In Australia, private health insurance is a voluntary form of insurance that provides financial assistance for the cost of specified health services. Depending on the type of cover, private health insurance can fully or partly cover the costs of hospital services and or the costs of other general treatment health services, such as physiotherapy and dental treatment (PHIO 2019).
For Australians wishing to access private health care, the private health insurance system helps them mitigate the risks associated with, potentially large, unexpected health care costs. Unlike other types of insurance such as car and life insurance, the Australian private health insurance system is not ‘risk-rated’ but is ‘community rated’. This means that insurance cannot be refused to any person, regardless of their risk profile (such as having pre-existing conditions or smoking) and likely usage of health services (Department of Health 2019a). It also means that private health insurers are not allowed to charge people more for the same level of cover just because they are more likely to use the health services covered by their policy.
Types of cover
Hospital health insurance cover is generally for the cost of in-hospital treatment and other hospital costs such as accommodation and theatre fees, in either public or private facilities.
General treatment health insurance cover is generally for non-hospital medical services that are not covered by Medicare, such as dental, optical, physiotherapy, other therapies and ambulance. It is also known as ‘ancillary’ or ‘extras’ insurance.
In Australia, private health insurance cannot cover services that are provided outside hospital and are listed on the Medicare Benefits Schedule (MBS) (Department of Health 2019b). This includes some services provided by general practitioners and medical specialists, as well as diagnostic testing.
When a person signs up to private health insurance or changes their private health insurance policy, they may be required to serve a waiting period before they can claim benefits under the new policy. The maximum waiting periods an insurer can impose are regulated by legislation.
At June 2019, 11.2 million Australians (44% of the population) had some form of private patient hospital cover, and 13.6 million (53%) had some form of general treatment cover (APRA 2019).
The proportion of the population covered by some form of hospital cover (including those covered by a combined hospital and general treatment policy) was lowest for those aged 25–29: 26% of females were covered, and 21% of males (Figure 1). As an incentive to encourage more young people to take out private health insurance, from 1 April 2019 insurers are able to offer up to 10% discount on premiums for people aged 18–25, and similar discounts to those aged 26–29 (Department of Health 2019c).
The proportion of the population covered increased from age 30, when ‘lifetime health-care cover’ loadings apply (see box below). The highest proportion of males covered was those aged 65–69 (55%) and for females was 70–74 (58%) (APRA 2019).