5 Need-To-Know Health Insurance Tips

It’s hard to avoid all the noise about private health cover. You might’ve noticed headlines nationwide discussing a 6% rate rise, now seemingly a perennial increase. Health cover is a big part of the cost of living for many families, couples and single, and oftens feels like an expensive and/or unnecessary addition to the household budget. It can also be quite a dull topic. For those that take just a little time, there is a lot of money to be saved. Here are some tips to help you make sense of it all:

  1. The April Rate Rise

Every March, news services of all kinds suddenly start talking about the private health insurance ‘Rate Rise’ that happens on 1 April each year. This is when health funds announce their annual price rise to factor in the increasing costs of health insurance in Australia. Every health fund must submit their costing and reasoning to the Minister for Health before this. Every fund also adjusts their fees and premiums as needed, so some funds will go up by a little, some by a lot. It varies from year to year, fund to fund. This year, it was an average of 5.59% across all registered Australian private health funds.

As a consumer, it’s highly recommended to take a few minutes and consider your arrangement and if it is still serving you well. It might be that you don’t need some Extras that you’re paying for,  or maybe you’re only using private health cover to avoid paying tax (more on that below) – the first priority is to have a suitable arrangement for your needs and your budget. Then check the facts; is your fund increasing their prices by more than the average, is it still right for you? Maybe it’s time to compare funds and find a better fit for your lifestyle and budget.

  1. Just turned 31?

With the new financial year starting on 1 July, it’s important for all 31-year-olds to consider the tax implications of not having private health cover. The government has introduced the Lifetime Health Cover scheme to encourage younger Australians to take up private cover and keep it for life.

This initiative penalises permanent resident and citizen taxpayers who do not take out this cover from the 1st of July following their 31st birthday (or 12 months after migrating to Australia) by adding a 2% health insurance loading on their premium for each year they delay joining a hospital cover after their cut-off date. If you decided to get private health cover later in life, say at age 41, you’ll be paying an extra 20% for your health cover. It goes all the way up to a maximum of 70% and the increased premiums are in place for 10 years.

Lifetime Health Cover only applies to Hospital cover and not Extras. There are also some rare exceptions so be sure to do your research or get ready to pay more for health insurance later on.

  1. Medicare Levy Surcharge

All Australians have access to Medicare even if they have private health insurance so, no matter what, you can always get help if you need it.

The Medicare Levy Surcharge is an additional cost for individuals who earn more than $90,000 per year or couples whose combined income exceeds $180,000 – and it goes up the more you earn. The table below indicates the additional percentage of your income you will pay in tax for every day that you do not have private health cover.

Income Thresholds

No surcharge 1% 1.25% 1.5%
Singles $90,000 or less $90,001 – $105,000 $105,001 – $140,000 $140,001 or more
Couples/Families $180,000 or less $180,001 – $210,000 $210,001 – $280,000 $280,001 or more

Source: accurate from 1 July 2014

So if you’re a higher income earner without private health cover, you could be stung come tax time.

  1. Australian Government Health Insurance Rebate

The government provides a private health insurance rebate to most individuals and families to help with the cost of private health cover, depending on your income. The rebate is also based on the age of the oldest person covered by a particular policy. Eligibility to receive a private health cover rebate depends on gross income, or combined gross income with a spouse, in a standard Australian financial year.

Income Tiers

Base Tier Tier 1 Tier 2 Tier 3
Singles $90,000 or less $90,001 to $105,000 $105,001 to $140,000 $140,001 or more
Family/Couples $180,000 or less $180,001 to $210,000 $210,001 to $280,000 $280,001 or more

Rebate Percentage

Insured Age Base Tier Tier 1 Tier 2 Tier 3
less than 65 26.791% 17.861% 8.930% 0%
65-69 31.256% 22.326% 13.395% 0%
70+ 35.722% 26.791% 17.861% 0%

This will help most Australians significantly with the cost of health insurance when they do their tax. Paying for private health cover might hurt a bit each month when the bills come in, but know that if you are not a high income earner then a percentage will come back to you.

  1. Find the best deal and buy 12 months cover before the rate rise

Using an online comparison service like Choosewell is the best and easiest way to do a side-by-side comparison of most funds. It’s specific to your personal requirements, it’s easy to see included services, it’s free to use and there are consultants available to help you make an informed decision. It’s worth the chat no matter what your decision as these consultants know health insurance and the tax implications back-to-front. Once you’ve found a good arrangement, lock in that rate by purchasing 12 months of cover before the rate rise hits on 1 April. You’re covered for a whole year at the lower rate.

So there you have it! Be curious about your health insurance in March and you could be saving serious dollars by April.

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1 Comment

  1. Chris Yena
    June 15, 2016 at 5:53 am — Reply

    There’s an age old saying that goes “Health is Wealth.” This for me is definitely true and given that life expectancy is increasing – we are living longer. More people are now sparing budget for their family’s health. It’s essential and having good budgeting processes for people having a hard time planning on what to do with their own health insurance. Thank you for sharing.

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