With the rising cost of living putting pressure on households across Australia, many people are questioning whether private health insurance is still worth keeping. Every dollar counts, and when essentials like rent, groceries, and utilities are already stretching budgets, insurance premiums can feel like an unnecessary extra.
Medicare provides all Australians with access to essential medical care, but private health insurance offers additional benefits such as faster treatment, greater choice of specialists, and cover for services not included under the public system. The big question is whether these advantages outweigh the cost when money is tight.
How private health insurance works in Australia
Australia’s healthcare system is built on Medicare, which covers GP visits, public hospital care, and some medications. But Medicare doesn’t extend to everything, and this is where private health insurance comes in.
- Hospital cover allows you to be treated in private hospitals, choose your own doctor, and reduce waiting times for elective surgeries.
- Extras cover helps pay for things like dental care, physio, optical, and chiropractic treatments.
- Combined cover bundles hospital and extras into one policy.
Why people keep private health insurance
Even in tough economic times, many Australians choose to hold onto their cover for several reasons:
- Avoiding long wait times – Non-urgent surgeries in the public system can take months or even years. Private cover can mean faster access to care, which often leads to better outcomes.
- Choice and flexibility – Insurance gives you the option to choose your doctor, where you’re treated, and when. This is particularly important for maternity care or planned procedures.
- Financial incentives – The government offers rebates on premiums and applies penalties to higher-income earners without private hospital cover. For example, the Medicare Levy Surcharge (MLS) applies an extra tax to singles earning over $101,000 or families earning over $202,000 if they don’t hold hospital cover. Younger Australians also benefit from avoiding Lifetime Health Cover (LHC) loading, which increases premiums if you delay taking out insurance after the age of 31.
The financial challenges
While the benefits are clear, private health insurance can be costly. Some of the main challenges include:
- Rising premiums – Costs tend to increase each year, often higher than inflation.
- Gap and excess payments – Even with cover, you may still need to pay a share of hospital or specialist fees.
- Unused extras – Many people don’t claim on all the services included in their plan, meaning they’re paying for benefits they rarely use.
When it makes sense to keep your cover
Private health insurance may still be worthwhile if:
- You’re a high-income earner who would otherwise pay the MLS.
- You’re planning a family and want private maternity care.
- You live with a chronic condition or need frequent specialist treatments.
- You want to lock in lower premiums early and avoid LHC loading later in life.
How to reduce the cost of insurance
If your premiums feel overwhelming, there are strategies to bring them down without losing cover completely:
- Review your policy regularly and drop extras you don’t need.
- Choose a higher excess to reduce monthly payments.
- Consider basic hospital cover if your main goal is to avoid the MLS.
- Compare providers annually, as switching funds can often lead to savings or added benefits.
When to reconsider your policy
For some, the cost may still outweigh the benefits. If you rarely use extras, don’t earn enough to be affected by the MLS, and don’t have ongoing health concerns, paying out of pocket when needed may be cheaper. However, cancelling comes with risks, such as re-serving waiting periods or paying higher premiums later if you decide to rejoin.
Final thoughts
There’s no universal answer to whether private health insurance is worth it during a cost-of-living crisis. For some, the peace of mind and faster access to healthcare makes the expense justifiable. For others, the premiums feel like an unnecessary burden. Ultimately, the decision comes down to your financial situation, health needs, and long-term plans.
