However, while it is important to understand the direct expense of private health cover, it is also worth considering the potential costs of not taking out a policy.
When you take these costs into consideration, it is easy to see how investing in an Australian health insurance product could be a cost-effective endeavour.
Medicare Levy Surcharge
If you earn over a certain amount and you do not hold private hospital cover, you will be required to pay the Medicare Levy Surcharge (MLS). This surcharge is used by the government to help fund the public health system in addition to reducing the reliance on these public services.
Single individuals who earn more than $88,000 per annum, or families with an annual income higher than $176,000, will be charged an MLS of between 1 and 1.5 per cent, depending on total income.
Once the MLS is applied to your earnings, you may find you are paying almost as much for the surcharge as you would be for private health insurance. This is a significant expense without any of the benefits of health cover, so it is worth considering using that money to instead take out a private hospital policy.
Lifetime Health Cover loading
While you may be in good health now, there is no way of knowing what your health care requirements will be in the future. If you suffer an illness or injury later in life, you may change your mind about taking out private hospital insurance.
Unfortunately, if this decision occurs after your 31st birthday, you will most likely be affected by the Lifetime Health Cover loading.
The Lifetime Health Cover loading is designed to encourage people to take out hospital cover earlier in life. It does this by adding a 2 per cent loading on your hospital insurance premiums for each year you are over 30 when you take out a private hospital insurance product.
This loading still applies to individuals who have held private hospital insurance in the past, then left, then joined again, if the time of being uninsured exceeds typical gap periods.
Fortunately, the loading only affects premiums for a maximum of ten years and is capped at a 70 per cent increase. However, this can become a significant expense for those above a certain age.
While all Australians are covered under the Medicare scheme, individuals who require specialist treatment are often left out of pocket when the bill for treatment arrives.
The Medicare system covers very few treatment options, typically only covering such expenses as hospital accommodation and subsidies on medications listed on the Pharmaceuticals Benefits Scheme (PBS).
This means that an individual who requires specialist treatment or non-PBS drugs is expected to pay for these costs out of their own income. However, those who take out a private health insurance can significantly reduce this expense.
Most extras insurance policies will help cover these costs, though some limitations, excess payments and gap charges may apply. It is therefore important to ensure the insurance product you choose suits your needs and medical requirements.
Often the price of insurance premiums is eclipsed by the amount your family may spend on health care and treatment each year, so it is easy to measure the economic benefits of investing in private health insurance.
If you would like to avoid these costs, get in touch with the team at HICA today. HICA is a specialist insurance broker offering obligation-free quotes and health insurance comparisons to help you choose the right cover for your needs.