Value of private health insurance 'eroding' as doctors urge reform


Dec 5 2025
ABC News.
A monitor in a hospital room seen from outside.
The Australian Medical Association says private health insurers have not been delivering value for money.   

In short:
A new report from Australia's peak doctors' body says private health insurance is increasingly failing to deliver value.

About 15 million Australians hold some level of private health insurance.

What's next?
The AMA has called for insurers to pay 90 per cent of their earnings directly into patient healthcare.


The value of private health insurance is "eroding" as private hospitals face mounting financial pressure, according to a new report from the peak doctors' body, which calls for urgent reform to protect patients.

The Australian Medical Association's (AMA) annual Private Health Insurance Report Card described a system under pressure and "increasingly failing to deliver value for money" to the roughly 15 million Australians with private health insurance.   

The report found premiums had risen sharply, outpacing inflation and wage growth.

But AMA President Danielle McMullen said almost 70 per cent of policies now contained exclusions — the specific treatments or conditions an insurer will not cover.

"Australians are paying more for their private health insurance and getting less value in return,"  she said.
"We've seen that private health insurance premiums are going up and up, which will be no surprise to Australians and sadly, our coverage is being narrowed."


Danielle McMullen says insurers need to make their products more transparent.

The AMA report showed a total increase of 640,000 policies in June 2025 compared to March 2020, but demand for gold-tier policies had fallen dramatically, as people opted for cheaper policies that excluded a lot of services such as no-wait maternity or psychiatric care.

The report also found gold-tier policies were susceptible to "phoenixing" — when insurers close an existing policy and replace it with a nearly identical one at a higher price.

"We're seeing Australians … turn to those lower tier products, which means they're probably not covered for the health issues they may in fact face," Dr McMullen said.

"It's more important than ever that people read the fine print of their insurance policy but … insurers need to work harder to make their products more transparent."

Is private health insurance worth it?

Are you better off buying cover or relying entirely on the public system? Let's do the maths.

Same procedure, different benefits
The report also uncovered major variations in the amount insurers would pay for the same procedure.

For example, the AMA found an almost 30 per cent variation in the benefits paid between two insurers for an uncomplicated childbirth.

The amount an insurer will cover can also vary depending on where you live, with data showing someone in New South Wales would get a higher benefit than someone in South Australia for cataract surgery this year.



Overall, the AMA said an inadequate portion of premiums were being returned to consumers in the form of health care, with more money ending up in insurers' hands.

Private health insurers returned about 84 per cent of premiums to patients in 2024-25 despite large profit margins, the report found. That figure is slightly lower than the estimates of 85.5 per cent the government has previously used.

The AMA has called on the government to make it compulsory for insurers to return at least 90 per cent of premiums to consumers in the form of treatment benefits.

The group also wants an independent authority established to oversee the health insurance sector.

Underfunding has 'weakened' public system
The private sector is responsible for more than two in every three planned surgeries, and two out of every five hospital admissions.

However, the AMA argued underfunding had "weakened" the public system for decades, with private healthcare never "intended to be the only option".

Dr McMullen said the government needed to substantially boost funding to ensure the system remained fit for purpose.

"Our public system is so neglected, underfunded, strained, and people know that the waiting lists are unacceptably long in public, and that's forcing them to choose private care that they may not be able to afford," she said.

"That's not the situation we want Australia to be in. We want our private system to be about choice … it is there to support our public system, not replace it."

Two nurses walk down a hospital corridor seen from behind.
The AMA wants insurers to pay 90 per cent of their earnings directly into patient healthcare.

The report has landed in the middle of an increasingly turbulent relationship with private hospitals and insurers.

Many private hospitals say they are on the brink of financial collapse as insurers are not passing on enough money to cover the rising costs of health care.

Insurers argue they have been paying out record amounts and must keep premiums affordable for customers.

I blame mass uncontrolled immigration of millions of people
without having the hospital infrastructure to cope with the demand.