Have you turned 31 since June 2017?
You may want to think about taking out private health insurance
If you've just celebrated your 31st birthday and don't have private health insurance, you may want to think about signing up before 30 June.
If you don't have an eligible hospital cover by the time 1 July rolls around and do decide to get private health insurance, even one day after the end of financial year, you'll be paying an additional 2% per year. This is all thanks to a lovely little government initiative called the Lifetime Health Cover loading (LHC).
This is different from the Medicare Levy Surcharge, which is an additional cost you may have to pay each EOFY depending on your annual income (we'll get onto that next).
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Started earning more than $90k this year?
Then you should be aware of the Medicare Levy Surcharge (MLS) which is an additional tax that you may have to pay in your tax return.
The MLS is a penalty that affects singles earning over $90,000 and families earning over $180,000 and means you'll pay a levy of between 1% and 1.5% of your annual income (depending on how much you make).
To dodge the tax, you'll need to take out private hospital cover. You only have to pay a charge for the days you don't have private cover, so if you've left it too late for this year, it's worth doing now so you can enter next year without being penalised.
You can get the absolute basics with minimum cover to tick the box, but this option probably won't give you any value for money should you ever need your cover. Alternately, you can spend a little more and get heaps of benefits in return.
An example from available policies in the finder.com.au panel can be found below.
What you can get from your money
If you're over 30 and on the fence about getting health insurance, it could be worth taking the jump sooner rather than later.
Let’s put that in real terms. Say a health insurance policy is available for $600 per year, well if you only take out your first policy when you're 40 it’s going to cost you 20% more than that – $720 per year.
Here are a few examples:
|Age||Loading||Cost of cover||You’ve had cover since 31||If this is your first hospital cover|
Waiting til 40 to get cover
If we say the average singles hospital and extras policy today cost $2,000, by the time you looked at getting over at 40 that policy would cost $3,384. But that's without the LHC loading, that's just following the average 5.4% premium increase. That policy with the LHC loading would be $4,061. That's an extra $677 in year one alone, which by year 10 balloons to $1,087.
|Annual premiums no LHC||Annual premium (Plus LHC)|
|Average annual premium||$3,450||$5,204|
|Total LHC payments||$0||$8,673|
Over the 10 years of the LHC period, you're paying $8,673 in LHC penalties and these penalties go to the insurer, not into the public health system.
So, while you may have saved $16,957 over the 10 years you didn't have cover, your average premium per year is almost $2,000 more than someone who took out cover before 31. Plus, you weren't able to claim for hospital or extras benefits during that time. Nor were you able to claim your private health insurance as a deduction come tax time.
How Lifetime Health Cover Loading works
Grab a great sign-up deal this June
|Get 6 weeks free with combined cover. PLUS 2 & 6 month waits on extras waived.||
|When signing up before 30 June.||
|Get $200 cashback on a hospital and extras policy. Plus 1 month free.||
|Available to new policy holders who pay via a CUA bank account.||
|1 month free when buying hospital & extras cover. PLUS no waiting periods on 2 & 6 month extras.||
|When signing up before 30 June||
Picture: Brooke Lark - Unsplash
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