I’ll write a complete, researched article on whether private health insurance in Australia is still worth it, following your exact structure and rules.
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More than 15.2 million Australians have some form of private health insurance, yet the portion of the population with hospital cover has barely budged in a decade while premiums are heading back toward 4% in 2026. For a family on an average combined policy costing $4,908 a year, that means an extra $191–$216 annually starting next year. For a single person on a $3,264 policy, it’s another $127–$144 out of pocket. The question of whether the whole thing still stacks up has never been more personal — or more tied to your income, your age, and where you live.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
The most common reason people take out private cover is to avoid the Medicare Levy Surcharge — a tax penalty that kicks in once your income crosses certain thresholds. The most common reason people don’t have it? The cost. That tension sits at the heart of the Australian debate. For a growing number of households, especially those in their 20s and early 30s, the value equation is shifting. Dropping cover in your early 30s can trigger costly consequences later. Here’s what you actually need to know.
The concept that ties all of this together is the Medicare Levy Surcharge — a tax you pay if you earn above a certain threshold and don’t have an appropriate level of private hospital cover. For a single person earning $100,000, the surcharge alone costs between $1,000 and $1,500 a year, depending on your tier. That’s real money, and it changes the arithmetic of whether a policy is worth holding.
What the premium hikes actually mean for different households
Private health insurance premiums in Australia have stayed unusually low since 2021, but the gap with health inflation is closing. Money.com.au’s General Manager of Health Insurance, Chris Whitelaw, describes 2026 as “a reset” — a return to what feels like a normal but painful growth cycle. The numbers land differently depending on your household type and income bracket.
For a single person on an average combined hospital and extras policy costing $3,264 a year, a 4% rise adds about $130. For a family on $4,908, it’s roughly $200. Those aren’t trivial amounts when wages are growing slowly. But the calculation isn’t just about the premium — it’s about what you’re paying in tax without cover, and what you might pay in out-of-pocket costs when you actually need care.
The state-by-state picture is revealing. Western Australians are the most likely to hold hospital cover (68.2%), while Tasmanians are the least (40.2%). That’s not random — it’s tied to the availability of private hospitals and specialists in each region. Where you live directly shapes what a policy is actually worth to you.
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| State / Territory | Hospital cover (%) | Extras cover (%) |
|---|---|---|
| Western Australia | 68.2% | 53.8% |
| Australian Capital Territory | 54.2% | 40.2% |
| South Australia | 53.8% | 65.8% |
| Northern Territory | 48.1% | 48.1% |
| Australia (average) | 46.3% | 56.9% |
| New South Wales | 45.1% | 59.6% |
| Victoria | 42.3% | 50.0% |
| Queensland | 41.2% | 48.1% |
| Tasmania | 40.2% | 50.1% |
Where people get the decision wrong
Most of the costly mistakes I see come down to people treating health insurance like a simple purchase rather than a multi-year tax and risk calculation. The research backs this up. Here are the gaps that cost the most.
Dropping cover right before you need it most
The 20–24 age bracket shows the biggest drop in coverage, which makes sense — that’s when people come off their parents’ policy. But the Lifetime Health Cover loading adds 2% to your premium for every year you’re uninsured after age 30. Wait until you’re 40 to get cover and you’re paying 20% extra, permanently. That loading stacks on top of premium increases. For someone earning $90,000 and deciding to skip cover in their 20s, the long-term penalty can easily outweigh the short-term savings.
Thinking extras cover is enough
Around 2.7 million Australians have extras-only policies, which cover things like dental, optical, and physio but not hospital treatment. The Medicare Levy Surcharge only applies if you don’t have hospital cover. So if you’re earning above the threshold and holding extras-only, you’re still paying the surcharge. That’s a double cost — premium plus tax — with no hospital benefit. The research shows this is a common misunderstanding, especially among younger policyholders.
Ignoring the out-of-pocket gap
Even with private hospital cover, many people face significant out-of-pocket costs — co-payments, excess fees, and gap payments for specialists. Consumer expert Graeme Hughes notes that the limited choice and standardised nature of policies, combined with the cost-of-living squeeze, is dampening enthusiasm. A policy that costs $3,264 a year might still leave you paying hundreds or thousands more when you actually use it. The key is to check the preferred provider arrangements and compare add-ons carefully before committing.
