Private Health Insurance – A Snapshot

In Australia, the private health system works on the underlying premise that you should not pay more for health insurance simply because you are older. So the 70 year old who may use more of the health system than a 30 year old can still access cover at the same premiums.

So why would younger people ever agree to join and subsidise those who will use the hospital and medical resources more often? That is where the various incentives to encourage younger people to take out private health insurance come in. For example:

1. Private Health Insurance Rebate – Depending on your age and income level, a reduction in your premiums
2. Lifetime Health Cover Loading – works as a penalty for each year over the age of 30 when you first join a private health fund. So that if you join a private health fund when you are 30 or younger, you can access the cheapest premiums for life but for each year after the age of 30, you are slugged with a 2% loading up to a maximum of 70%. Therefore if you first start paying for insurance when you are in your late 60’s compared to your late 20’s, then you will pay 170% of the premiums.
3. Medicare Levy Surcharge – an extra 1% – 1.5% of your taxable income for higher income earners, if you don’t have suitable private health insurance in place for the financial year.

So what to do? Well each circumstance is different but the important thing is to weigh up the costs of private health insurance (the premiums) against the benefits, being the improved health care options and the financial incentives listed above.

Posted 28.3.17

The information we are providing to you is purely factual in nature and does not take into account all of your personal objectives, situations or needs.  The information is objectively ascertainable and, therefore, does not constitute as financial product advice.  If you require personal advice you should consult an appropriately licenced person or authorised financial advisor, such as HQB Financial Solutions Pty Ltd.