“I think a big driver of the uptake in private health insurance, despite the cost-of-living issues, comes down to timeliness and having that surety of treatment when you need it.”—Rebecca Windsor, CEO, Health Insurance, Australian Unity
Key points
- The Medicare Levy Surcharge kicks in if you earn more than $90,000* as a single, or over $180,000* as a family. It can be avoided at tax time if you have private patient hospital cover.
- Once you turn 31, you’ve got until the following 1 July to buy private patient hospital cover and avoid payingthe Lifetime Health Cover loading fee.
- Australian Unity’s Bronze Plus Core Hospital package is a great entry-level cover for someone who is healthy but wants to protect themselves against the unexpected.
If you’re feeling cash-strapped right now, it’s safe to say you’re not alone. From rising mortgage and rental costs to rocketing grocery prices, Australians—especially those in their late 20s to late 40s who are considered by the Australian Bureau of Statistics to be “employee households”—are grappling with mounting costs on multiple fronts.
The natural inclination, then, is to consider ways to tighten your belt. Take health insurance, for example. If you’re young, fit and healthy, you may be thinking about cutting back or removing your cover. But, as always in life and with money, the simple option may not always be the right decision for you.
In this article, we talk to the experts at Australian Unity to discover why holding onto your health insurance can be advantageous and how to make your cover work for you come tax time.
The value of peace of mind
“It's really interesting to see that, while there’s a lot of cost-of-living pressures, the number of people buying health insurance is increasing,” says Rebecca Windsor, CEO, Health Insurance at Australian Unity.
Much of this, Rebecca suggests, is due to the unprecedented strain that the public health service is confronting in the wake of COVID-19. Federal Health Minister Mark Butler recently described Medicare as being in the “worst shape it’s been in its 40-year history”, while waiting lists for hospitals, mental-health care and dental continue to blow out.
That news aligns with recent Australian Unity Wellbeing Index research findings, which found that, when it came to our health, our satisfaction levels have plummeted to an all-time low.
“There have been some challenges around the public hospitals system hitting the front-page news,” Rebecca said. “I think a big driver of the uptake in private health insurance, despite the cost-of-living issues, comes down to timeliness and having that surety of treatment when you need it.”
Certainly, in a time of widespread financial insecurity when many are feeling vulnerable, the peace of mind that health insurance offers can be particularly welcome. “For me, it's about flexibility and choice,” says Dylan Brasier, Senior Member Specialist at Australian Unity.
“I know that the public health system is already pretty good and will help me out if I get in a pinch. But sometimes it’s important to be able to know I can choose my own doctor, go to a private hospital and just have that extra flexibility—especially if there’s something specific that I want to plan for, like surgery. If I want something done, I know I don't have to wait in line for too long.”
Weighing up the Medicare Levy Surcharge
While the flexibility and peace of mind that health insurance provides is an important consideration, it’s not the only one. Another incentive to keep or sign up for health cover is financial—it’s about getting value for money.
Specifically, private health insurance may allow you to avoid the Medicare Levy Surcharge. This is an additional tax that amounts to between 0 percent and 1.5 percent of your income, depending on your income threshold. Basically, if you earn over $90,000* as a single, or over $180,000* as a family (which includes couples or single parent families), you may avoid paying the Medicare Levy Surcharge if private patient hospital cover is part of your private health insurance policy.
“It’s definitely a trade-off,” Rebecca says. “You could theoretically just pay the tax. Or you could actually get some value by buying private patient hospital cover, and take advantage of having a greater choice of care and the ability to receive treatment when you want to get treated.”
It’s a compelling argument. But even if you’re a younger person whose income is below that $90,000 threshold, there are other financial advantages to starting or keeping your health insurance.
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The long-term benefits of starting early
The Lifetime Health Cover loading was introduced by the government to encourage people to take out private patient hospital cover at a younger age and maintain it over time. Once you turn 31, you’ve got until the following 1 July to buy private patient hospital cover—failure to do so exposes you to extra loading fees. For every year you delay, you may have to pay an additional 2% (up to a maximum of 70%) on top of the cost of your private patient hospital cover. “Once you’ve held hospital cover for 10 continuous years, then your Lifetime Health Cover loading gets removed,” Dylan explains.
It’s also about making sure you’re prepared for the unexpected. “The pressure starts to build as you get older, and the loading starts to get higher and higher,” says Dylan. “You might be young now, but you have to think of your future financial security because that’s where it’s going to start to affect you, especially with Lifetime Health Cover loading.”
Accessing affordable packages
Clearly, there are a bunch of solid reasons to maintain your private health insurance cover. Yet, at the same time, it’s equally true that a lot of people are struggling right now and being forced to consider tough sacrifices due to the cost of living.
Thankfully, there are now an increasing number of competitively priced health insurance packages on the market. Prices for Australian Unity’s Bronze Plus Core Hospital package, for example, start at $45.61 per fortnight. Depending on your income, this may work out as the same price (or even less) than the Medicare Levy Surcharge.
Essentially, Bronze Plus Core Hospital cover offers straightforward cover for simple and common procedures, and includes unlimited emergency ambulance transport. “It’s a good entry-level cover for someone who's relatively healthy but wants that ‘just in case’ cover,” says Rebecca.
The healthcare industry has evolved, creating a variety of packages that cater to a wide range of needs. If money is tight, it’s always possible to manage your premiums by modifying your level of coverage. “Find the cover that meets your needs for your budget,” advises Rebecca. “It's about what you can afford and what you need.”
* Note, that income thresholds increase on 1 July 2023.
Information provided in this article is of a general nature. Australian Unity accepts no responsibility for the accuracy of any of the opinions, advice, representations or information contained in this publication. Readers should rely on their own advice and enquiries in making decisions affecting their own health, wellbeing or interest. Interviewee names and titles were accurate at the time of writing.
