What is personal health insurance?
Answer
Private insurance supplementing Medicare
Explanation
Personal health insurance in Australia is voluntary private insurance that supplements Medicare by covering services Medicare does not fully cover and giving access to private hospitals and choice of doctor. There are two main types: hospital cover (for treatment as a private patient in a hospital) and extras cover (for services like dental, optical, physiotherapy, and remedial massage that Medicare does not cover for adults).
Two government measures encourage private health insurance. The Medicare Levy Surcharge (MLS) applies to higher-income earners (about 97,000 dollars for singles or 194,000 dollars for families in 2024 to 2025) who do not hold private hospital cover. The MLS adds 1 to 1.5 per cent on top of the standard 2 per cent Medicare Levy. Lifetime Health Cover loading adds 2 per cent to hospital premiums for each year a person delayed taking out hospital insurance after the age of 31 (capped at 70 per cent and removed after 10 years of continuous cover).
The Australian Government Private Health Insurance Rebate reduces the cost of cover based on age and income. Younger and lower-income members get a higher rebate, ranging from about 8.5 per cent to 32 per cent of the premium as of 2024 to 2025, paid as either a direct premium reduction or a tax offset on the annual return. About 13 to 14 million Australians (about 55 per cent) hold some form of private health insurance, with about 11.5 million holding hospital cover.
Hospital policies pay all or most of the in-hospital fees for treatment as a private patient, including the doctors' fees not covered by Medicare, accommodation costs, and theatre fees. Most policies have an excess (typically 250 to 750 dollars per admission) and may have waiting periods of two to twelve months for specific services. Extras policies pay a percentage of the cost of dental, optical, physiotherapy, and similar services, up to annual limits per service category. Comparison and complaints are handled by the federal Private Health Insurance Ombudsman through privatehealth.gov.au, which offers free, independent comparison and dispute resolution.
Why this matters for your test
Private health insurance affects taxes and access to healthcare for many Australians, and recognising the Medicare Levy Surcharge and Lifetime Health Cover rules helps new citizens decide whether and when to take out cover.
Source: Australian Citizenship: Our Common Bond (2024)
