The Fine Print Australia · PUBLISHED 24 JUN 2026 · VERIFIED 24 JUN 2026 · AU EDITION

$80 Back for Every $100: Are Health Insurance Extras Worth It?

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For every $100 Australians pay in extras premiums, they only get about $80 back in claims on average, meaning funds keep roughly 20% of extras premiums as profit and admin costs.

The number that matters

79.7% — the percentage of extras premiums returned to consumers as benefits in 2023–24, meaning about 20.3% of all extras premiums are kept by insurers. This “benefits ratio” for general treatment (extras) was reported by the Australian Prudential Regulation Authority (APRA) in its 2023–24 operations data.

How it quietly costs you

Mechanism: Extras are priced so many people pay more in premiums than they ever claim, and the product design makes this hard to see.

• About 55% of Australians have extras cover, mostly bundled with hospital cover.
• Extras policies typically pay a fixed benefit per visit (e.g. $40 per physio session) or a set percentage, with annual limits and item limits that cap how much you can claim per service and per year.
• CHOICE reports that in 2023 the average insurer rebate was about 50% of the total fee for extras services. If you pay $300 at the dentist, your fund only covers about $150, you pay the other $150 out of pocket.
• Annual limits for common extras like general dental can be as low as $200 (some higher, some unlimited), while major dental/endodontic limits can be as low as $300 per year. Once you hit those, you get zero benefit for further visits.

How this costs people money:

1. You don’t get dollar-for-dollar “insurance” — you get capped rebates. APRA’s benefits ratio shows that on average, for every $1 of extras premium, funds only pay back about 80 cents, keeping the rest for management expenses and profit. By design, most customers must claim less than they pay in, or there would be no margin.

2. Many people barely use the services they’re paying for. CHOICE notes that extras can be poor value if your claims don’t exceed your premiums and suggests that if your extras benefits “don’t pay out more than your extras premium, it pays to either switch to a better policy or drop it altogether.” For lightly used policies, the effective “loss” is close to 100% of the premium.

3. Policies are marketed using “headline” annual limits that you rarely reach. Funds advertise top-line limits like “$400 a year for physio”, but item limits can mean you only get around $40 per visit, so you must attend 10 sessions just to hit that limit. Many people never reach those usage levels.

Concrete cost example (single, typical extras policy):

• Compare the Market shows single extras policies ranging from $13.02 to $129.35 per month, or $156.27 to $1,552.25 per year.
• Money.com.au’s 2026 analysis puts the average extras cost for singles at about $58 per month, or $696 per year.

Assume:

• Single 30‑something pays $700 per year in extras premiums.
• They only manage a couple of dentist visits and one physio during the year and get $350 back in benefits (roughly the average 50% rebate on the fees they pay).

Result:

• Out-of-pocket on services: $350.
• Premiums: $700.
• Total cost: $1,050 for $700 of healthcare.
• The extras policy has effectively cost them $350 beyond what they would have paid just paying cash — a 50% markup on their actual healthcare spend.

APRA’s benefits ratio implies that this is not an outlier; on average the system is designed so that around 1 in 5 extras dollars stays with the fund, even before you factor in under‑use of benefits.

Old vs better:

• “Old” behaviour: Pay about $696 a year for extras as a single and use it lightly, claiming, say, $350–$400.
• “Better” behaviour: Only buy extras if you know you’ll claim significantly more than your premiums. CHOICE’s practical benchmark: if what you’re getting back in extras benefits doesn’t exceed what you’re paying in premiums over a few years, consider switching or cancelling.

The second, compounding trap

Mechanism: Extras are often bundled with hospital cover for “peace of mind”, but they don’t help with tax incentives and can compound long‑term costs through premium inflation.

1. Extras do not reduce the Medicare Levy Surcharge (MLS) or Lifetime Health Cover (LHC) loading.

• The Australian Government states that the Medicare Levy Surcharge only applies to people without appropriate hospital cover and explicitly notes that you cannot avoid the MLS or LHC loading with extras‑only health insurance.
• Compare the Market reiterates: a stand‑alone extras policy won’t exempt you from the Medicare Levy Surcharge, which is a surcharge on higher-income earners who don’t hold eligible hospital insurance.

So:

• High‑income earners who take out extras‑only cover to “do the right thing” about tax are still hit with up to 1.5% extra tax via the MLS, with $0 tax benefit from those extras premiums.

