The government gives $7 billion a year to private health insurers. You can't opt out without paying a penalty for life. The policies often cover almost nothing.
Let's say you turned 31 last week and you don't have private health insurance.
Congratulations. You are now paying a 2% loading on your premiums — for every year you've gone without cover since age 31. That loading compounds for the rest of your life, up to a maximum of 70%. So if you finally sign up at 51, you're paying 40% extra on top of whatever the insurer charges. Forever.
This is called the Lifetime Health Cover loading. It is government policy.
It was introduced under John Howard. The goal was to push young, healthy Australians — who don't use much healthcare and therefore cross-subsidise older, sicker policyholders — into buying private cover before the penalty clock started. If you didn't buy in early, you'd pay more for life.
How we got here
Before Medicare, over 50% of young Australians had private health insurance. By 1998, once Medicare had been running for a generation, that number had dropped below 17% for 15–24 year olds.
Why? Because Medicare worked. If the public system covers you, you don't need to pay a private company on top.
The private health insurance industry, facing falling membership and a worsening risk pool (older, sicker members staying, younger members leaving), went to Canberra. What came out the other end was a combination of compulsion policies: the Lifetime Health Cover loading, the Medicare Levy Surcharge (pay extra tax if you earn over a threshold and don't have private cover), and a government rebate to subsidise premiums.
The rebate now sits at over $7 billion a year. That's $7 billion in public money flowing from the Commonwealth directly to private health insurers, every year, to help prop up a system that's built around coercion rather than value.
What you're buying
Here's the problem with the compulsion part: it worked. People signed up. But what they signed up for has changed.
When the Lifetime Health Cover policy was introduced, around 30% of policies had significant excesses or co-payments. Today, that figure is over 88%.
Meaning most policies now come with large out-of-pocket costs. Many exclude common procedures. Many restrict which hospitals or specialists you can access. If you're young and healthy — the exact demographic the system needs in the pool to function — you're likely in a "junk" policy. You're paying monthly premiums for cover that won't actually do much when you need it.
Premiums went up 4.41% in 2026. That's the biggest approved increase in recent years. The government approves premium rises annually.
The arithmetic
Let's run it plain.
The $7 billion annual rebate goes to private health insurers. In return, those insurers have a captive market (because the penalty system forces people in) and the ability to raise premiums annually (with government approval).
What does the public get? A two-tier health system — private for people who can afford extras and gap cover, public for everyone else — in which the private tier is increasingly covered in asterisks and fine print.
The public system — Medicare, public hospitals — covers everyone. It doesn't check your excess. It doesn't exclude procedures. The $7 billion that currently subsidises private insurers' revenue base could, instead, go directly into the public system.
But that is not the current arrangement.
Who benefits?
Private health insurers. Their shareholders. And the policy architecture that was built by a Howard-era government trying to reduce pressure on the public system by compelling young people into the private one — rather than by simply funding the public system better.
Who pays?
Young Australians already dealing with housing stress and cost-of-living pressure, who are legally penalised for not buying a product from a private company. Taxpayers funding the $7 billion annual handout. And anyone who's ever needed to use their junk policy and discovered what the excess and exclusions clause actually means.
The coercion model
Here's the thing about the Lifetime Health Cover loading: it is a government-mandated lifetime penalty for not purchasing a private company's product.
That's not how Medicare works. You don't get a lifetime loading for not having a GP. You don't get penalised for choosing to rely on the public system you've already paid for through your taxes.
But for private health insurance, the rules are different. The industry needed the young and healthy in the pool, so the government built a wall around the exit. The loading compounds. The premium goes up 4.41%. The rebate flows through.
The contract was written a long time ago. It runs on compulsion, not value.
Yeh nah.