A recent consumer survey has found that many Australians remain unsure about how the private health insurance tier system operates, despite its implementation being mandated five years ago.
The study, conducted by Money.com.au, indicated that a significant portion of policyholders are unclear about what coverage each tier includes, particularly when it comes to additional features offered under “Plus” policies.
The tiered classification system, which became compulsory in April 2020, was introduced by the federal government to standardise hospital cover options and enhance transparency.
Policies are grouped into four main categories – Basic, Bronze, Silver, and Gold – with each level guaranteeing coverage for a minimum number of treatment categories. The intent was to allow consumers to more easily compare hospital insurance products across different providers.
According to the survey, 56% of individuals with private cover said they only partially understood the current tier framework. A smaller group (13%) stated they found the new system equally confusing as the previous arrangement, which varied significantly between insurers.
Money.com.au’s health insurance general manager, Chris Whitelaw, said the reforms aimed to demystify policy coverage, but gaps in understanding remain widespread.
“The product tier system isn’t delivering the simplicity we expected. People are paying thousands in premiums each year without really knowing the inclusions and exclusions of their hospital cover. The feedback we’re getting is that the tier system feels like new jargon layered over old complexity,” he said.
He added that “Plus” products – variations like Bronze Plus or Silver Plus – were particularly challenging for consumers.
“We’re seeing more policyholders with specific health needs wanting to switch providers, but they’re still unsure whether another ‘Plus’ policy in the same tier includes all the benefits they were previously getting,” Whitelaw said.
Understanding of the system varied across generations. Millennials were most likely to say they grasped how the system works (36%), followed by Baby Boomers (30%). Gen X respondents were the least confident (26%), with Gen Z slightly ahead at 29%.
Insurance costs also seem to be a main concern among Australians. In a separate January 2025 survey, Money.com.au explored motivations behind hospital insurance uptake.
The findings showed that 24% of Australians said they took out cover primarily to avoid the Medicare Levy Surcharge (MLS), a tax targeting higher-income individuals without private hospital cover. The surcharge applies to those earning above $93,000 annually (or $186,000 for families).
Millennials led the trend, with 29% naming the surcharge as their key reason for maintaining hospital insurance. Gen X followed at 24%, while Gen Z and Boomers reported lower rates at 21% and 16%, respectively.
Meanwhile, a larger proportion of older Australians said they held hospital insurance to ensure better access to healthcare facilities, with 18% of Boomers selecting this option, compared to 15% of Millennials.
In a February address to the Members Health Directors’ Professional Development Program, Australian Prudential Regulation Authority (APRA) executive board member Suzanne Smith said the private health insurance sector was entering a period of structural change.
“The industry’s vital signs have continued to improve; however, we can also see it is experiencing significant change and faces a range of immediate and longer-term challenges,” she said.
She encouraged insurer boards to adapt their governance practices in response to rising costs, demographic shifts, and shifting consumer expectations.
