4 reasons to get (or keep!) private health insurance during a cost-of-living crisis

Lots of Australians are looking for ways to cut household costs and private health insurance is sometimes on the chopping block. But, that might not be the most money-savvy idea.

Cost of living pressures are causing many Australians to revisit their spending and cut non-essential expenses from the budget. For some, that means cancelling private health insurance. But, if you've been considering the same, don't pull the trigger just yet - there are a few factors you should think about first.

1. Waiting times

One of the most significant advantages of having private hospital insurance compared to relying on the public system is that you can avoid lengthy waiting lists for elective surgeries.

Data from the Australian Institute of Health and Welfare found that, in 2023-24, public patients waited an average of 46 days for elective surgery after being added to the waiting list. However, waiting periods for some surgeries were significantly longer including an average of 119 days for cataract extraction, 185 days for tonsillectomy, and 265 days for knee replacement. Worryingly, 6.4% of public patients waited over a year for their elective surgery.

In comparison, private patients don't have to live with long wait lists - once a doctor advises a patient needs surgery, they can obtain a referral and select a surgery date that suits them.

If you hate the thought of waiting months for a surgery, it might be worth keeping private health insurance. Depending on the procedure you need, you could even end up saving money by minimising lost income if you can't work while you wait for surgery.

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2. Offsetting costs

Cancelling extras cover might seem like a quick way to save money, but always calculate how much you're likely to claim, and how much your policy costs, before rushing ahead. When used wisely, extras cover can easily pay for itself - and some.

For example, HIF's Simple Extras policy costs around $465 a year¹. But let's say you need new glasses, already get remedial massages, and go to a dental check-up every six months. Annual coverage for a singles' policy includes 100% of optical claims up to $200, 60% of complimentary therapies costs (including remedial massage) up to $150, and 60% of general dental treatments up to $600. With just a few health visits, it's likely the policy has already paid for itself, and there are plenty more benefits to take advantage of too².

If you're ever unfortunate enough to need an emergency ambulance, the policy could also come in incredibly handy. In NSW, the cost for an emergency ambulance call-out is $445 plus an additional charge of $4.02 per kilometre, up to a maximum of $7,299. However, if you have a hospital or extras policy, the call-out and journey for emergency road ambulance could both be covered entirely³.

3. Taxes, levies and penalties

For the 2025-26 financial year, if you earn over $101,000, or $202,000 for a couple or family (for families with children, the thresholds are increased by $1,500 for each child after the first) and you, your spouse and dependent children do not have the appropriate level of health insurance, you could be required to pay an additional tax called the Medicare Levy Surcharge (MLS), which ranges from 1% to 1.5% of your income for MLS purposes taxable income.

For an individual earning $101,000, that could mean an extra $1,000 in tax. However, you can potentially save this tax by taking out appropriate hospital insurance - but you need to do your homework and look at your personal financial situation carefully when examining policies available. An entry level policy such as HIF's Basic Plus Hospital Cover could be worth exploring.

It's also worth thinking about the long-term implications of not holding hospital cover - particularly if you're over 31 - due to Lifetime Health Cover (LHC) loading. LHC loading is a government surcharge introduced to encourage Australians to take out, and keep, hospital cover earlier in life. If you don't have hospital cover by 1 July following your 31st birthday, a loading of 2% will be added to your premium for each year you were aged over 30 without it. For every year you're over 30 without private hospital cover, an additional 2% is added to your premium, up to a maximum of 70%.

The loading is only removed after 10 years of continuous hospital cover. There are some exceptions, so refer to full details at the ATO – but the crux of it is that temporarily dropping your policy to save money in the short term could end up costing you thousands in the long run.

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4. Choice and control

Having private health insurance also gives you the ability to control the details of your own healthcare. You can select specialists you trust, in hospitals that are most convenient for you, and at times that fit your schedule. In the public system, you typically have very little say over who treats you, where it happens, or when.

When you're already balancing budgets, and managing a busy life, having control over your healthcare can relieve stress and make the entire process far more bearable.

The bottom line

While dropping private health insurance might seem like a quick way to cut back on household costs during challenging economic times, the decision shouldn't be made lightly as it can potentially end up costing you more money in the long run, impacting on your overall health, and exposing you to greater stress levels.

Learn more about switching to HIF

Sources

ATO - Lifetime Health Cover
Australian Institute of Health and Welfare - Elective surgery hospital waiting times
NSW Ambulance - Costs and fees

Footnotes
¹Price is based on a HIF single policy in Western Australia (WA) after deducting a 24.288% Australian Government Rebate on private health insurance. Refer to product factsheets for more information here.
²HIF's annual limits and waiting periods apply. Refer to product factsheets and the Health Cover Guide for more information here.
³Read the HIF product factsheets and the Health Cover Guide for more detail about ambulance cover here.