Advantages And Disadvantages Of Private Health Insurance
Consider the advantages and disadvantages of private health insurance right here with Savvy.
Fact checked
The benefits of private health insurance are enjoyed by just over 45% of the Australian population, with the latest APRA figures showing that Aussies holding hospital cover increased by 2.2% in 2022. The number of Aussies having extras cover is higher, with just over 55% of the population holding a policy. So, what are the advantages and disadvantages of private health insurance?
You can take a look at the advantages and disadvantages of private health insurance in Australia with Savvy to help you make up your mind over whether it’s the right choice for you and your family. Consider the pros and cons of coverage through our informative guide before purchasing your policy.
What are the advantages of private health insurance?
Private health insurance in Australia can provide assistance with the cost of your healthcare and can also give you more choice and flexibility about who provides your treatment and when you receive it. Some of the main advantages include:
Coverage for areas not covered by Medicare
Private health insurance covers services and treatments that may not be covered by Medicare, such as affordable access to elective surgery and auxiliary healthcare services such as dental, optical, physio and podiatry. This can provide you with more comprehensive cover and access to a wider range of treatments and services, crucially preventing you from having to pay the full cost for potentially very expensive treatments.
Choice of healthcare providers and hospitals
With private health insurance, you may have the flexibility to choose your own healthcare providers and the hospital where you receive treatment, depending on your policy and the facilities available in your area. Having private health insurance may also allow you to have a private room if you're admitted to hospital, although this will depend on the availability of private beds in your area.
Shorter waiting times
Private health insurance may offer shorter waiting times and allow you to skip long public hospital waiting lists, particularly for elective surgeries and specialist appointments. This can result in quicker access to care and reduced waiting times for non-emergency treatments.
Choice of when to receive treatment
Having private health insurance (particularly hospital cover) may also allow you to fit your health needs around your other work, family or sporting commitments. It can give you more choice about when you have an operation done, so you can schedule your surgery for a time most convenient for you and your family.
This can be a vital consideration if you play sport or if your work is seasonal. For example, being able to schedule a knee reconstruction out-of-season may make all the difference for a keen sportsperson or someone working in the tourism industry who can’t afford to take time off during the peak season.
What are the disadvantages of private health insurance?
The main disadvantages of private health insurance are:
Cost
The cost of private health insurance is a major consideration for many people, particularly those who are aged under 30 or young and fit with no chronic health issues. As people age, their health needs tend to become more complex, having private health insurance may become more important.
Out-of-pocket expenses and gaps
Even if you have private health insurance, it's rare to have the entire cost of your health treatment covered, so there may still be out-of-pocket expenses and gaps. These include the excess you may have to pay if you’re admitted to hospital and any co-payments which may be part of your policy’s details.
Waiting periods prior to being able to claim
Private health insurance policies have waiting periods which you have to serve before you’re able to make a claim on your new policy. This can range from a month or two right up to 12 months for some major procedures which can be covered by private health insurance, such as joint replacements or IVF treatment. These can extend beyond 12 months for certain extras treatments also, right up to two to three years. Waiting periods may be a serious disadvantage for those needing immediate treatment.
Policy restrictions
Private health insurance policies may come with restrictions, such as benefit limits and waiting periods for pre-existing conditions. Some health funds may require you to receive treatment only from their preferred providers, which can be a disadvantage if you have a favourite physio or dentist who isn’t on your fund’s preferred provider list.
What are the tax disadvantages if I don’t have private health insurance?
There are several disadvantages and tax implications which may affect you if you don’t have private health insurance. They include:
Medicare Levy Surcharge
The Medicare Levy Surcharge (MLS) is an additional tax imposed by the Australian Government on high-income earners who don’t have private health insurance. It’s calculated based on the income of those earning above the threshold of $90,000 p.a.* and is designed to encourage Australians to take up private health insurance to reduce the Medicare burden.
If you earn above the MLS income threshold and do not have private health insurance, you may be liable to pay it as part of your income tax. The amount you’ll have to pay varies between 1% and 1.5%, depending on your income*.
By having an appropriate level of private health insurance, you can avoid paying the MLS. The cover required to avoid the MLS is a hospital cover policy with a maximum excess of $750 or singles, or $1,500 for couples and families. The hospital cover must be provided by a registered health insurer.
Lifetime Health Cover (LHC) loading
The LHC loading is an additional amount you may have to pay on top of the normal cost of health insurance premiums if you don’t get health insurance before you turn 31 and decide to buy it later on. It's a way to encourage people to get private health insurance early in life and to keep it continuously. If you don't have private hospital cover by July 1 in the year you turn 31, you may have to pay an additional 2% for each year you’re uninsured over 30 when you first get private health insurance.
For example, if you get private health insurance at the age of 35, you'll pay an additional 10% (5 years x 2%) on top of your base premium. The maximum LHC loading is 70% and it’s removed after you have held private hospital cover for ten successive years. However, if you cancel your private health insurance for more than three years, you may have to pay LHC loading again if you decide to get private health insurance in the future.
*Figures correct as of April 2023 but subject to change.
More questions about the advantages and disadvantages of health insurance
Helpful health insurance guides
Compare health insurance policies online
Disclaimer:
Savvy is partnered with Compare Club Australia Pty Ltd (AFS representative number 001279036) of Alternative Media Pty Ltd (AFS License number 486326) to provide readers with a variety of health insurance policies to compare. Savvy earns a commission from Compare Club each time a customer buys a health insurance policy via our website. We don’t arrange for products to be purchased from these brands directly, as all purchases are conducted via Compare Club.
Savvy’s comparison service is provided by Compare Club. Compare Club compares selected products from a panel of trusted insurers and does not compare all products in the market.
Any advice presented above or on other pages is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an insurance policy.
For any further information on the variety of insurers compared by Compare Club or how their business works, you can read their Financial Services Guide.