The $1,100 loophole: why 1 in 5 Aussies really have health insurance
Key takeaways
- Almost 1 in 5 Australians (18%) say tax avoidance is the main reason they hold private health insurance, not because they value the cover itself.
- Gen Y is driving the trend hardest. 29% say the Medicare Levy Surcharge is what keeps them insured, compared with just 4% of Baby Boomers.
- For FY 2026-27, the surcharge kicks in at $105,001 for singles, and even the cheapest qualifying policy can save around $1,100 in tax, but it may come with a $750 excess attached.
Nearly 1 in 5 Australians with private health insurance don't actually want it.
New research from Finder's 2026 Health Report has found 18% of policyholders say the only reason they're covered is to dodge the Medicare Levy Surcharge (MLS), not because the policy itself is any good.
The MLS is an additional tax high income earners must pay on top of the standard 2% Medicare Levy that all Australian taxpayers pay.
Who's buying cover just to beat the taxman
The trend skews heavily generational.
Around 29% of Gen Y say the MLS is their primary reason for staying insured, more than 7 times the rate of Baby Boomers, at just 4%. For younger, higher-earning Australians, private health insurance is increasingly a tax minimisation tool rather than a safety net.
How much you could actually save
For the 2026-27 financial year, the MLS kicks in at $105,001 for singles and $210,001 for families. A single person earning $110,000 could avoid roughly $1,100 in extra tax simply by holding the cheapest qualifying hospital policy, a saving that can comfortably outweigh the premium itself.
Finder's free MLS calculator gives you a clear picture of not only your MLS liability, but also if you could be financially better of with private hospital cover. Simply plug in your income, tell us your cover status and you're on your way.
The catch with "tax-dodge" policies
Remember, buying private hospital cover to avoid the MLS only really pays off if the policy is decent enough to actually use.
The bare-bones policies bought purely to clear the MLS threshold often carry $750 excesses and significant exclusions, meaning that if you actually need to use the cover, it may not pay out much at all. Before buying a policy for tax purposes alone, check what, if anything, it would actually cover you for.
If you're going to hold cover either way, it's worth comparing whether a slightly higher-tier policy gets you real value for a similar price, rather than just the cheapest box-ticking option.
Buying cover just to dodge the MLS?
Compare policies that clear the threshold without a near-worthless excess.
Sources
Ask a question