Kylie Catterick's son Josh was just four-and-a-half months old when she realised something was wrong and took him to hospital.

Key points: The Cattericks gave up their hospital cover after a bill for their son's brain surgery was rejected

The Cattericks gave up their hospital cover after a bill for their son's brain surgery was rejected Private health insurers are struggling to keep customers

Private health insurers are struggling to keep customers More than 5,000 people a month opted out of private health insurance in 2018

"It turned out that he'd been born with a brain tumour," Mrs Catterick told 7.30.

"Within 12 hours of taking him up to the hospital, he was in critical condition."

The Cattericks had private health insurance with NIB and thought that the cost of treatment was something they would not have to worry about.

"They were a nightmare," Ms Catterick said.

"We didn't go private when Josh was first transferred to Randwick [Children's Hospital], we just went through the public system.

"But when he transferred back to Canberra Hospital we tried to go private in a public hospital, and they denied our claim straight up."

They found their mid-level hospital cover would not be enough.

"We hadn't specified neurosurgery on our policy," Ms Catterick said.

"I mean, who thinks about neurosurgery for a four-month-old?"

'You are never fully covered'

Kylie Catterick says she didn't have the strength to fight her health insurer while going through the trauma of having a sick child. ( ABC News: Jerry Rickard )

After their experience, the Cattericks gave up their private hospital cover.

"I didn't have it in me to fight it, we were going through enough," Ms Catterick said.

And she says they will never take it up again.

"You are never fully covered," she said.

"But people don't realise that before they go to use it."

Josh Catterick survived the tumour but still has ongoing health issues. ( ABC News: Jerry Rickard )

The Cattericks are among a growing number of Australians who are disillusioned with private health insurance and pulling out.

The latest figures available from the Australian Prudential Regulation Authority (APRA) show that 64,000 people dropped their private hospital cover in 2018.

That is despite successive federal governments spending billions of dollars a year on rebates to encourage people into private health insurance, and increased taxes for high-income earners who do not take out coverage.

Health expert Professor Stephen Duckett of the Grattan Institute said a combination of sluggish income growth and steep rises in health insurance premiums are leading people to question the value of health cover.

"Every time premiums go up, more people drop out. Every time more people drop out, it's the young and the healthy who are dropping out. That means premiums have to go up more next time," he told 7.30.

"People are walking away, people are saying it's not for me anymore."

Health insurance 'not a savings plan'

Mark Fitzgibbon, managing director of NIB, says people are looking at health insurance the wrong way. ( ABC News: Julia Holman )

Mark Fitzgibbon is the managing director of Ms Catterick's old health insurer NIB, the fourth-largest health insurer in the country.

He said people are looking at health insurance the wrong way.

"It's not there as a savings plan," he told 7.30.

"You shouldn't be thinking about how much I put in versus how much I get out.

"It's there to protect you in the event of misadventure or serious disease or accident.

"We exist to pay claims, we exist to keep people healthy.

"And we believe that we do a good job at that."

He recently proposed a radical shake-up of the way health is funded, arguing that Australia would be better off if universal Medicare was replaced with compulsory private health insurance.

"My idea is, I should be able to opt out of Medicare, take the pressure off of the public system and taxation as a funding mechanism, and take care of my own lifetime health care costs. I believe I should have that option," he said.

"And I think inevitably that Medicare, as an insurance scheme, is retained for the vulnerable and those who would otherwise not be able to take out appropriate levels of cover.

"We want a universal system, but in my world you have a choice as to whether you go with a public carrier or you go with a private carrier. Just like we have a choice today about telecommunications."

Post-cancer breast reconstruction bill rejected

Jess Braude had to fight to get her health insurer to pay for breast reconstruction after cancer surgery. ( ABC News: Julia Holman )

Jess Braude also found herself in a fight with her health insurer after being diagnosed with an aggressive form of breast cancer at just 30 years of age.

After urgent treatment including a lumpectomy and months of chemotherapy, she had a double mastectomy.

Ms Braude was paying $55 a fortnight for mid-level hospital cover with Teachers Health Insurance, but the fund requested further information* to pay for her breast reconstruction, claiming it was a cosmetic procedure.

"Nobody would choose to have that [a breast reconstruction], trust me," she told 7.30.

Teachers Health eventually agreed to pay for the reconstruction, but the whole process still left Ms Braude considerably out of pocket.

"I ended up, for my three surgeries, it was about $7,000 of out-of-pocket costs," she said.

Jess Braude during chemotherapy to treat her breast cancer. ( Supplied: Jess Braude )

"I had to rely on my parents, which I'm extremely lucky that I have.

"Other people wouldn't have that option.

"If I didn't have them I imagine I would have to take out a credit card and be in debt."

Furthermore, Ms Braude complained to the Private Health Insurance Ombudsman when her fund didn't cover a portion of her IVF treatment. She underwent IVF prior to having chemotherapy, due to the high chance that her fertility would be compromised by the cancer medication.*

The complaint was resolved in Ms Braude's favour after the Ombudsman advocated on her behalf.*

Ultimately Ms Braude has not opted out of private health insurance, although she says she's now much more aware of what funds will and won't cover.*

"I think it's really important that people push back in the health fund and don't just accept the letters they send you, or the emails, as the truth," she said.

"Push back on them if you don't think it's right."

As for Ms Catterick, she has no regrets about pulling out of her private hospital cover.

"The care we were getting going public was phenomenal," she said.

"It just didn't make sense to keep spending money on something we couldn't use."

* Editor's note: These lines have been amended from the original story after contact from Teachers Health.