2. Premiums rise over time while usage often doesn’t.

• The Department of Health notes that insurers must notify policyholders of premium increases, and that premium increases are governed by private health insurance law, but premiums tend to rise regularly over time.
• Extras premiums for a family can already range up to $319.50 per month (about $3,834 per year) for higher-cover policies, based on 2025 quotes. Even modest annual premium increases compound significantly over decades.

3. Bundling pushes people to keep extras they don’t need.

• CHOICE notes that extras policies are “often sold as a bundle with private hospital insurance,” but there is usually no price advantage to bundling; you can take hospital without extras.
• This means many people pay for extras year after year simply because it’s part of the package, not because it’s assessed value.

Concrete long‑run cost example (middle‑income couple):

Assumptions:

• Couple in their mid‑30s, no kids yet.
• Average extras cost for a couple: $115 per month, or $1,380 per year, per Money.com.au’s 2026 analysis.
• They mostly use public dental and occasional physio, receiving $700 per year in extras benefits (slightly more than singles because two people).
• Their insurer’s rebate is around the average 50% of service fees; they spend $1,400 a year on those services and get $700 back, paying $700 out-of-pocket.

Financially:

• Total annual cost:
• Premiums: $1,380.
• Out-of-pocket: $700.
• Total: $2,080 for $1,400 of services.
• “Extras penalty” vs just paying cash:
• They pay $680 extra per year ($2,080 – $1,400).

Over 30 years (age 35 to 65), ignoring inflation for clarity:

• Extra cost from keeping extras: $680 × 30 = $20,400 in today’s dollars.

If those unused premium dollars were invested instead:

• Assume they redirected $680/year into super or an investment earning a real 5% annual return (after inflation).
• Future value after 30 years: [ FV = 680 \times \frac{(1.05^{30} - 1)}{0.05} \approx 680 \times 66.4 \approx <mark class=“fig”>$45,152 ]
• So the long‑run cost of unnecessary extras for this couple is on the order of $45,000 in lost wealth over their working lives.

Importantly, none of this extras spending reduces their Medicare Levy Surcharge or Lifetime Health Cover loading risk; only hospital cover does that.

What this looks like in practice

Persona:

• Name: Amy
• Age: 34
• Job: Marketing manager in Sydney
• Income: $105,000 per year before tax
• Situation: Single, reasonably healthy, sees dentist once a year and physio sporadically
• Health cover: Combined hospital + extras, mid‑tier product
• Extras premium: Around $58 per month (about $696 per year) – a typical single extras cost per Money.com.au’s 2026 analysis.
• Years to retirement: About 31 years (to age 65)

Discovery 1 — She’s losing money annually on extras

• Over the last 12 months, Amy checks her insurer statements and sees she claimed:
• Dental: $220 benefit
• Physio: $130 benefit
• Optical: $100 benefit
• Total extras benefits: $450 for the year.
• Her premium: about $696 per year.

Net position:

• She’s effectively paying an extra $246 per year ($696 – $450) above what she would spend if she just paid the providers directly.
• This is consistent with CHOICE’s warning that many people “don’t get great value” from extras and should compare premiums to actual benefits claimed.

Discovery 2 — Extras don’t save her any tax

• Amy assumed her combined cover helped with the Medicare Levy Surcharge.
• She learns that only hospital cover counts for MLS; having extras or extras‑only doesn’t exempt her from the surcharge.
• If Amy ever dropped hospital but kept extras, on her $105,000 income she would still face the MLS at up to 1% of taxable income (depending on thresholds at the time), meaning up to $1,050 per year in extra tax on top of her extras premiums.
• Government guidance makes clear: extras cover alone is not a tool to avoid MLS or Lifetime Health Cover loading.

Discovery 3 — The “headline limits” are almost unreachable for her

• Her policy advertises “$400 per year for physio”, but the item limit per visit is about $40. That means she’d need 10 physio sessions in a year to reach the advertised $400 benefit.
• In reality, she’s only gone 3 times, and her total physio benefit is about $120 (3 × $40).
• Similarly, the dental annual limit might be $700, but with per‑item caps and her once‑a‑year check‑up, she only claimed $220.
• CHOICE highlights this tactic: top‑line annual limits hide tight per‑item limits that substantially constrain what you can actually claim per visit.

Seeing this, Amy realises the policy was sold on big sounding annual limits that don’t match her actual usage pattern, so her realistic maximum value is far below the marketing claims.

The full cost of doing nothing

For Amy, the combined effect of:

• Paying more in extras premiums than she claims (Problem 1), and
• Keeping those extras for decades despite minimal usage (Problem 2),

creates a large long‑term cost.

