With healthcare costs rising and private health insurance premiums following suit, many Australians are looking for ways to keep their cover affordable without losing essential protections. Enter the high-deductible health plan (HDHP): a model that’s well-established in the US and is now gaining traction in Australia’s private health sector.

What Is a High-Deductible Health Plan?

An HDHP is a type of private health insurance policy where you pay lower premiums in exchange for a higher upfront excess (the deductible) when you make a claim. In practical terms, this means you cover more of the initial healthcare costs yourself, but your regular insurance payments are significantly reduced.

In 2025, Australian insurers are offering more HDHP options, particularly as younger, healthier consumers seek budget-friendly ways to maintain their Lifetime Health Cover (LHC) status and avoid the Medicare Levy Surcharge.

Premiums: Typically 15–30% lower than standard policies.
Excess: The annual excess can be as high as $1,000 for singles or $2,000 for families, per the latest government regulations.
Coverage: Core hospital services are included, but some extras (physio, dental) may have limited or no coverage unless you add them separately.

2025 Policy Updates and Market Trends

The Australian Government’s 2025 Private Health Insurance Reform Package has brought a new wave of flexibility for HDHPs. Notably:

Standardised Excess Limits: The maximum allowable excess has been indexed for inflation for the first time since 2019, rising to $1,000 for singles and $2,000 for couples/families.
Tax Incentives: The Medicare Levy Surcharge exemption still applies if you hold an eligible HDHP, helping higher-income Australians avoid up to 1.5% extra tax.
‘Youth Discount’ Extensions: Insurers can now offer premium discounts to policyholders under 35, even for HDHPs—making these plans even more attractive to young adults.
Digital Claiming: Most major insurers now support instant online excess payments and claims, streamlining the process for those with high-deductible cover.

As of March 2025, over 900,000 Australians hold HDHP-style private cover, up 11% from last year according to APRA data. This growth is driven by cost-consciousness, but also by increased transparency in policy features and out-of-pocket cost calculators now mandated by the ACCC.

Pros and Cons: Is an HDHP Right for You?

HDHPs aren’t one-size-fits-all. They suit certain lifestyles and risk profiles, but can backfire if you’re unprepared for high upfront costs.

Best For:
- Young, healthy individuals with low expected hospital usage
- High-income earners wanting to minimise both tax and insurance premiums
- People who can afford to cover a larger excess in an emergency
Potential Pitfalls:
- Anyone with chronic health conditions or ongoing medical needs
- People who may struggle to pay a large excess on short notice
- Families with young children, who may have unpredictable hospital visits

Case Study: Sarah, a 32-year-old Sydney-based consultant, switched to an HDHP in 2024. She pays $900 less per year in premiums, but faces a $950 excess if she’s admitted to hospital. Since she hasn’t needed hospital treatment, she’s saved money—but she also keeps a $1,000 emergency fund, just in case.

How to Choose the Right HDHP in 2025

With over a dozen major insurers now offering HDHPs, it’s vital to compare:

Excess vs. Premium: Crunch the numbers—how much would you save in a typical year, and what’s your maximum out-of-pocket risk?
Hospital Networks: Some budget HDHPs limit your choice of hospitals or doctors, so check the network maps before signing up.
Extras Options: If you want dental, physio, or optical, you may need to bundle extras cover separately.
Policy Transparency: Use the government’s new ‘Private Health Insurance Product Compare’ tool for up-to-date, apples-to-apples comparisons in 2025.

Look for policies that offer digital excess payments, quick claims, and strong customer reviews. And always read the fine print—especially around exclusions and waiting periods.