Private insurers insist they have become an essential part of the health system and it would not be possible to put the care they help fund back on the public purse.
Private Healthcare Australia chief executive officer Rachel David - the peak body for the industry - told a Senate committee in Sydney she believes the federal government's reforms of the sector will help reduce premiums and pressures overall.
But Australian Medical Association president Michael Gannon launched a scathing attack on the industry, saying Australians are buying "useless" health insurance and shouldn't have to be an actuary or doctor to understand what those products cover.
Dr Gannon blamed the health insurance industry for increased premiums in order to pay shareholders, while reducing choice for patients by "controlling what services are provided".
He told the hearing the cost of medical procedures is not the reason why patients with health insurance are seeing a rise in out-of-pocket expenses.
Most consumers understand they may need to contribute to the cost of care but face the problem of having inadvertently bought a product that is "useless", he said.
"If a policy does nothing more than avoid the tax penalty, how is it not a junk policy?" Dr Gannon said.
But the hearing was told by insurers exclusions have been a result of consumer pressure about affordability.
Dr David said Private Healthcare Australia is working with the government to keep prices down and reduce waste.
The government health insurance reforms include offering people in their 20s lifetime cover at discounted premiums.
"This will help to keep premiums lower for everyone and reduce pressure on the overall system," Dr David said.
But Dr Gannon said insurers are trying to convince government they can reduce health expenditure by controlling what services are provided.
"We do not believe insurers should decide which procedures should be funded," he said.
"Insurers should not ... interfere with the relationship between the patient and the doctor."
He says while health insurers are focused on minimising their expenditure, they are creating barriers for patients accessing care.
"These are the same patients that have paid substantial premiums for top cover."
He says in one case, an elderly woman was told by an insurer her surgery was covered, only to have the insurer not pay when the surgery was performed.
"She was out of pocket $7000," he said.