Not comparing policies annually
Premium increases are applied across the board, but your personal circumstances change. A policy that made sense at age 25 might be wrong at 35, especially if your income has crossed the MLS threshold or you’ve started a family. The research shows that most people stick with the same insurer for years, even when better-value options exist. A 30-minute comparison before each renewal date is one of the highest-return activities you can do with your money.
How to decide whether private cover is worth it for you
This isn’t a one-size-fits-all answer, but the research points to a clear framework. Your decision hinges on three things: your income, your age, and your tolerance for public hospital waiting lists.
Run the surcharge calculation first
If you’re single and earning over $93,000, or a family earning over $186,000, the Medicare Levy Surcharge is the single biggest factor. Calculate 1% of your income (the base surcharge rate) and compare it to the cheapest hospital policy available to you. For many people, the surcharge is roughly the same as or higher than the premium, meaning the policy effectively costs nothing — or even saves money — while giving you access to private treatment. If you’re below the threshold, the surcharge doesn’t apply, and the decision becomes purely about whether you value faster access to elective surgery.
Factor in the Lifetime Health Cover loading
If you’re under 30 and healthy, it’s tempting to skip cover. But every year you delay after 30 adds 2% to your future premiums. By age 40, you’re paying 20% extra forever. The loading is capped at 70%, but it never drops off. For someone who waits until 50, that’s a 40% permanent penalty. The numbers strongly favour getting a basic hospital policy before your 31st birthday, even if you rarely use it. The private route to faster treatment becomes a lot more expensive if you’ve delayed enrolment.
Compare your local hospital access
The value of private cover depends heavily on where you live. In Western Australia, where 68.2% of people have hospital cover, private facilities are widely available and waiting lists in the public system can be long. In Tasmania, where only 40.2% have cover, the private hospital network is thinner, and the gap between public and private wait times may be smaller. If you live in a regional area with limited private hospital access, the premium may not deliver the speed advantage you’re paying for.
Upcoming premium changes and what to watch
The 2026 premium increase of 3.9%–4.4% is expected to be confirmed in early 2026, taking effect from 1 April. This follows several years of below-inflation rises. If health inflation remains near 4%, further increases in 2027 and beyond are likely. The trend is clear: premiums are normalising upward. If you’re on the fence, locking in a policy before the April increase gives you another year at the lower rate. For existing policyholders, this is the right time to review your level of cover — you might find that dropping from gold to silver hospital cover, or increasing your excess, offsets the increase without changing your day-to-day access.
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| Scenario | Annual premium (combined) | MLS if uninsured | Net cost of having cover |
|---|---|---|---|
| Single, $100k income | $3,264 | $1,000–$1,500 | $1,764–$2,264 (plus coverage) |
| Family, $200k income | $4,908 | $2,000–$3,000 | $1,908–$2,908 (plus coverage) |
| Single, $80k income | $3,264 | $0 (below threshold) | $3,264 (full cost, no MLS offset) |
| Young adult, age 25 | $1,800–$2,500 | $0 (below threshold) | Full cost, but avoids LHC loading |
Frequently asked questions
What happens if I drop my hospital cover mid-year? ▾
Does the MLS apply if I have extras cover but not hospital cover? ▾
Can I avoid the surcharge by holding a basic hospital policy? ▾
What if I turn 31 and don’t have cover? ▾
Does the MLS threshold apply per person or per family? ▾
Are premium increases guaranteed every year? ▾
The real question isn’t whether it’s worth it — it’s for whom
The research makes one thing clear: private health insurance in Australia is not universally worth it or not worth it. For a single person earning $80,000 in Tasmania with good public hospital access, the value is low. For a family earning $200,000 in Western Australia with a history of elective surgery needs, the value is high. The premium trend is upward, but so is the cost of being uninsured — both through the MLS and through the Lifetime Health Cover loading. The decision requires a calculation, not a rule of thumb.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read The future of healthcare in Australia: where does private insurance fit in?.
Sources and Further Reading
Regional vs metro: does your location affect your health insurance needs? — A closer look at how postcode-level hospital access changes the value of private cover.
Navigating hospital waiting lists in Australia: can private insurance help? — Real data on public vs private wait times for common procedures.
Money.com.au (2025). Health insurance statistics — research insights. 🔗
