Nib chief executive Mark Fitzgibbon said a knowledge "imbalance" between patients and doctors meant some fund members were treated in private hospitals with no out-of-pocket fees, while others getting the same procedure were left with large bills to pay.

"This is consumers not being in a position to shop around," Mr Fitzgibbon said.

"They've got no information about cost; they've got no information about quality. They're pretty much just relying on who the GP happens to refer them to."

Medicare and health insurers only cover doctors' fees up to a set amount, and anything a private specialist decides to charge over that - called a "gap" - is billed to the patient.

Nib's patient claims data from 2018 shows the huge variation in what doctors can charge for the same procedure.

For prostatectomy procedures, about a quarter of nib members were charged between $2500 and $3000, meaning they had no out-of-pocket fees. However about another quarter were charged between $9000 and $10,000, and one was charged $17,600, and so had a "gap" bill of about $15,000.

Knee replacements and knee reconstructions ranged from $1000 up to $9775, leading to an almost $8000 "gap fee". Nib's data only covers the specialist fees, and the total cost of procedures can be much higher again, including hospital fees, anaesthetist charges, out of hospital consultation and prosthesis.

Mr Fitzgibbon said this kind of "bill shock" was one of the major reasons people were cancelling their private health insurance, second only to rising premiums.

This comes at a time when the private health insurance industry is facing what has been described as a "death spiral", as people leave the system at the fastest rates in 15 years.

Mr Fitzgibbon said the solution was to give customers information about what fees particular doctors charge, as well as about whether there were alternatives to surgery - such as losing weight and doing physiotherapy rather than going straight to knee surgery, for example.

Nib, the country's fourth-largest health fund, last week signed a partnership with online medical directory Healthshare, which tracks how often doctors participate in a health insurer's "gap cover" scheme, which means they agree to not charge the patient any out-of-pocket fees.

The system is built into GP consultation software, helping GPs refer patients to specialists who won't charge them gap fees. The program also tracks patient outcome data, and includes information such as what languages a doctor speaks and their capacity to accept urgent appointments.

Most smaller funds have joined Healthshare, but the three largest - Medibank, Bupa and HCF - have not signed up. Nib was previously involved in the launch of a similar service called WhiteCoat.

Amid rising premiums, figures released by the Australian Prudential Regulation Authority last month showed there were 65,000 fewer people with health insurance in December 2018 than there were a year earlier.

Healthy young people are leaving the industry the fastest, which puts more pressure on the system because they make fewer claims and therefore subsidise the cover of older members.