a condition that your policy restricts and you want to upgrade your cover, you'll have to serve a 12-month waiting period until your new policy covers you. Rehabilitation and palliative care have only a two month waiting period. No waiting period applies for psychiatric services once you have held any level of hospital insurance for at least two months.

Excesses and co-payments

By choosing an excess or co-payment, you can save on the premium.

An excess is an expense you pay out of your own pocket once per hospital stay.

  • Be sure to check how many times the excess applies per year.
  • Some policies do not charge an excess for children, for a day stay or for treatment after an accident.
  • The highest excess you can choose without becoming liable for the Medicare levy surcharge is $750 per year for singles and $1500 per year for couples and families, but there's no restriction on co-payments.

A co-payment is like an excess, but instead of paying a lump sum you pay an amount per day that you stay in hospital.

  • Some co-payments have a yearly cap such as $500 or only apply for a private room.
  • Some co-payments are only charged after you've been in hospital a period of time, e.g. they kick in after five days in hospital.
  • Check how many times the co-payment applies per year.

Gap payments

Hospital gap payments

If you're going into hospital, first check that your health fund has a gap agreement with that hospital or you may be liable for the kind of accommodation costs that celebrities pay for penthouses. If there's no agreement between your fund and the hospital, you won't just be up for the excess or co-payment, you'll be up for the whole amount. 

Medical gap payments

Talking of exorbitant costs, your first foray into the world as a private patient, in a private or public hospital, will likely be welcomed by the confusing and potentially costly world of medical gap payments.

Under private hospital insurance, the government will pay 75% of the Medicare Benefits Schedule fee for each 'item' that your doctor intends to charge for, and your insurance will pay the remaining 25%. However, doctors are not bound by the Medicare schedule fee so they can and often will charge higher. The amount that doctors charge above the Medicare schedule fee is known as the medical gap.

Some doctors have agreements with health funds to cover this gap. If the doctor recovers all of the medical gap from your health fund then this is called a 'no gap' agreement. Otherwise, if the doctor recovers some of the medical gap from the health fund and the rest from you, then this is a 'known gap' agreement.

  • No gap = good
  • Known gap = not so good, but at least your health fund covers more than the 25% and you know how much you're paying.

Medical gaps can cost you thousands of dollars so make sure you find out if you're liable for a gap fee. The recommended top policies with $0 excess in our review have above average coverage of 'no gap' agreements with doctors in that state.

Suspending your membership

Your health fund may let you suspend your membership if, for example, you go overseas or become unemployed.

  • You don't pay a premium and are not covered.
  • Your Lifetime Health Cover (LHC) rating stays in place, so later on, when you can afford to take up hospital cover again, you won't have to pay a surcharge.
  • The Medicare levy surcharge (MLS) can still apply depending on your income.

If your fund does not allow you to suspend your membership you can use your LHC 'days of absence' which allows a maximum of 1094 days (three years minus one day) of no hospital cover without affecting your LHC.

Restricted membership funds

Check whether you qualify to join a restricted membership fund – for example, for people working in the education or defence industry. They often offer good policies at a lower premium than open membership funds, especially if you're after Gold cover with no excess.

Family policies

Family cover generally includes your partner and children under a certain age. The age varies from fund to fund – it could be 16, 21 or even up to 23. Some policies may include full-time students under 25 or other dependents; check if an extra charge applies.

Switching and waiting periods

If you switch to hospital cover considered equivalent or lower than your existing policy (check with the health fund), the waiting period you served on your previous policy will be carried across. For more information, see our article on how to switch and save on health insurance.

Ambulance cover

Ambulance cover varies between each state and health fund. Check our health insurance buying guide for the status of ambulance cover in your state.

Private health insurance rebate

A single person earning up to $90k a year (or a couple or family earning $180k) gets a 25.1% (1 April 2019 to 31 March 2020) rebate on their private health insurance premium (hospital and extras). For those earning above $90k, the rebate steps down incrementally until it reaches 0% for people earning over $140k (families or couples earning over $280k). The rebate is paid by way of reduced premiums.

The income thresholds for the private health insurance rebate and the Medicare levy surcharge are:

Private health insurance rebate for singles
% rebate by
income bracket
≤$90,000 $90,001–105,000 $105,001–140,000 ≥$140,001
< age 65 25.059% 16.706% 8.352% 0%
Age 65–69 29.236% 20.883% 12.529% 0%
Age 70+ 33.413% 25.059% 16.706% 0%

Private health insurance rebate for families/couples
% rebate by
income bracket
≤$180,000 $180,001–210,000 $210,001–280,000 ≥$280,001
< age 65 25.059% 16.706% 8.352% 0%
Age 65–69 29.236% 20.883% 12.529% 0%
Age 70+ 33.413% 25.059% 16.706% 0%

Please note: Tiers are correct from 1 April 2019–31 March 2020.

Discounts for young people

For every year you're under the age of 30, insurers may offer a discount of two percent on your premium. So a 29-year-old can get a discount of up to two percent, a 28-year-old four percent and so on, up to a maximum of 10% for 18- to 25-year-olds. If you stay on the same policy you can keep the full discount till you're 40.

But there's no guarantee your insurer will offer a discount, and you can't keep it if you switch – which may prevent you from getting a better deal or a policy that meets your changing needs.

Young people usually get very little value from private health insurance – take our quick quiz to see if you need health insurance.

Medicare Levy surcharge

depending on how much you earn, it can be cheaper to take out hospital insurance than paying the Medicare Levy Surcharge.

Medicare levy surcharges for singles
% surcharge by
income bracket
≤$90,000 $90,001–105,000 $105,001–140,000 ≥$140,001
All ages 0.00% 1.00% 1.25% 1.50%

Medicare levy surcharges for families/couples
% surcharge by
income bracket
≤$180,000 $180,001–210,000 $210,001–280,000 ≥$280,001
All ages 0.00% 1.00% 1.25% 1.50%

Please note: Tiers are correct from 1 April 2019–31 March 2020.

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