The Federal Government will today unveil the biggest overhaul of the private health industry in years.
The Turnbull government is planning a major shake-up, with Australians under 30 expected to be the biggest beneficiaries.
Health Minister Greg Hunt is due on Friday to announce the details, including discounts of up to 10 per cent for younger people.
It's understood privately insured patients admitted to hospital with a mental illness will be offered an immediate upgrade of their policy to fully cover mental health with no waiting period.
The changes will re-categorise policies as either gold, silver, bronze or basic packages and remove some limitations on mental health cover.
The government will also cut the price insurers must pay for medical devices on the prostheses list - generating savings of more than $1 billion and easing pressure on premiums.
Australian Medical Association president Michael Gannon says the move won't solve the issue of affordability, but is a step in the right direction.
While the one-off savings will help, longer-term measures to manage the rising costs of healthcare were needed.
"The biggest problem in the affordability of private health insurance is the amount that's going into the pockets of the for-profit insurers," he told ABC radio.
"We need serious reform which addresses the simple fact that the costs will continue to increase year on year."
With 10,000 people cancelling their policies each month, it's hoped these changes will make the industry more sustainable.