If you've never had a serious injury or illness, it can be tempting to think that private health insurance is something for other people. Don't make that mistake.
In this article, we'll demonstrate the downsides of forgoing this vital cover. These include potentially paying additional tax, missing out on reduced premiums and sacrificing the opportunity for quicker medical care should you need it.
1. Avoiding the Medicare Levy Surcharge with private health insurance
Australia has a great public health system, which is funded in part through the Medicare Levy. The majority of the population pays this tax, which is calculated at 2% of an individual's annual income.
However, people often confuse the Medicare Levy with the Medicare Levy Surcharge (MLS). This is an additional 1-1.5% tax designed by the federal government to encourage wealthier Australians to take out private health insurance. Those eligible for this extra tax are:
- Singles earning over $90,000 year who don't have private health insurance.
- Couples earning a combined $180,000 a year who don't have private health insurance.
Crucially, if you fall into these categories, you could have been paying the MLS without even realising. The tax is often invisible to people who have their returns prepared by an agent, or it could be hidden in a refund or separate tax bill. Asking your tax agent directly is the best way to find out.
Having a private health insurance plan can help you avoid paying the Medicare Levy Surcharge.
If you've so far decided not to take out a private health insurance plan for yourself or your family because you're concerned about costs, it might be time to think again. Importantly, to use private health insurance to avoid the MLS completely for a financial year, need to have held a policy for the 365 days of the financial year.
If you want more information on saving tax by investing in a private health insurance policy, HICA has state-specific solutions that may cost less than the MLS.
2. The benefits of buying private health insurance young
As of April 1, 2019 the federal government introduced a system of age-based discounts aimed at incentivisng young people to invest in private health insurance.
This means insurers now have the option to offer buyers premium discounts of 2% for every year under 30 someone is when first buying hospital cover. For example, someone aged 29 would get a 2% reduction, a 28 year-old a 4% reduction and so on. The maximum discount of 10% is available for 18-25 year olds. As long as you stay on the same policy or transfer to a similar one, you can keep this discount until you turn 41. This amounts to some serious savings!
If you delay investing in private health insurance for too long you will face more expensive premiums.
On the flip side of these benefits is the phenomenon of a Lifetime Health Cover (LHC) loading. Fundamentally, LHC means that if you've not taken out private hospital cover by July 31st following your 30th birthday, your future premiums will be more expensive. In fact, for every year after this point that you delay investing, insurers will charge an additional 2% loading. This maxes out at a massive 70%, and you'll have to pay this extra amount for 10 years before the loading is removed.
If you've turned 30 this year it's still not too late to take out a plan, and if you're yet to hit the big 3-0, you could already be accessing the premium reductions brought in by the recent reforms. Don't delay!
3. The care advantages of private health insurance in Australia
In addition to the financial pros of having private health insurance, there are clear care benefits. Among the most important are:
- Shorter wait times – When you're sick the last thing you want to be told is that you're going to have to wait a while before you can see a doctor or get treatment. Patients with private health insurance are generally seen quicker than those using Medicare, according to Canstar. And, in fact, the public system is getting slower: In 2017-18, the median waiting time for admission for elective surgery in the public system was up 36 days on the figure from 2013-14, reports the Australian Institute of Health and Welfare.
- Larger selection of hospitals and doctors – If you have private health insurance, you can choose who treats you or your loved ones, and where. This is a luxury often not available in the Medicare system.
- Additional care – Private health insurance doesn't just mean cover for hospital treatment. On top of this, extras (or ancillary) cover can include physiotherapy, chiropractic work and dental care – none of which are easily covered by Medicare.
- Private hospital rooms – With a private plan you can have your own private hospital room, providing you more peace and quiet as you recuperate.
How HICA can help you find the right cover
As a consultancy with over 35 years' experience, HICA is perfectly positioned to help Australians find health insurance plans for themselves, or their family, that address their exact circumstances.
Whether you're interested in private health insurance to avoid the MLS, or simply want better cover to give you and your loved ones peace of mind, our personal approach will help ensure you get the best advice to address your needs. We'll also be with you to provide ongoing support and to help you update your plan should your situation change.