What is Private Health Insurance and What Does it Cover?
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What is Private Health Insurance and What Does it Cover?

Angelica Silva

Angelica Silva

26/03/2021 • 8 minute read

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As the saying goes – health is wealth! No matter how much we may wish we were, we’re not invincible, and there are inevitably going to be times when we need access to hospital care or medical extras. All Aussies have access to public healthcare – but what about private health insurance? Knowing what private health insurance is and when to get it can be tricky. So, we’ve put together this helpful summary to act as your guide to understanding exactly what private health cover entails.  

Private vs Public

Before we delve deeper into private health insurance, it’s important to understand the basics. So, what’s the difference between private and public health insurance? Basically, where you’re being treated, who is treating you, and how quickly you receive care for non-life-threatening issues can depend on whether you’re treated through Medicare or private health insurance. 

Public healthcare is made up of public hospitals, community-based services, and affiliated health organisations owned and governed by state and territory governments. Medicare is the public healthcare program that gives all Aussies access to free or low-cost healthcare. From hospital costs to medical and pharmaceutical expenses. Under this system, you will be treated in a public hospital, but you won’t get a say in when or where you’re treated or who is treating you. 

Private healthcare, on the other hand, means patients are still entitled to Medicare, but can also be treated in private hospitals without the significant out-of-pocket fees public patients would have to pay if they were to be treated there. As a result, private health insurance gives you more control over the medical treatment you receive.  

What is covered by private health insurance?

Now that the basics are done and dusted, let’s get into the nitty-gritty. What exactly is covered by private health insurance? Depending on your policy, private health insurance can offer hospital cover, extras cover and ambulance cover. We’ve detailed each of these below: 

Hospital cover

Hospital cover helps offset the cost of staying in hospital if something were to happen to you. This generally includes hospital accommodation and meals, but will depend on what types of procedures and expenses are covered in your policy. Hospital cover also includes medically necessary surgeries, such as surgeries on congenital abnormalities, burns, traumatic injuries, removal of cancers or tumours, laceration and scar repair. However, elective cosmetic surgeries which are not necessary to maintain your health, including facelifts, liposuction and breast augmentations to name a few, are not covered by Medicare or private health insurance.

You should always take a closer look at all of your inclusions and waiting periods before you decide on a provider to make sure they can provide everything you’re looking for.  

Extras cover

Extras cover can be thought of as more of an everyday services cover. Basically, it includes any medical services that you may require out-of-hospital. Again, this will depend on your policy. However, extras cover can be used to cover the following expenses:

Examples of Services Extras Covers
Dental Physiotherapy
Home nursing Occupational therapy
Hearing aids Speech pathology
Chiropractic Glasses and contact lenses
Osteopathy Prosthesis
Remedial massage

Ambulance cover

This is your most basic type of cover. Ambulance cover helps pay for the costs of emergency transport and medical care. The costs of an ambulance can bring on unwanted stress when you’re already experiencing a stressful emergency situation. So, this specific cover is designed to ensure you won’t have to worry.  

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Key takeaways:

  • Medicare is the universal scheme that gives all Australians access to healthcare from public hospitals, community-based services, and affiliated health organisations.
  • Private healthcare means patients are still entitled to Medicare, but can also be treated in private hospitals without the out-of-pocket fees

What is not covered by private health insurance?

Private health insurance does not cover medical services that are provided out of a hospital and which are covered by Medicare. This includes:

  • GP visits
  • Consultations with specialists in their rooms
  • Diagnostic imaging and tests 

Private health insurance also may not cover the total cost of the doctor’s services provided to you in hospital. This may leave you with what’s called an ‘out of pocket’ expense, also referred to as a ‘gap’. 

What are the benefits of private health insurance?