Modelling assumptions:

• Extras premium: $696 per year (as per average single extras cost).
• Average annual extras benefits used: $450 (based on her current pattern).
• Annual “wasted” premium (premium minus benefit): $246 per year.
• Investment return if she redirected that $246 into her super or a low‑cost index fund: 5% real (after inflation).
• Time horizon: 31 years (age 34 to 65).

Future value of redirecting $246 per year for 31 years at 5%:

[ FV = 246 \times \frac{(1.05^{31} - 1)}{0.05} ]

• (1.05^{31} \approx 4.467), so the factor is (\frac{4.467 - 1}{0.05} \approx 69.3).
• (246 \times 69.3 \approx 17,048).

So, over her working life, Amy is on track to forgo roughly $17,000 in today’s dollars by keeping extras that consistently pay out less than she spends on them.

If at any point she mistakenly dropped hospital but kept extras, she could also be hit with up to about $1,000–$1,500 per year in extra tax via the MLS at higher incomes, on top of those wasted premiums.

What to do about it

1. Audit your extras: compare 2–3 years of claims to premiums

1. Action: Download your last 2–3 years of extras claims and premiums and see if benefits > premiums.
2. Tool/portal: Your fund’s online member portal or mobile app. Almost all Australian health funds must provide access to claims histories and premium statements under private health insurance rules.
3. Steps:

• Log in to your health fund’s online portal.
• Download or view your claims history for extras/general treatment for the last 24–36 months.
• Download or view your premium payment history for the same period and calculate, year by year, total extras premiums vs total extras benefits paid.

4. What “good” looks like:

• Over a multi‑year period, your total extras benefits should comfortably exceed your total extras premiums; CHOICE’s guidance implies that if you are consistently getting back less than you pay, the value is questionable.
• If benefits are less than or roughly equal to premiums, your extras policy is financially marginal or poor value.

2. Check if you actually need extras bundled with your hospital cover

1. Action: Compare the cost of your current combined policy with hospital‑only cover and consider unbundling extras.
2. Tool/portal:

• Private health fund comparison site (e.g. government‑endorsed comparison tools) or your insurer’s online quote tool.
• Use these to price hospital‑only policies vs combined hospital + extras.

3. Steps:

• Get your current hospital + extras premium from your fund’s online portal or latest renewal notice.
• Use a comparison tool to quote equivalent hospital‑only policies (same excess, similar cover level).
• Compare the hospital‑only premium with your current combined premium to see how much extra you’re paying for extras and whether that amount is justified by your actual extras claims.

4. What “good” looks like:

• You should only keep extras if the extra amount you pay for extras each year is less than or equal to what you routinely claim in benefits, and you value the “pre‑commitment” to preventive care.
• If you’re paying, say, $700 per year for extras but typically only claim $400–$500, dropping or downgrading extras is financially sensible.

3. Confirm your MLS/LHC position using ATO/myGov and government guidance

1. Action: Check whether you’re paying the Medicare Levy Surcharge and whether extras help (they don’t).
2. Tool/portal:

• myGov → ATO online services for your tax return and MLS details.
• Australian Government health website for MLS and Lifetime Health Cover rules.

3. Steps:

• Log in to myGov, link to the ATO if not already linked.
• In your last tax return, check the Private Health Insurance section and whether MLS was applied, comparing your income to the relevant thresholds.
• Read the MLS and LHC rules on the Department of Health or ATO sites to confirm that only hospital cover counts for MLS and LHC, not extras.

4. What “good” looks like:

• If your income is above MLS thresholds, you should hold appropriate hospital cover if you want to avoid or reduce the surcharge.
• Extras‑only or extras in addition to hospital provide no extra MLS benefit; any decision about extras should be made purely on value for money of the benefits, not on tax grounds.

A myth worth clearing up

Myth: “You have to keep extras cover or you’ll get slugged with extra tax (Medicare Levy Surcharge or Lifetime Health Cover loading).”

Fact: The Medicare Levy Surcharge and Lifetime Health Cover loading only recognise hospital cover, not extras. The Australian Government explicitly states that extras/general treatment policies do not exempt you from the MLS, and you cannot avoid LHC loading with extras‑only policies. Keeping or dropping extras has no impact on whether you pay the MLS or incur LHC loading; those decisions should be based solely on whether your extras benefits exceed your extras premiums over time.

Sources

• https://www.health.gov.au/topics/private-health-insurance/what-private-health-insurance-covers?language=en

Researched 2026-06-24.

Corrections & disclosure: an AI-assisted, human-reviewed guide. Every figure is dated and sourced above. Spot something out of date or wrong? Tell us and we’ll correct it — corrections are noted here and in the video description.