Health Insurance Claim Rejected in Australia: How to Appeal with the AFCA

Australia's private health insurance system is meant to give you peace of mind. But when a claim is rejected — often with dense policy language citing conditions or exclusions you weren't clearly warned about — that peace of mind disappears fast.

The good news: Australian policyholders have strong consumer protections, and the Australian Financial Complaints Authority (AFCA) provides a free, independent dispute resolution service that has real power to overturn insurer decisions. This guide explains exactly how to use it.

Why Private Health Insurers Reject Claims in Australia

Private health insurance (PHI) in Australia is regulated under the Private Health Insurance Act 2007 and overseen by the Australian Prudential Regulation Authority (APRA) and the Private Health Insurance Ombudsman (PHIO). Disputes, however, are now handled through AFCA.

Common reasons your claim may have been rejected:

• Waiting periods not served: Most PHI policies impose waiting periods of 2 months for general treatment and 12 months for pre-existing conditions and obstetrics. Claiming within these periods will result in rejection.
• Treatment not listed in your hospital cover: Australia operates on a tiered system (Basic, Bronze, Silver, Gold). If your procedure isn't included in your tier, it won't be covered.
• Pre-existing condition ruling: A medical examiner appointed by your insurer may determine that your condition existed before your policy started — often leading to denial of in-hospital claims.
• Failure to use an approved provider: Many extras (ancillary) policies require you to use a recognised provider. Claims with non-listed practitioners are commonly rejected.
• Benefit limits exhausted: Extras policies have annual limits. Once your optical or dental limit is reached, further claims are automatically declined.

Your Rights Under Australian Law

The Private Health Insurance Act 2007 and the Health Insurance Act 1973 collectively protect your rights as a policyholder. Key rights include:

• The right to an explanation of any decision that affects your claim
• The right to access all information the insurer used in making their decision, including any medical examiner's report
• The right to seek an independent review through AFCA at no cost
• The right to a fair and transparent claims process

The Australian Competition and Consumer Commission (ACCC) also enforces consumer guarantee provisions under the Australian Consumer Law — meaning your insurer cannot make misleading representations about what your policy covers.

Step-by-Step: How to Appeal a Rejected PHI Claim

Step 1: Obtain a Full Written Explanation

Call your insurer and request a written explanation of the rejection. Ask specifically:

• Which clause or exclusion is being applied?
• What information did they rely on?
• If a pre-existing condition was determined, can you see the medical examiner's report?

You are entitled to all of this information, and the insurer must provide it.

Step 2: Check Your Product Disclosure Statement

Your Product Disclosure Statement (PDS) is the legal document that defines exactly what is and isn't covered. Cross-reference the insurer's stated reason for denial with the actual PDS wording.

Insurers sometimes apply exclusions that are worded more narrowly than they claim, or apply waiting periods incorrectly. If you can show the policy language doesn't support their decision, you have strong grounds to appeal.

Step 3: Gather Your Medical Evidence

If the denial involves a clinical judgement — such as medical necessity or a pre-existing condition ruling — you need your doctor's input. Ask your treating specialist or GP to provide a letter addressing:

• The timeline of your condition (when did symptoms first appear?)
• Whether the condition was diagnosable before your policy start date
• Why the treatment is medically necessary
• Any relevant clinical guidelines supporting the treatment

A well-written letter from a specialist carries significant weight in AFCA proceedings.

Step 4: Lodge a Formal Internal Complaint

Most PHI disputes must go through the insurer's internal complaints process before AFCA will accept them. Write a formal complaint letter to the insurer's complaints team. Include:

• Your policy number and claim reference
• A clear statement that you are disputing the rejection
• Your grounds for appeal, referencing specific PDS clauses
• Copies of supporting medical evidence
• A request for a decision within 30 days

By law, insurers must acknowledge complaints within 5 business days and resolve them within 45 calendar days (or 21 days for urgent cases under the PHIO guidelines).

Step 5: Escalate to AFCA If Unresolved

If your insurer rejects your internal appeal, or fails to respond within the required timeframe, you can take your complaint to AFCA (afca.org.au). AFCA's service is completely free for consumers.