We’re not denying you’ll receive quality medical treatment as a public patient in the public system. However, there’s definitely a solid list of potential advantages of private health insurance that you may want to consider. Here are some of the key benefits:

1. Shorter waiting times

Don’t want to stay on waiting lists for long periods? Well, private health insurance members can potentially enjoy the benefit of shorter waiting times. Those with private health insurance generally have the security of being able to schedule a ‘locked-in date’. This may be especially helpful for elective surgery, which can involve long waiting times. Having private health insurance means you’ll be able to schedule a ‘locked-in date’ which can help ensure your operation doesn’t continue to get pushed back. 

2. Choose your own doctor

With private health insurance, you generally have a choice when it comes to your doctor should you be admitted to hospital. However, if you’re admitted as a public patient, the hospital will assign a doctor to you. 

3. Private hospital rooms

If you’re someone who likes their own space, having the option of being treated in a private room may be right up your alley. In a public hospital, you’re often placed in a room with multiple other patients with various conditions. Private health insurance allows members to typically request their own private room. Keep in mind though, this is subject to availability. 

4. Pay less tax

Having private health insurance might mean you don’t have to pay the Medicare levy surcharge (MLS). We know, it sounds big and scary. The MLS was designed to encourage those with higher incomes to take out private health insurance and take the pressure off the public health systems. It is a levy of up to 1.5% of taxable income on people who:

  • Don’t have private hospital cover
  • Earn income over a certain amount

However, having private health insurance potentially means you won’t have to pay this surcharge. We strongly recommend finding out more about the MLS and whether it applies to you. 

What are the drawbacks of private health insurance?

It goes without saying, there will always be some disadvantages to the advantages. When choosing your health cover, you should ensure you’re fully read up and ready to make a decision. That includes understanding not only what is private health insurance, but what some of its drawbacks are too. Here are some of the key ones you should consider:

1. It can cost a lot

Depending on your policy and whether you’re an individual, couple or part of a family, private health insurance can get expensive. Premiums can increase annually, adding up to thousands of dollars each year.

2. You may not always be covered for treatments

Again, this really depends on your policy. If you end up needing treatment in hospital, you could potentially not be covered. Even a comprehensive policy may not cover every type of treatment or procedure. 

3. Out of pocket costs

In addition to the premium you pay every month, a private health insurance policy may only cover part of the cost of a treatment or procedure. So, you could end up having to pay a pretty hefty amount to complete the cost. 

4. Still subject to waiting periods

Before you can claim benefits under your private health insurance, you have to complete waiting periods. A waiting period protects members by ensuring that individuals are not able to make a large claim shortly after joining and then cancel their membership. The government sets the maximum waiting periods that insurers can impose for hospital treatment:

Which one is better?

The annoying answer is – there isn’t one. We know, not what you wanted to hear! There are clearly many pros and cons to consider when it comes to private health insurance. The most important thing to remember is that your individual circumstances are a significant factor when it comes to deciding whether private or public health insurance is best for you. Your situation is unique to everyone around you, so always consider this when weighing up your options and finding the one that suits you best.

Looking to do more with your finances?

At Oiyo, we’re trying to change the way we talk about money. We’re not financial advisors, but we can offer helpful insights and information on finance to help you navigate the world of finance. 

We write helpful guides covering everything from personal finance to loans to insurance. Our aim is to make it easy for Australians to have access to simple, to-the-point financial guides. So, whatever financial query it is that you have, Oiyo is here to help!


Oiyo is a consolidated online resource, we are not financial advisors. We work with a range of industry professionals and compliance check our articles to ensure factual accuracy. However, we do not provide professional financial advice. Consider seeking independent legal, financial, taxation or other advice to check how the information and ideas presented in this article relate to your unique circumstances.

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Angelica Silva

Written by Angelica Silva

Angelica Silva is a contributing writer for Oiyo. Over the years, Angelica has worked as a journalist for a range of publications with her work appearing in SBS, Business Insider, and Brown Girl Magazine. She has a Bachelor of Journalism and Arts from the University of Queensland.

More about Angelica Silva

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