Will my private health insurance cover my surgery? What if my claim is rejected?

The Australian Competition & Consumer Commission (ACCC) has fined Bupa A$35 million for unlawfully rejecting thousands of health insurance claims over more than five years.

Between May 2018 and August 2023 Bupa incorrectly rejected claims from patients who had multiple medical procedures, with at least one of those procedures covered under their health insurance policy.

Instead of paying the portion of the treatment that was covered, Bupa’s automated systems wrongly rejected the entire claim.

Bupa admitted these errors were due to system problems and poor staff guidance, and has started to recompensate members.

So you may be worried whether your private health insurance will cover you for the procedures you need.

Here’s what you need to know about the different types of hospital cover. And if your claim is rejected, what to do next.

From basic to gold

As of March 2025, 45.3% of Australians have private health insurance for hospital cover. There are four tiers: basic, bronze, silver and gold.

Each tier has a minimum set of “clinical categories”. These are groups of hospital treatments that must be covered.

For example, basic hospital cover only has three mandatory inclusions: rehabilitation, hospital psychiatric services and palliative care. But this is “restricted” cover, meaning patients will often still have to pay substantial out-of-pocket costs for these services.

Basic cover is entry-level cover, mainly for people who want to avoid the Lifetime Health Cover loading and the Medicare Levy Surcharge. These are both ways of encouraging people to take up private health insurance while young and keeping it, especially people on higher incomes.

At the other end of the scale is gold cover, which includes unrestricted cover for all defined clinical categories, including pregnancy and birth.

You can generally change your level of cover at any time. When you upgrade to include new services or increase benefits for existing services, you will need to serve new waiting periods for those new or increased benefits.

A common waiting period is 12 months for pre-existing conditions (any ailment, illness or condition that you had signs or symptoms of during the six months before upgrading, even if undiagnosed), and for pregnancy and birth-related services. But there is generally only a two-month waiting period for psychiatric care, rehabilitation or palliative care, even if it’s for a pre-existing condition.

It’s a good idea to review your policy every two years because your health needs and financial circumstances can change.

How much do companies pay out?

The proportion of premiums that are paid out to cover medical claims is known as the “average payout ratio”. And this has been about 84–86% over most of the past 20 years.

This does not mean your health insurer will pay out 84–86% of your individual claim. This national average accounts for the percentage of all premiums in any one year, across all insurers, that’s paid out in claims.

The payout ratios vary by insurer and are slightly higher for not-for-profit health insurers than for-profit insurers.

That’s because for-profit health insurers have pressure to deliver profits to shareholders and have incentives to minimise payouts and control costs.

If not properly managed, these incentives may result in higher out-of-pocket expenses and denied claims.

Why has my claim been rejected?

Common reasons for claims to be rejected include:

• the policy excluded or restricted the clinical category

• the waiting period was not served

• incorrect information (for example, a doctor billed an incorrect item number)

• what’s known as “mixed coverage” (as in the Bupa scandal), where not everything in a claim is covered, but the entire claim is declined.

What if I think there’s an error?

If your health insurance company refuses your claim, you can request a detailed explanation in writing.

If you believe your claim has been incorrectly denied, you can make a formal complaint directly with the insurer. For this you need to check your policy documents, and gather supporting evidence. This may include detailed invoices, medical reports, referral letters and correct item numbers.

If you are not satisfied with the outcome of the health fund’s internal review, or the fund doesn’t respond with the specific time-frame (for instance, 30–45 days), you can escalate your complaint.

You can get in touch with the Commonwealth Ombudsman (phone: 1300 362 072). This provides a free, independent complaint handling service for a range of consumer issues, including health insurance.

Bupa customers concerned about a “mixed coverage” claim can contact the company directly.

What can governments do?

The Bupa scandal, along with ongoing concerns about transparency and rising out-of-pocket costs, highlights the need for policy reforms to better protect consumers.

The government should require health insurers and health-care providers to give clear estimates of all potential out-of-pocket costs for a procedure before it happens. This would avoid unexpected bills and help consumers make informed decisions about their health care.

The government could also let the ACCC or the Australian Prudential Regulation Authority conduct regular, independent audits of insurers’ claims systems and practices.