3 Things First Time Health Insurance Buyers Should Know

Posted: Apr 20 2022

Over 11 million Australians, or 44%, have private hospital cover, in large part because tax incentives and rebates contribute to the significant benefits of private health insurance. If you're under the age of 31, you're probably wondering about the benefits and advantages of private health insurance versus Medicare. Here are three things to consider as you make this important decision.

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1. Advantages of Private Health Insurance

Health insurers can fully or partly cover your private hospital expenses and apply to treatments in a hospital. You pay the insurer directly for your cover, who provide financial assistance for the cost of specified health services that are provided within a hospital and aren’t listed on the Medicare Benefits Schedule. Most insurers offer varying levels of Hospital cover which allows you to make informed choices about your health care based on your needs and your family's.

Reduced Wait Times

Private hospital cover provides you with the choice of location and doctor. Since you can decide when and where to obtain treatment, hospital cover can reduce the public system queue where waiting times for some services or doctors can last for months or years.

Access to Private Rooms

With the support of the doctors you've chosen, peace and privacy can immensely benefit your recovery. You can recover more comfortably in an available private room with a private hospital cover policy.

Continuity of Care

Maintain the integrity of your care by having the same specialist and medical team throughout the process. Private hospital cover allows you to select your specialist, ensuring continuity of care to protect your health and recovery.

2. Costs of the Lifetime Health Cover Loading

The Australian government designed the Lifetime Health Cover initiative to encourage people to obtain hospital cover from an early age and then maintain it long-term. Australian residents must receive hospital cover by 1 July after their 31st birthday. After that date, Lifetime Health Cover loading takes effect.

For every year after the above date, a 2% Lifetime Health Cover loading fee is added to your premium, up to a maximum loading of 70%. Your insurer will remove the hospital cover loading once you've maintained coverage for 10 years. However, insurers can reapply the loading if you cease to hold hospital cover.

3. Taxes and the Medicare Levy Surcharge

If you don't have private health insurance at tax time, you'll pay a Medicare Levy Surcharge based on your taxable income. This surcharge, like Lifetime Health Cover loading, applies only if you don’t hold appropriate Hospital cover and funds some of the expenses of Australia's Medicare system.

The Medicare levy surcharge is an additional tax that is intended to reduce demand on the public Medicare system by encouraging people to take advantage of private patient hospital cover through the private hospital system. A levy surcharge may apply to you if you, your dependent children and your spouse do not have sufficient private patient hospital cover and your income is above a certain amount ($90,000 for singles and $180,000 for families with some exceptions).

If applicable, the MLS of 1%, 1.25% or 1.5% is levied on your:

  • Total reportable fringe benefits
  • Taxable income, and
  • Any amount on which payment has been made to family trust distribution tax

Every year on 1 April, the Australian government reviews the rebate and adjusts the percentages. Therefore, the rebates may change year to year, based on your age and income. It's important to note that you won't be penalized for selecting the incorrect rebate tier. Depending on the error, the ATO will review your tier against your taxable income and either reimburse you or require a tax payment. Additionally, Lifetime Health Cover loading is not a valid claim on the LHC component of your premium.

Avoid Extra Costs Like Lifetime Health Cover Loading

Whether your 31st birthday and the 1 July deadline are in the distant future or just around the next corner, you may feel confused about making a final determination about electing for private hospital cover. From the income-based Medicare Levy Surcharge to the under-30 Lifetime Health Cover loading discount, the research required into the various regulations seems complicated, especially when you're also trying to protect your health and that of your family.

Health Partners can help you sort through the tables, documents and requirements for obtaining and maintaining private hospital cover. They can offer you support and information about the myriad components of government programs and health cover options. You'll worry less about making wise financial and health decisions so that you can focus on the other important things in life.

Margaret Check Your Cover

Experience Health Partners Generous

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Posted: Apr 20 2022


The information contained here is of a general nature and does not take into account your personal medical situation. The information is not a substitute for independent professional medical advice and is not intended to diagnose, treat, cure or prevent any disease or used for therapeutic purposes. Should you require specific medical information, please seek advice from your healthcare practitioner. Health Partners does not accept any liability for any injury, loss or damage incurred by use of or reliance on the information provided. While we have prepared the information carefully, we can’t guarantee that it is accurate, complete or up-to-date. And while we may mention goods or services provided by others, we aren’t specifically endorsing them and can’t accept responsibility for them.

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