Is It Worth Having Private Health Insurance? 

Is it worth having private health insurance? Find out the pros and cons of purchasing a policy right here with Savvy. 

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, updated on July 10th, 2023       

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You may be wondering if having private health insurance in Australia is really worth it? Private health insurance offers advantages such as skipping public health waiting lists, access to private healthcare services, and coverage for prescription medications. However, it also has disadvantages such as potentially high premiums, limitations in coverage and gap fees.  

Deciding if private health insurance is worth it for you requires careful consideration. You can explore the advantages and disadvantages of private health insurance in Australia with Savvy to help you decide this question for yourself. Our helpful guide can help you make an informed decision on whether private health insurance is worth it for you, taking into account your personal circumstances and healthcare needs. 

Is it worth having private health insurance?

Having private health insurance in Australia offers many advantages. These can be summarised as:  

  • Access to private hospitals and specialists (depending on the availability of private health services in your area) 
  • Shorter waiting times to see specialists, and for elective surgeries  
  • More flexibility and control over your health care, including when and where you receive treatment 
  • Financial coverage for treatments that are not covered by Medicare 
  • Cheaper pharmaceuticals 
  • No ambulance bills 
  • Potential tax benefits 

The main advantages of private health insurance

The main advantage is that private health insurance provides a level of financial protection against unexpected medical expenses. If you have extras private health insurance, you can reduce the risk of having to fork out for expensive auxiliary healthcare services such as physiotherapy if you suffer an accident or injury that isn’t covered by Medicare. This can provide peace of mind and protect your finances from unexpected medical bills. Ambulance cover is also often packaged with hospital cover, so you can avoid expensive bills for a trip to hospital in case of an accident.  

Secondly, health insurance gives you access to private healthcare services so you can be treated as a private patient in a public or private hospital. Private hospitals and specialists often have shorter waiting times for elective surgeries compared to public hospitals, allowing you to receive medical treatment more quickly. Private health insurance may also allow you to choose your preferred healthcare provider, giving you more control over your healthcare decisions. However, this will depend on where you live and the private healthcare services which are available in your area. 

Cheaper prescription medicines 

Additionally, health insurance can provide coverage for prescription medications. Many health insurance policies in Australia include coverage for prescription drugs which can help offset their cost and improve your access to treatments, particularly if the medications you require are expensive or not subject to subsidy through the Pharmaceutical Benefits Scheme.  

Avoid paying additional tax 

If you don’t have private health insurance, you may also have to pay additional tax in the form of the Medicare Levy Surcharge. This applies to those who earn over $90,000 per year and don’t have the required minimum basic hospital cover. The tax ranges from 1% to 1.5% of your income depending on your earnings in that financial year. 

In addition, if you decide you want health insurance later in life, it could end up costing you more if you haven’t bought your health insurance policy by July 1 in the year you turn 31. A Lifetime Health Cover loading may apply, which will add 2% to the cost of your health insurance for each year you remain uninsured past the age of 31. This will increase the cost of your premiums for ten years, potentially making health insurance more expensive for you in your 40s and 50s when you may require more health services.  

What are some of the disadvantages of health insurance?

The disadvantage of private health insurance can be summarised as:  

  • Expensive premiums 
  • Limitations in coverage 
  • Excess and co-payments 
  • Potential for gap payments 
  • Waiting periods before you can claim for certain treatments 

Health insurance premiums can be expensive 

Despite its advantages, private health insurance also has some disadvantages. Firstly, health insurance premiums can be expensive, especially for comprehensive coverage offering both hospital cover and extras cover. Health insurance premiums can strain the budget of individuals and families, particularly those on lower incomes, making it a less attractive option for some. 

Secondly, health insurance may not always provide the most comprehensive coverage, particularly if you opt for a cheaper policy. Some treatments and services may be excluded from coverage or subject to long waiting periods, depending on the tier of hospital cover and level of extras cover you choose.  

May not be cost-effective for some 

Health insurance may not be cost-effective for healthy individuals who rarely use healthcare services. If you’re in good health and don’t require frequent medical care, you may end up paying more in premiums than you receive in benefits, making health insurance less financially beneficial.  

However, even if you’re a young person in good health, you may still end up with an injury which requires long-term physiotherapy, rehabilitation services or even surgery, such as if you need a knee reconstruction or Achilles tendon repair. Without health cover you could end up on the wrong end of a long public health waiting list, which could mean you have to wait months or even years to have the repair surgery you need. 

Review your healthcare needs  

It's important to carefully review the coverage, costs and limitations of health insurance policies to fully understand their advantages and disadvantages. That way you can determine if one particular policy aligns with your individual needs, priorities and budget. 

How do I decide if health insurance is worth it for me?

Factors to think about when deciding if you can afford health insurance include: 

  • Think about how often you need medical care and what sort of services you currently use 
  • Factor in any pre-existing conditions you may have and whether they may require you to have surgery or expensive treatments in the future 
  • Compare the cost of premiums through Savvy, to help you gain a greater understanding of the true cost of different levels of cover 
  • Learn about potential out-of-pocket costs and gap payments 
  • Understand what is and isn’t covered by different policies 
  • Consider your budget and think about the consequences if you require medical treatment that is not covered by Medicare, or for which you’ll have to wait a long time to receive treatment
  • Think about waiting periods which may apply before you can make a claim
  • Consider what private health facilities are available in your local area 
  • Consider the financial and tax implications of not having private health insurance, particularly if you earn over $90,000 a year 

Frequently asked questions about if it’s worth having private health insurance

Is private health insurance necessary since I’m covered by Medicare in Australia?

Private health insurance isn’t mandatory, but it can be very useful for a wide range of people. If you’re in a vehicle accident or are injured, Medicare can cover the basic cost of emergency treatment. If that injury occurs at work, you may be covered by a WorkCover insurance claim. However, having private health insurance may give you more choice and greater flexibility about when and where you receive your medical treatment and will assist with the cost of a wide range of services which aren’t covered by Medicare. 

Is it compulsory in any occupations to have private health insurance?

No, having private health insurance is not compulsory for any jobs, but it can provide many additional benefits beyond Medicare coverage. It can also save you from having to pay the Medicare Levy Surcharge if your income is over $90,000 p.a. 

Does the Australian government assist with the cost of private health insurance?

Having private health insurance may entitle you to receive the Private Health Insurance Rebate, which you can either claim back at tax time on your return or from your insurer in the form of lower premiums.  

Is it worth having private health insurance during pregnancy?

Having private health insurance during pregnancy in Australia can provide benefits such as access to private hospital facilities, your choice of obstetrician and coverage for pregnancy-related services which are not fully covered by Medicare. It can offer peace of mind and potentially reduce out-of-pocket expenses for maternity care. However, there is usually a 12-month waiting period for pregnancy cover, so planning your health insurance needs well in advance is vital if you are planning to grow your family.   

Does private health insurance cover cosmetic procedures?

Cosmetic procedures generally aren’t covered by private health insurance unless the procedure is deemed medically necessary. Therefore, you won’t be able to claim any benefits for procedures such as tummy-tucks, breast implants or face-lifts that aren’t considered medically necessary. 

Is there a price difference between singles and couples health insurance policies?

No, you will pay almost the same for a couples policy covering two adults as you would for two singles policies. Therefore, if you're choosing between a singles vs a couples policy, factors such as convenience and only having to make one premium payment are more important considerations. 

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