As of September 2024, more than 15 million Australian people are covered by some form of private health insurance policy.

Extras health insurance policies (covering non-hospital treatments) are more popular than Hospital policies.

Around 12.3 million are covered by a combined Hospital and Extras policy, which is roughly the same number of people covered by a Hospital policy. Around 2.7 million people have Extras only cover, which does not cover treatments that are also covered by Medicare.

For Hospital policies, around half of people are covered under a family policy, while 21% have couples cover and a further 24% are covered under a singles policy. The remaining 5% or so have a single-parent policy.

While the overall number of people covered by health insurance has been steadily rising, the portion of the population that’s covered has remained relatively steady for the past decade or so as Australia’s population has also grown.

In fact, for Hospital policies (designed to take pressure off the public hospital system), the number of people who are not covered has been rising consistently since around the year 2000.

Rates of health insurance coverage are lower among younger people, with a noticeable drop-off going into the 20-24 age bracket. This is not surprising, as it’s around the age at which individuals typically come off their parents’ health insurance policy.

The level of take-up of private health insurance also has significant state/territory variations. This is likely due in part to the reduced availability of private health facilities in certain parts of the country, and the higher out-of-pocket costs (those not covered by insurance) private health members face in some areas (more on this below).

The top reason Australians have private health Hospital cover is to avoid the Medicare levy surcharge (an extra tax some people are charged if they don't have an eligible private health insurance policy).

That’s according to a nationwide survey of Australians carried out by Money.com.au in 2024. The second most popular reason was the ability private cover offers people to choose between private public hospital treatment.

For Extras cover, comfortably the top reason for getting a policy is to access dental cover for the likes of check ups and cleans. Accessing cover for optical care and treatments was the second most commonly chosen reason for getting an Extras policy.

This aligns with the treatments covered by Extras policies that have the highest level of benefits paid out to policyholders, with dental and optical being the areas where members get the most money back from insurers.

No prizes for guessing the main reason Australians say they do not have private health insurance. Cost is overwhelmingly the biggest barrier.

Benefits paid are very unevenly spread across age groups, as you might expect given older people are typically more likely to experience health issues. Roughly two-thirds (66.5%) of Hospital benefits are paid towards treatments for policyholders aged 60 or above. Over 60s make up less than 27% of the population of people with Hospital cover.

The uneven distribution of benefits becomes all the more apparent when we look at the average benefit paid to people across the various age groups. But again, this is not surprising given the more complex health needs of older Australians.

Extras benefits paid are more evenly distributed by age, with younger people more likely to utilise services like dental treatments at similar rates to older people.

Speaking of dental treatments, these are by far the most common reason a benefit is paid on Extras cover, dwarfing the other main treatment types.

Nathan Kettlewell of University of Technology Sydney, explained how gap payments can be problematic when consumers are weighing up whether health insurance will be worth it for them.

“If you're a consumer and you go to a private hospital and you've got insurance that you're spending a lot of money on and then you still get a bill at the end of that hospital admission, no doubt that’s frustrating," he said.

“People are paying for insurance and then they're paying twice. So they're paying for the privilege of paying.

“It would make you reconsider whether you really ought to have private health insurance. Especially considering that if you have your surgery in a public hospital, you won't get any bill at all.”

Lack of competition in the market is another concern for consumers, with the top five providers accounting for almost 82% of the market. Most of these large insurers have multiple sub-brands they sell their policies through.

Graeme Hughes of Griffith Business School explained that health insurance is not a product type that lends itself well to thriving competition among providers.

“While multiple private health insurers exist, the heavily regulated nature of the industry, particularly for Hospital policies, limits genuine competition and consumer choice,” he said.

“To foster innovation and encourage new entrants, further regulatory reform is needed. This could involve streamlining approval processes, allowing for more flexible product design, and providing targeted incentives, such as subsidies or reinsurance support.”

The number of complaints received by the Commonwealth Ombudsman relating to private health insurance rose to 3,429 in the most recent year for which data is available (FY 2022/23). But according to the Ombudsman, this increase was partly down to a single event (a data breach at insurer Medibank).

To put the number of complaints into perspective, that’s around 0.0002 complaints per person covered by private health insurance.

Prior to 2022/23, complaint numbers had been steadily decreasing since 2016-17.