Putting members’ health before profit

A Beginner’s Guide to Private Health Cover

There are very few things as important in life than health. Whether we actively prioritise our well-being day-to-day or not, we all want to be healthy. That’s why it’s important to know your options for healthcare, should you need an expert helping hand.

Here in Australia, healthcare comes under two main categories: Medicare and private health insurance. We’re going to break down the latter in comprehensive detail. But first, it’s important to unpack the differences between the two healthcare types.


What’s the Difference Between Medicare and Private Health Insurance?

Before you can decide whether you want private health insurance, you first need to understand the key differences between private and public healthcare in Australia.


Medicare is Australia’s healthcare system that offers Australian citizens and permanent residents a minimum of healthcare accessible to all, with free (or heavily subsidised) treatments.

However, its scope is somewhat limited in comparison with private health insurance. For instance, Medicare does not (usually) cover ambulance services, or out-of-hospital services like physiotherapy or dental work. There can also be very long and uncertain waits for care in the public system, you don’t have choice of doctor and may be less likely to get a private room.

Medicare Levy Surcharge

The Medicare levy surcharge (MLS) encourages people with higher incomes to look toward private healthcare, instead of Medicare, by making them pay more of their taxable income towards the program (at rates of either 1%, 1.25% or 1.5%, depending on income).

How is Private Health Insurance Different?

Depending on your policy, private health insurance pays all or some of the costs of treatment in a hospital as a private patient. It gives you access to much more comprehensive healthcare than Medicare services can offer, with the doctor of your choice, enabling policyholders to seek treatment in private hospitals as well as public hospitals, and can also cover additional extras, including those health services not covered by Medicare – optometry, physiotherapy, dental treatment and ambulance, for example.

Private Health Insurance Explained

Now that we’ve learned about the main differences between Medicare and private health cover, let’s look at private healthcare in more detail.

Levels of Private Health Insurance

Private health insurance products fall into one of four categories or tiers: Basic, Bronze, Silver and Gold. A Bronze private health insurance product, for example, must cover ENT (ear, nose and throat) treatments, but doesn’t have to cover certain things like assisted reproductive services, pregnancy or cardiac surgery.

By comparison, for a private health insurance product to meet the Gold criteria, it has to offer assisted reproductive services and mental health, as well as other complex clinical treatments like joint replacements and dialysis for chronic kidney failure, as a minimum requirement.

Types of Private Health Insurance

In the same way that there are different tiers of private health insurance, there are also three different types: hospital cover, extras cover and ambulance cover.

Hospital Cover

This type of cover is for hospital costs, enabling policyholders to receive hospital treatment in both public and private hospitals, with the treatments available depending on your chosen tier of private health insurance.

Extras Cover

Also known as ancillary cover, extras cover typically cover treatments that take place out-of-hospital. So, if your medical treatment relates to speech therapy, for instance, or orthodontic work, this will fall under extras cover.

Ambulance Cover

Ambulance costs aren’t covered under Medicare. Private ambulance cover will pay for ambulance costs should you require an emergency trip in one. This is usually included in any hospital or extras cover you have, so is only needed separately if you primarily rely on Medicare for everything else.

What Can a Private Patient Expect?

People who take out private health insurance policies can expect several benefits, the most notable include:

  • The choice of your own doctor or clinician for your treatment.
  • Treatment in your choice of either a public or private hospital, often with the choice of a private room.
  • Reduced waiting periods compared with public hospitals (for both elective and planned surgeries).

What is Lifetime Health Cover?

Lifetime Health Cover (LHC) is a fee that encourages people to take out private health insurance policies earlier in their life.

How does it work? If you take out a private health insurance premium after 1 July, following your 31st birthday (your base day), you’ll be subject to LHC loading. The rate at which you’re charged depends on how long after that date you take out your health insurance policy. For every year, 2% loading is added, up to a maximum loading figure of 70%.

For instance, if you take out private health insurance cover aged 40, then you’ll have to pay your premium, as well as another 20% on top of that. Or if you were to leave it even longer and wait until you’re 55 to take out a private health policy, you’d be paying an additional 50% on your premium.

People are granted a total of 1094 Days of Absence (one day short of three years) in which they can be without private health insurance and not have to pay the LHC loading fee; this is to accommodate gaps in cover, like when people are switching insurers. 

You can also apply to suspend your hospital cover for a short period (like if you’re going overseas). If your insurer agrees, this time is not counted towards your 1094 Days of Absence. 

Are there Exemptions?

There are certain exceptions to the rule when it comes to LHC loading, namely, if:

  • You were born on or prior to 1 July 1934
  • You are a new migrant to Australia (aged over 31) but took out private health insurance within 12 months of being registered for Medicare
  • You go overseas for a continuous period of over one year (in which you don’t return to Australia for a stay of more than 90 days).

If you’re eligible for the Private Health Insurance Rebate, this can be used to lower your premiums.

Note: LHC loading only applies to private hospital insurance, not extras or ambulance cover.

Do You Ever Stop Paying LHC?

Yes, provided that you pay your LHC loading fee on your insurance premium for 10 continuous years, the LHC loading will be taken off on your next premium.

Age-Based Discount

If you’re aged between 18 and 29, you might be able to access what’s known as the age-based discount, which can reduce your private hospital cover by up to 10%. This scheme was introduced in April 2019.

What Factors Impact Your Private Health Insurance Premiums?

Typically, there shouldn’t be any factors that affect your private health insurance. This is because, unlike many other forms of insurance, which are risk-based (car insurance or life insurance for instance), health insurance is community-rated.

This means that regardless of your age or medical history, you can purchase the same health insurance policy at the same base price.

The Benefits of Not-for-Profit or Member-Owned Health Insurance

One of the other main things to know when it comes to private cover is that you can either go with a for-profit insurer or a not-for-profit and member owned insurance fund. For-profits operate to drive profits for their stakeholders. Not-for-profit and member owned insurers, like our member funds, by contrast, are set up with all money besides operational costs typically put back into improving/developing the fund and the community it serves. This reinvestment often allows for lower premiums overall.

With so many different funds and insurers out there, it’s important to do your research before you commit to one. Consider your current health, your family history, whether you’re single or want to take out a family policy, and whether you think you’ll need extras cover or not. Once you’ve thought about all of this, you’ll be ready to make your decision. 

Members Health is a community of funds that are not-for-profit or member-owned, so we’re a good place to start for a wide range of options. Many of the Members Health funds are also established to serve specific regional communities and industries.

Final Thoughts on Health Insurance and the Private Healthcare System

If you can afford to, private hospital cover, extras cover or combined cover can each be great options. Going with a private health insurer unlocks many benefits, from reduced waiting times to your choice of doctor and hospital, and you can choose a package that suits you. Find out more about our member funds.