AFCA can:

• Require the insurer to explain and justify their decision
• Order the insurer to pay a claim they wrongly rejected
• Award compensation for financial loss and non-financial loss (stress, inconvenience)
• Award up to $1,085,000 for insurance disputes (as at 2025 limits, subject to annual adjustment)

You can file online at afca.org.au, by phone at 1800 931 678, or by mail.

Step 6: Use the Private Health Insurance Ombudsman as a Resource

While AFCA handles the formal dispute, the Private Health Insurance Ombudsman (PHIO) at phio.org.au provides free information, fact sheets, and guidance specific to PHI disputes. They can help you understand your rights but refer formal disputes to AFCA.

Common Mistakes to Avoid

Waiting too long to escalate: AFCA requires complaints to be made within 2 years of becoming aware of the issue. Don't let time slip by while hoping the insurer changes its mind on its own.

Not reading the PDS before lodging: Your appeal must reference specific policy language. Vague complaints ("they shouldn't be allowed to do this") are far less effective than clause-specific challenges.

Accepting the pre-existing condition ruling without challenge: Insurers must prove, on the balance of probabilities, that the condition pre-existed the policy. Your specialist's timeline evidence can directly challenge this.

Failing to request the medical examiner's report: If a medical examiner was used, you have the right to see their report and respond to it.

Not documenting everything: Keep records of every phone call, email, and letter. Note dates, times, and the names of representatives you spoke with.

Lodging only verbally: Always follow up any phone complaint in writing. This creates the paper trail AFCA needs.

Special Situations in Australian PHI

Hospital Cover Disputes

Hospital claim disputes are among the most significant, often involving tens of thousands of dollars. If you were hospitalised and your insurer refuses to pay the gap or the hospital benefit, pay particular attention to:

• Whether the procedure is listed in your policy tier
• Whether your hospital is an in-fund (contracted) hospital
• Whether the admission was elective or emergency (emergency admissions have different rules)

If your insurer changed its contracted hospitals or procedures without adequate notice, this may itself be grounds for a complaint.

Extras Cover Disputes

Extras (ancillary) disputes are usually smaller amounts — optical, dental, physio — but they're also the most common. Check:

• Whether your provider is registered with your insurer
• Whether you've hit your annual limit (and whether that limit was clearly disclosed)
• Whether the item number claimed matches what's covered

Mental Health Treatment Claims

Mental health parity is an evolving area in Australian PHI. As of 2022, reforms require insurers on Gold-tier policies to cover psychiatric treatment. If you have a Gold policy and a mental health claim was denied, this may be an error.

What the AFCA Process Looks Like

After you lodge a complaint with AFCA:

1. Registration: Your complaint is registered and a reference number issued (usually within a few days).
2. Referral to insurer: AFCA contacts the insurer and gives them an opportunity to resolve the dispute directly with you.
3. Case assessment: If unresolved, an AFCA case worker reviews all documents and evidence.
4. Preliminary view: AFCA may issue a preliminary view, and both parties can respond.
5. Final determination: If still unresolved, AFCA issues a binding determination.

The whole process typically takes 3 to 6 months for standard cases. AFCA data shows they close about 70% of insurance complaints within 60 days at the registration and referral stage — meaning many insurers back down once a formal complaint is lodged.

Getting Help Writing Your Appeal

A well-drafted appeal letter is your first — and often most important — step. The clearer and more structured your letter, the more likely the insurer is to reverse their decision internally, avoiding months of waiting.

ClaimBack (claimback.app) helps Australians generate professional appeal letters tailored to their specific situation, insurer, and the type of claim denied. The tool is free to use, takes about five minutes, and produces letters that reference the relevant policy clauses and regulatory framework specific to Australian PHI.

Summary

1. Get the denial reason and the medical examiner's report in writing
2. Cross-reference with your PDS — look for misapplied exclusions
3. Get a specialist letter addressing the medical facts
4. Lodge a formal internal complaint with the insurer
5. Escalate to AFCA if unresolved within 45 days
6. AFCA is free, independent, and has genuine power to overturn decisions

Don't let a rejection letter be the end of the story. Australia's regulatory framework exists precisely to protect you from unfair insurer decisions.