Health insurance in your 30s - the facts.
You may want to think about taking out private health insurance
You may have noticed, once you turn 30, there seems to be a lot of noise about private health insurance. So what are the facts? Here are some of the key things you need to know beneth all the noise:
1. Prices start to rise after your 31st birthday
If your 31st birthday is coming up this year, 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). Oh, it will also increase an additional 2% each year - so even if you're a year or two late, it's probably worth comparing your options.
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).
2. There's a tax surcharge if you earn over $90k
It's called the Medicare Levy Surcharge (MLS), and it's an additional tax that you may have to pay in your tax return.
Medicare Levy Surcharge 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.
You can get the absolute basics with minimum cover to tick the box and save on your taxes, 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
Thanks to Government initiative number 2, Lifetime Health Cover Loading - It could be worth taking the jump sooner rather than later.
Once you turn 30, a 2% loading is added to your hospital cover costs for every year you’re without hospital cover. So when you do eventually take it out, it will cost you a lot more than your mate who took out private cover before 31.
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 till you're 40 will cost you big bucks
If we say the average singles hospital and extras policy today cost $2,000, by the time you looked at getting health cover and you're 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.
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 directly over the 10 years you didn't have cover (assuming you didn't have to pay any unexpected medical fees), 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.
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How Lifetime Health Cover Loading works
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Picture: Brooke Lark - Unsplash
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