How does health insurance for psychiatric and mental health issues work?

Updated 15/09/2022

Many Australians are experiencing mental health issues that require ongoing support, but your health insurance can help ease the burden.

Compare The Best Private Health Insurance Policies For Psychiatry

While many Australians have encountered periods of difficult mental health, one in five^ deals with a mental health issue that requires ongoing support. 

Finding the appropriate support should be the least of your stresses and not break the bank. 

Depending on what you want covered, you can find some private health insurance policies that cover psychology and have a high annual limit. 

Our guide can help you navigate the world of private health insurance and mental health services.

Key Points

  • A mental illness or disorder is a health problem that significantly impacts how a person thinks, behaves, feels and interacts with others.

  • Some parts of mental health care can be covered by private health insurance: both hospital and extras cover.

  • Be aware of out-of-pocket costs as your health insurance policy may cover a hospital stay, but not gap costs for services that need to be claimed through Medicare.

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What is a mental illness?

A mental illness such as depression, anxiety, mood disorders or eating disorders is a health issue that is diagnosed according to pre-determined criteria. 

While mental illness often affects how a person thinks and interacts with the world, there are effective options for treatment through early recognition and proactive treatment. 

Visiting a General Practitioner (GP) when you recognise the early signs and symptoms of mental illness can help you get the support you need. Your GP can give you advice on what to do next as well as discuss any concerns you may have about how you’re feeling.

Private health insurance can also help, as some parts of mental health care can be covered, including  hospital admission and psychological services

Does private health cover psychiatrist visits?

Yes, but only for treatments taking place while you are a hospital in-patient. There’s also only a two month waiting period, even if your mental illness is a pre-existing condition.

Psychiatric hospital care is  sometimes a restricted benefit, meaning that no matter your level of cover, the private fund may only pay a benefit towards private care in a public hospital. 

This may leave you with out-of-pocket expenses unless you have a Gold hospital policy, which typically covers psychiatric treatment in public and private hospitals. Outside of a hospital, private health insurance does not typically cover psychiatric services. 

How much does it cost to see a psychiatrist out of pocket?

Each Psychiatrist determines their own fees, so the out of pocket payment varies. 

If seeing a psychiatrist privately you may need to pay out of pocket at the time of the session, but Medicare will refund part of the fee. 

If your psychiatrist bulk bills, the full fee will be covered by Medicare.

Contacting your psychiatrist’s clinic is the best way to find out their fees and your out of pocket expenses. 

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Does Medicare cover mental health treatment?

Yes, Medicare may cover part or all of your mental health treatment costs. This process starts with a visit to the GP to refer you to a specialised mental health professional (psychologist, psychiatrist, social worker ect). 

Depending on your GP, this appointment will either be bulk-billed or partially covered by Medicare. Specialists determine their own rates, however part or all of these costs may be covered by Medicare.

How is psychiatric treatment covered by Medicare?

There’s a range of ways that psychiatric treatment is covered by Medicare.

If you have a mental health treatment plan, which can be set up with the help of your GP and they refer you to a specialist, such as a psychiatrist or a psychologist, you can claim up to 20** sessions with a mental health professional each calendar year.

These sessions, as they are confirmed through your mental health plan, will allow you to get a refund from Medicare based on your type of appointment, how long the appointment is and whether or not you need services not covered by Medicare (such as NDIS reports).

For care in psychiatric hospitals, you can be covered if you purchase an appropriate private health insurance policy. Your cover will make sure that the costs of hospital accommodation and a portion of treatment fees are paid for. 

What is the difference between inpatient VS outpatient mental health services?

There are a range of differences between inpatient and outpatient mental health services, which we’ve outlined below.

  • In-patient mental health services generally refers to psychiatric treatment in a hospital. You can be treated as a private patient in a public hospital if you hold Basic, Bronze or Silver hospital cover, and in a public or private hospital if you hold Gold hospital cover..

The two-month waiting period may be waived depending on your insurer and some of the treatment is paid for by Medicare Part A.

Outpatient mental health services are a bit different, as you’re not admitted to the hospital overnight. Some outpatient services provided by public hospitals may be available free of cost.

If you are seeing a psychologist or psychiatrist in their consulting room, Medicare may fund part of the cost for a defined number of visits. 

Benefits for private psychology services may also be covered by private health insurance - Extras cover. 

It can be a bit confusing, but our experts can help you understand the difference between the two.

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Is mental health covered by private health insurance?

Psychiatric care that takes place in-hospital is covered to an extent by all private health insurance, with the level of cover depending on your policy tier. While Gold-tier policies provide unrestricted cover (public and private hospitals), Basic, Bronze and Silver policies will be restricted to public hospitals. 

Mental health care out of hospital, such as seeing a psychologist or counsellor is covered by many Extras covers. 

Which health insurance is best for mental health?

Mental health cover varies across different health insurance funds, with some policies having higher limits for Psychology than others.  

Our experts can help you find better value cover that is right for you and your mental health needs.

Can I buy mental health insurance only?

No, Mental Health Insurance comes under Health Insurance so cannot be purchased separately.

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Does private health insurance cover rehab?

Yes, Rehab for drug and alcohol disorders is covered by purchasing a private hospital policy.

This covers hospital accommodation costs and part of the medical fees. This incurs a 2-month waiting period (even for pre-existing conditions). 

An exemption to the waiting period is the mental health waiver, accessed only once by a person in their lifetime.

If you’ve got limited psychiatric cover in your hospital policy and have already served the 2 month waiting period, you can upgrade to a higher level of cover without the waiting period, which lets you access psychiatric care in a private hospital.  

How long are the waiting periods for mental health treatment under the public system?

Public health, covered by Medicare, does not have a waiting period. This means you can begin seeing a mental health professional whenever you are ready (subject to availability of the health care professional). 

How long do I have to wait to claim on mental health from my private health insurance (hospital cover)?

Usually you will need to wait 2 months before claiming, even for pre-existing conditions. The mental health waiver lets you upgrade your policy after you have served the 2 months wait, with no new waiting periods. 

How do I compare health insurance for psychologists?

You can compare health insurance specifically for psychology services by checking if your current extras policy has high benefits and annual limits for psychology, as well as checking if your hospital policy covers in-patient psychiatric services.

Our experts can help you find a better value policy that meets your needs with ease^. Click below to speak to them today.

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This article is opinion only and should not be taken as medical or financial advice. Check with a financial professional before making any decisions.

^ Commonwealth Ombudsman, Mental Health Treatment and Private Health Insurance, accessed 12th September 2022.

*Based on 111,658 policies sold Jan 2017 - Nov 2021

**Services Australia, Mental Health and Medicare, accessed 12th September 2022.

^Compare Club compares selected products from a panel of trusted insurers. We do not compare all products in the market.


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Chris Stanley is the sales & operations manager of health insurance at Compare Club. With extensive experience and expertise, Chris is a trusted leader known for his deep understanding of health insurance markets, policies, and coverage options. As the sales & operations manager of health insurance, Chris leads a team of dedicated professionals committed to helping individuals and families make informed decisions about their health insurance needs.

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Chris Stanley

Sales & Operations Manager for Health Insurance