If you're considering taking out health insurance, you won't want to jump straight in and sign on for a policy right away. As the old saying goes, knowledge is power – and that's particularly true in the realm of private health insurance.
There are many nuances to Australia's health insurance system that need to be understood to get a good deal, which involves having a policy that meets both quality and cost requirements. Take a little time to understand some key terms, and you can save money on your premiums and finalise a policy that suits all your criteria.
It doesn't help when the health insurance industry can be so complex. If you need help, our experts are on the other end of the phone and ready to explain things in person. However, if you're looking for a quick rundown of some common terms, here are three to be aware of.
While emergency hospital care is available to everyone across Australia, private health insurance policyholders get more choice in terms of the facility in which they are cared for and the doctor who treats them.
However, what about out-of-hospital care? That is covered by the blanket term "extras". Extras can be any of the following:
- Dental care
- Pharmacy treatment that is not covered by the Pharmaceuticals Benefit Scheme
- Chiropractic care
- Medical instruments, such as hearing aids
Health funds can provide different extras, and policies can be built from a selection of the above, which will then cover all or some of the cost of treatment. It's best to think about what extras you think you and your family may need before running off and purchasing health insurance.
Lifetime health cover
While we don't recommend you rush into any health insurance policy, we do advise some degree of urgency if you're approaching your 30s. On 1 July after your 31st birthday, if you haven't taken out hospital cover, you will start paying a 2 per cent premium for every year you delay, up to a maximum of 70 per cent.
For instance, if you take out your first policy at 40 years of age, you'll pay 20 per cent more than you would have done at the age of 30. This incentive is called lifetime health cover (LHC) and is a way to encourage people to take out insurance early in life, and not just when they need it later on.
For new migrants, there is a grace period of 12 months from the time you first register for Medicare, after which point, the 2 per cent LHC loading will come into play.
Medicare levy surcharge
As you've been contemplating the pros and cons of private health insurance, you've likely heard the three words "Medicare levy surcharge". The surcharge is a means-tested fee levied on those without private health insurance.
The surcharge comes in four tiers:
- Individuals who earn less than $90,000 each year pay nothing extra
- Those whose income sits between $90,001 and $105,000 pay a 1 per cent surcharge
- Earners of between $105,001 and $140,000 pay 1.25 per cent
- And anyone who takes in a yearly wage of $140,001 and above pay the full 1.5 per cent
The Australian Taxation Office applies this surcharge to encourage those who can afford private care to opt for it. Although the fee is rather low, it is something to factor into your budget, as you begin to weigh up the cost of taking out insurance against the expense of not having it.
Anything we've missed?
If any health insurance term is causing you confusion, contact our team on 1300 44 22 01. As independent consultants, we can help you make an informed decision that suits you best.