How to cancel health insurance in Australia

It's easy to cancel health insurance coverage in Australia, but there are some things to consider first.

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By

Tim Bennett

Edited by

Jason Loewenthal

Updated

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Key takeaways

  • In Australia you can cancel your health insurance at any time, which is nice.
  • There are some downsides to ditching your cover that you should think about first.
  • You might be better off downgrading your insurance or switching to another fund.

Cancelling your health insurance: A calculated risk

Sometimes cancelling your cover is a good idea. I'm not here to lecture you about why you should keep it. In fact, I cancelled my hospital cover a few years back and I regularly switch my extras cover. That's a story for another time, but my point is this: Your situation is unique, and you need to figure out what makes sense for you.

To cancel health insurance is to take a calculated risk. In this guide I'll give you the things to consider before making that decision for yourself.

4 reasons to cancel your health insurance

There are some great reasons to cancel your health insurance. Here are just some that might apply to you.

1. It's expensive

Health insurance can be really expensive, especially if you're on a comprehensive plan. For gold hospital cover, the cheapest premium is $175.29 a month – that's for a single earning less than $97K in Sydney, with a $750 excess. All that stuff matters by the way, as I'll talk about later. My point is, health insurance can get more expensive than you can manage sometimes.

2. You don't get value for money

For extras especially, if you're not getting back the price of your premiums as benefits each year, you might decide you're better off paying fully out of pocket. You do open yourself up to having a big expense suddenly pop up though, so you need to be careful here.

3. You're young and healthy

If you're in good health, health insurance may seem like an unnecessary cost that you don't need to deal with yet. If you're not likely to claim in the coming decades, then you're potentially paying for years of coverage you never need. This is as good a reason as any, despite what some people might say! There are some important caveats to consider though, which I lay out below.

4. You're already covered by Medicare

In Australia, a truly lucky country thanks to progressive social spending, we're covered by Medicare, the public health system. Medicare is far from perfect, but it will keep you alive for free. Plenty of Australians feel confident enough with the public system to opt out of private coverage for this reason. There are absolutely some benefits of private cover that you might want to pay for, but they're not for everyone.

4 reasons to not cancel your health insurance

Okay, time to put on my responsible adult hat and tell you the downsides of ditching your health cover. Any one of these could be enough to seal the deal for you, so give them some thought – especially numbers 2 and 3.

1. Loss of coverage

If you cancel private health insurance, you won't be covered anymore. Seems obvious, but give it some thought. This means no cover for treatment in a private hospital, which can offer faster treatment and shorter surgery waiting lists, your choice of surgeon, nicer facilities and more. For extras cover it also means you'll have to pay completely out of pocket for services like dental, optical, physio and more. Ditto for ambulance cover, with a few exceptions I'll cover later. You ready to give that up?

2. The Medicare levy surcharge (MLS)

The MLS is an extra tax you'll pay if you earn more than $97,000 per year ($194,000 for couples) if you don't have a hospital policy. It starts at 1%, or $970 a year at a minimum. You can get a bronze hospital policy for about that price, which offers pretty decent cover for basically nothing, because you wouldn't be paying the tax. Look – if you're earning more than $97,000 a year, it's financially worth keeping some hospital cover.

3. Lifetime health cover loading (LHC)

The LHC loading is the "turning 30" thing you vaguely remember you should think about. For every year after you turn 31 you don't have hospital insurance, your premiums will increase by 2% per year when you eventually get it. So if you waited until 41 to get hospital cover, it'd cost you 20% more than your base premium. Mind, this only lasts 10 years and then resets. From a policy perspective, it doesn't really offer enough financial incentive as the MLS, but if you think you'll need hospital cover in the coming years, it could make the difference.

4. Waiting periods

If you cancel your health insurance, you'll reset all your waiting periods. That's a problem if you decide you need private cover again in a few years. For extras, it could mean anything from 2 months to 3 years before you can claim for some services. For hospital cover, the waiting periods you'll reset are:

    • 2 months for most treatments
    • 12 months for pregnancy and child birth
    • 12 months for treatments for any pre-existing conditions

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How to cancel your health insurance

If you're ready to cancel, you're in good company. In 2023 we ran a survey finding over 3 million Aussies planning on cancelling or switching health funds. Did all of them switch or cancel? Probably not. But you're not alone in thinking about it.

To cancel your health insurance, just call your provider and cancel. In Australia you can cancel health insurance at any time, for any reason. There are no direct financial penalties that the health fund can issue, though there are the financial impacts I covered above. In fact, the government mandates that funds must refund you for any premiums you've paid in advance.

When you call your provider it'll probably try to sell you on a different policy. Just push through that. Or maybe give the alternatives a thought. Up to you.

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"Real talk – think twice before canceling your ambulance cover. Medicare doesn't cover ambulance, crazy as that seems! Queensland and Tasmania cover ambulance for residents, though Tassie won't pay when you're on the mainland. So if you're not a Queenslander or a Tasmanian that never leaves the island, you probably want some ambulance cover. Standalone ambulance policies start at like $5 a month, but a single ambo trip can cost thousands. It's so so worth it!"

Insurance expert

Alternatives to cancelling your health cover

If you've decided you'd like to hold onto cover for now, but still need to save some dosh, you have options.

Change your level of cover

Downgrading your cover will cover you for less, but it will cost less too. Sometimes this is a no-brainer – for example if you're done having babies, you don't need cover for pregnancy or IVF on your hospital policy. Similarly, if you have perfect eyesight (I'm very jealous) then you probably don't need extras with a big optical limit. Other times, downgrading your cover is great to keep the tax incentives of hospital cover, while saving some money every month. The hospital cover tier system helps a lot here, making it a bit easier to understand what is and isn't covered at every level.

Switch providers

Switching health funds is pretty easy and gives you the ability to find a policy that's better suited to you. You also get to benefit from the sign-up offers funds have going. For hospital cover, any served waiting periods will all be honoured by your new provider. For extras, most providers will also recognise already-served waiting periods, but it's not mandated like hospital. Switching is the smart-money approach to saving on health insurance, as well as most other financial products.

Suspending your cover

If you're overseas, or sometimes if you're unable to keep up with your premiums, your fund may let you suspend your health policy temporarily. Generally this is available for a few months, sometimes up to 2 years. You won't be able to claim while your policy is suspended, but you won't have to re-serve any waiting periods when you start it up again. Note that a suspended policy will impact whether the MLS will apply to you, and it could affect your LHC loading.

Getting rid of extras

If you don't want to mess with your hospital cover, you could consider just cancelling your extras. If you're not regularly claiming on your extras, you're often better off just paying out of pocket for services like dental when you need them. Of course, having extras can often give you a little incentive to get those check-ups done more regularly, so it might not be so simple!

Frequently asked questions

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To make sure you get accurate and helpful information, this guide has been edited by Jason Loewenthal as part of our fact-checking process.
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Tim Bennett is a Finder insurance & utilities expert. For over 10 years he's reported on news, politics, finance and other topics as a journalist and radio presenter. Tim's roles have included radio news reader and breakfast at the ABC, news producer for SBS and producer for Fairfax Media. Tim regularly appears as a health insurance expert on programs like Sunrise and SBS news, as well as in the Australian, The Daily Telegraph, The Courier Mail and more. See full bio

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Tim has written 122 Finder guides across topics including:
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