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What is Private Health Insurance

A simple guide to understanding private health insurance and how it works.

Private health insurance helps cover the cost of your health care and medical expenses. With private health insurance, you can claim a sum of money (known as a benefit) from your health fund, which will contribute towards the cost of your treatment.

While the Australian Government’s free public health care system, Medicare, covers most basic medical expenses, it doesn’t cover everything. Private health insurance gives you more flexibility and choice when it comes to looking after your health.

There are two types of private health insurance: hospital insurance and extras insurance (otherwise known as ancillary cover or general treatment cover). Hospital insurance helps cover costs when you go to hospital as a private patient. Extras insurance covers out-of-hospital treatments Medicare doesn’t usually cover, like a visit to the dentist, optometrist or physio. You can buy hospital or extras insurance separately, though most funds offer combined policies which package hospital and extras insurance into one tidy product.

What is hospital insurance?

Hospital insurance helps cover costs of in-hospital medical treatment by a doctor as well as additional hospital expenses including accommodation, prostheses and theatre fees.

With hospital insurance, you can choose your doctor, have access to a private room and book in treatment at a time that suits you.

View our hospital products

What is extras insurance?

Extras insurance helps cover costs of non-medical health services including dental, optical and physio.

These services are not generally covered by Medicare – for example, if you go to a dentist without extras insurance you’ll need to pay the full cost of treatment rather than a subsidised fee.

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What is ambulance insurance?

Ambulance insurance helps cover the cost of ambulance transport by road.

In most states, Medicare doesn’t cover the cost of emergency transport and other ambulance services (with the exception of Queensland and Tasmania), so you could pay up to $1000 out of your own pocket if you need an ambulance in an emergency situation.

Most HBF health insurance policies include unlimited urgent ambulance for transport by road.

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What is combined insurance?

Most health funds offer hospital and extras insurance as a package – these packages are called ‘combined insurance’ or ‘hospital + extras packages’.

Combined insurance saves you time by pre-selecting a hospital and extras insurance policy for you.

View our combined products

How does private health insurance work?

Imagine a giant piggy bank – this is a health insurance fund. When you make regular payments (known as premiums) as a health fund member, that money goes into the piggy bank.

Everybody pays their premiums into the same piggy bank; it is a communal pool of money that can be accessed by the health fund’s members when they make an eligible claim.


What is the difference between a not-for-profit and a for-profit health fund?

There are two types of health funds: not-for-profit and for-profit.

A not-for-profit health fund, like HBF, uses the money it accumulates through premiums to pay for the cost of its members’ claims and to run the business. They don’t have shareholders to pay, so they can dedicate themselves to taking care of their members’ health. Not-for-profit funds use any surplus earnings to give their members a better health care experience, which can come in the form of lower premiums or new benefits.

A for-profit health fund, like Medibank, Bupa or NIB, must consider the interests of their shareholders and will pay some or all of their surplus earnings to those shareholders.

Of the not-for-profit health funds, there are those open to anybody and those only open to people who work in a particular industry. Examples of health funds that are restricted to people in a particular industry include Teachers Health and Police Health.

HBF is one of the largest not-for-profit health funds in Australia open to everyone. Unlike health funds that are only open to people who work in a particular industry, anybody can join HBF.

What is community rating and why is it important?

Unlike other forms of insurance, health insurance in Australia is community-rated rather than risk-rated.

Simply put, health funds can’t stop someone from joining or adjust the price of an individual’s premiums based on risk factors like age, gender, lifestyle or physical condition. Community rating means regardless of how likely you are to claim, everyone is entitled to pay the same base price for the same health insurance policies, and that health funds must provide health insurance to anybody who wants it.

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