Why You Need To Sort Your Health Insurance Before June 30

The lead up to June 30 means doing a lot of things you wouldn't normally do. You rummage for receipts, you use a calculator for the first time since year 12 and for one in five uninsured Australians, you start to think about the tax benefits of private health insurance.

Hospital picture from Shutterstock

This is even truer of younger Australians, with over a third of 18-31 years old Australians looking to secure a policy before June 30, according to a recent iSelect/Ipsos survey.

But what is the real reason for this mad rush? Why does the mere mention of the phrase "End of Financial Year" turn us into the equivalent of fashionistas at a Boxing Day sale, madly scrambling for purchases like the world is about to end?

The reason is tax benefits. The federal government encourages Australians to take up private health insurance by effectively taxing those without it through the Medicare Levy Surcharge (MLS) and Lifetime Health Cover (LHC) loading.

The Medicare Levy Surcharge (MLS) is an additional tax levied on those who don't have health insurance and earn above $90,000 for singles or $180,000 for families and couples. The Lifetime Health Cover (LHC) loading is a two per cent loading payable on top of your premium for every year you are aged over 30 and do not hold private health insurance.

Basically, LHC loading means that if you're 31 or older and wait until after June 30 to take out private health insurance for the first time, you'll pay two per cent more than if you had taken it out before you turned 31. A forty year old taking out private health insurance for the first time will pay 20 per cent more.

For those of you who are uninsured, there is no need to "panic-buy" a policy… even if you are about to turn 31 (happy birthday by the way). But given there are over 34,000 different policies currently available in Australia, where should you start?

Instead of trying to go it alone, run through this checklist to help you secure the best value policy to suit your own unique circumstances.

Only hospital cover delivers tax benefits Taking out an extras only policy will not deliver any tax benefits, such as excluding you from the Medicare Levy Surcharge. If you are looking to save on tax, make sure your private health insurance includes hospital cover.

Think about your current and future health needs Speak to a private health insurance expert to discuss your life stage. This ensures you take out the right policy that covers you for everything you need and so you are not paying for things you don't need. For example, you wouldn't want to be a 25 year old covered for dentures or a grandmother insured for IVF.

Opt for an excess or co-payment If you don't think you'll require hospital admission in the near future, choosing a co-payment option or an excess (such as a $500 excess) will bring down your monthly/annual premium.

Review the extras If you don't think you'll use them, why pay for them? Also consider flexible extras products that combine your separate extras limits into a single annual limit for you to use across different services.

Make sure ambulance is covered Not all private health insurance policies include ambulance cover and it can also vary by state. Make sure your policy includes ambulance cover or you could be left thousands out-of-pocket in the unfortunate case that you require an emergency ambulance ride.

Look for payment discounts Some providers offer a discount for paying by direct-debit. Similarly, paying 12 months of premiums upfront can see you avoid the annual premium increase.

At the end of the day, choosing a private health insurance policy is one of the most important things to get right. After all, it's about more than just saving money -- it's about insuring your most valuable asset of all, your health.

Reminder: For specific tax advice relating to your individual situation, consult a registered professional.

Matt Cuming is head of corporate affairs for product comparison service iSelect.


Comments

    With ambulance cover, how does that compare / stack with ambulance membership? I've got membership with Ambulance Victoria, which should theoretically cover me for Ambulance trips, so should I not care about Ambulance cover in the insurance? Conversely, if I get Ambulance cover in my insurance, should I not bother with the membership because I'm paying for it twice?

      Short answer: It depends.

      1. Some funds with ambulance allow only a certain number of trips
      2. Each trip has to be an emergency, no false alarms or patient transport
      3. A health fund can elect to declare the trip a non-emergency - so you'll have to fork out

      So make sure you know the ambo exclusions of your policy. Ambulance policies are cheap by themselves and you are supporting the organisation by going direct.

      @zenu is correct, it depends.

      Carefully review the detail of your Ambulance Victoria membership and compare this with the ambulance cover detail of your private health insurance policy.

      Also pay special attention to whether your ambulance cover entitles you to reciprocal ambulance rights in other states. Some health funds offer true 'national' ambulance cover.

    Hmm, will have to get something before next year.

    I absolutely refuse to get health insurance until there is no other choice. With Ambulance cover and Medicare there is no good reason why I need it. This country is becoming more and more like America every day, and we all know what their health system is like. If you want that for Australia then yeah get health insurance, but if you don't, stay the hell away from it.

    Last edited 26/06/15 8:45 pm

      That's your choice, just be prepared to accept the medicare levy surcharge.

      Private health is supposed to take pressure off the health system by offering choice to people who can afford to pay. Yes, premium increases are crazy - my view is that is driven by:

      i. More expensive (safer) treatments,
      ii. People living longer (requiring more treatments),
      iii. Medicos covering their butts by ordering every test (unnecessary resource usage) and;
      iv. Hospitals charging the Government a lot because they know they can (health cost inflation).

      Australia has a community rating system for health (not a risk rated system) so someone who is sick and 65 pays the same as someone who is 18. This is far different from the US.

        Considering my annual Income would have to go up to 6x its current amount before I had to pay this. I think I'm in the clear.

        v. health insurers including pseudo-medicine and hipster nonsense in coverage.
        vi. health Insurers incomprehensibly ignoring the actuarial cost of their customers.

        For example; a healthy, near-50 might want coverage for joint issues since they're getting on a little. Every policy which includes such cover also seems to include things like IVF and 'alternative therapies'.
        To add insult, the cost of 'family cover' is often just double that for a single and their TV ads all boast of covering the children, often gap-free and until they're in their 20s, at zero cost.

        In short, a healthy single who wants insurance to cover the worst thing that could happen pays $X. A chain-smoking, obese, diabetic alcoholic couple with 7 sickly kids pays maybe $2X.

        Then tax time comes around and the total of those premiums and medicharge levy means the single paid something like $2000 for that single visit to the Doctor for a checkup during the year.

        Why are health insurance premiums not based on the risk of the insured like very other form of insurance?
        Or is it that it's not really 'insurance' but a government-endorsed scheme to offset the cost of the health system at the expense of those who use it least?

          Because the biggest risk factor is a low socio-economic status and once upon a time society gave a fuck about the poor.

    Unless you're in the top twenty per cent of earners. don't bother. I've earned up to $80K per year, never had to pay the surcharge. Now in a lower paying job, never will have to pay it.

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