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

$1,026 Out of Pocket: Private Health Insurance Gaps in Australia

▶

Australians paid <mark class=“fig”>$34.5B in private health insurance premiums in 2023–24, yet the average insured person still needed <mark class=“fig”>$1,026 in out-of-pocket hospital and medical costs in 2022–23—a sign many policies do not cover the “private” experience people think they are buying.

The number that matters

The central number is <mark class=“fig”>$1,026: the average out-of-pocket hospital and medical cost per privately insured person in Australia in 2022–23.

How it quietly costs you

The first quiet money leak is overestimating what private health insurance will pay for: many people buy hospital and extras cover expecting broad protection, but the system is built around policy inclusions, exclusions, limits, waiting periods, excesses, and Medicare/private billing gaps, so insured people still face significant out-of-pocket costs.

The quantified impact is the <mark class=“fig”>$1,026 average out-of-pocket cost per privately insured person in 2022–23, with the private hospital sector also recording <mark class=“fig”>$34.5B in premiums in 2023–24.

The “old vs better” comparison is:

• Typical experience: paying premiums and still landing with meaningful gaps and exclusions.
• Better: choosing a policy that explicitly matches the services you actually use, because the system does not guarantee full coverage of hospital or specialist charges.

The second, compounding trap

The second layer is excessive duplication and under-use of cover, where Australians keep paying for policies whose benefits they rarely claim, especially extras cover that is often constrained by annual limits and provider networks.

The quantified cost of inaction is that people continue paying for cover that may not return value; nationally, private health insurance premiums reached <mark class=“fig”>$34.5B in 2023–24, showing how large the recurring cash drain is even before considering gaps and limits.

A concrete long-run cost example is this: if a person pays <mark class=“fig”>$3,000 a year in premiums and still averages <mark class=“fig”>$1,026 in out-of-pocket costs, the effective annual cost of “being covered” is already <mark class=“fig”>$4,026 before any extra services, gap fees, or unused benefits are counted.

What this looks like in practice

Mia, 38, is a payroll officer in Melbourne earning <mark class=“fig”>$82,000 a year, with hospital + extras cover costing <mark class=“fig”>$3,100 a year and 12 years to retirement.

She would discover:

• Her policy still leaves her exposed to gaps: the average privately insured Australian still paid <mark class=“fig”>$1,026 out of pocket in 2022–23, so “insured” does not mean “fully covered.”
• Her premiums are part of a huge recurring spend: Australians paid <mark class=“fig”>$34.5B in private health insurance premiums in 2023–24, so even a small mismatch in policy choice compounds quickly over time.
• Her extras may be more limited than she expects: many people pay for benefits they do not fully use because annual caps, item restrictions, and provider rules reduce the value of extras cover relative to the premium.

The full cost of doing nothing

For Mia, combining the two problems means paying premiums for cover that still leaves gaps plus continuing to fund a policy that may not deliver full value.

A conservative modelling basis is:

• <mark class=“fig”>$3,100 annual premium
• <mark class=“fig”>$1,026 annual average out-of-pocket cost
• 12 years to retirement

That implies a combined cash outlay of about <mark class=“fig”>$49,512 over 12 years, before inflation, premium rises, or any additional gap fees are included.

What to do about it

• Check your policy against your actual usage using PrivateHealth.gov.au’s policy comparison resources and your insurer’s product sheet; look for inclusions, exclusions, waiting periods, excesses, and annual limits.
• Find the relevant figure by comparing what your policy pays for the services you actually use.
• Steps:

1. List the 3–5 services you most expect to use in the next 12 months.
2. Read the policy summary and identify exclusions, waiting periods, and annual limits.
3. Compare the premium against the likely benefit you would receive.

• What good looks like: your policy should cover the services you actually need, with gaps and exclusions clearly understood before you pay.

• Compare your current hospital cover with the Medical Costs Finder to see typical specialist and procedure costs before you assume insurance eliminates out-of-pocket spending.

• Find the relevant figure by checking the typical cost and gap for the procedure you may need.

• Steps:

1. Search the procedure or specialist type.
2. Review the typical total cost and average gap.
3. Compare that gap with your excess and policy benefit.

• What good looks like: you know the likely gap before treatment, not after the bill arrives.

• Review whether your extras cover is worth the premium by using your insurer’s benefits table and the government comparison tools for private health insurance.

• Find the relevant figure by adding up likely rebates or claims against your yearly premium.

• Steps:

1. Add up what you actually claimed in the last 12 months.
2. Compare that with annual premiums and caps.
3. Cancel or downgrade cover that returns less than it costs.

• What good looks like: annual claims and expected benefits are close to or above the yearly premium for that product.

A myth worth clearing up

Myth: Private health insurance means the insurer pays most of the bill, so you are protected from major medical costs.

Fact: Australians with private health insurance still faced an average <mark class=“fig”>$1,026 in out-of-pocket hospital and medical costs in 2022–23, which shows that premiums do not eliminate gaps.

Sources

• https://moneysmart.gov.au/check-and-report-scams/check-before-you-invest

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.