In Australia, we have a universal public hospital system and private health insurance is entirely optional. Yet 13.5 million Australians – that’s more than half of the population – opt to have private health insurance and spend money on premiums.
So what are the potential financial benefits of private health insurance cover? We look at why you might need to have private health insurance and the key benefits it could have for your finances.
1. More control and wider range of health care options
Private health insurance means having hospital cover or general treatment cover (ancillary cover or extras), or both. Your hospital insurance can cover some or all of the costs of hospital treatment as a private patient, whether you’re in a public or private facility. This includes items like accommodation and theatre fees.
Private hospital insurance gives you freedom and flexibility. You might be able to choose a preferred doctor, hospital, and admission time for your hospital treatment, and you may have the option of a private room as well. You can still opt to receive hospital treatment as a public patient in a public hospital, but you might not have the same range of options.
And what about ancillary or extras cover? This can subsidise some or all of your non-hospital health care services like dental, optical, home nursing, chiropractic, and physiotherapy. These items generally aren’t covered by Medicare. Extras cover can be a great budgeting tool, especially if you receive more in benefits and subsidies than you pay. It can make enhancing your quality of life much more affordable.
So, private health insurance could give you access to services that you might otherwise have to pay completely out of pocket for or be unable to afford. With the different tiers (often referred to as either Basic, Standard and Top or Bronze, Silver, and Gold) of hospital cover available, you can tailor your hospital cover to your needs. Typically insurers also offer extras cover in different tier levels as well, so you can personalise your general treatment cover. Additionally, you could opt for a higher excess to manage your premium cost.
2. Protection against costs of unexpected health issues
With private health insurance, you can better protect yourself financially if you have unexpected health issues. Even people without a family history of illness can find themselves needing emergency or expensive health care, whether that’s in a dental clinic or a hospital.
We understand that you may prefer not to think about it, but a fall or accident could lead to not just an ambulance ride but also a hospital stay with a hefty bill if you don’t have insurance, depending on your state/territory. And without insurance, you might have to wait a long time to receive treatment, or you could be asked to pay all costs costs upfront (at admission) as a private patient.
3. Reduce your tax bill with the Private Health Insurance Rebate
The government might help pay a percentage of your premiums – for hospital and/or extras policies – depending on how much you earn and your age. You can choose to claim the Private Health Insurance Rebate against your personal tax bill each year, or have it deducted as a premium reduction.
For example, if you’re a single earning less than $90,000 (or couple/family earning less than $180,000), you fall into the base tier and you can claim the highest rebate. In real dollar terms (accounting for inflation), the rebate could mean having private health insurance costs you no more than it did in 1998.
4. Avoid Lifetime Health Cover loading
The Lifetime Health Cover (LHC) loading is another reason why having private health cover could benefit you financially in the coming year. If you wait until after the 1st July of the year you turn 31 to take out private hospital insurance, or you have major gaps in between getting hospital cover, you’ll usually need to pay the LHC loading.
The LHC loading can result in you paying an extra 2% on top of the monthly premiums for every year you went without hospital cover after turning 31 and/or for any significant gaps after this. The LHC can go up to as high as 70% (if you go 35 years without cover), and it’s removed once you have maintained cover for 10 continuous years.
Keep in mind the LHC loading won’t affect people who never take out private health cover, since it’s payable with your premiums.
5. Exemption from the Medicare Levy Surcharge
If you don’t have private hospital cover and you fall into the higher income brackets, you might also need to pay the Medicare Levy Surcharge (MLS). You’ll need to pay it as part of your tax return if you earn over $90,000 as a single or over $180,000 as a family. The MLS could be 1%, 1.25%, or 1.5% of your taxable income, depending on how much you earn.
Even though Australians can access a public hospital system, private health insurance still offers strong benefits, not in the least financial ones, for Aussies. With private cover, you could access more health care cost options and have more control over your health care at a lower cost. In addition, you could avoid government surcharges and take advantage of incentives like the Private Health Insurance Rebate.
All of these factors suggest having private health insurance could make a major difference for you and your family’s finances while supporting better access to a wider range of health care.
At Itsmyhealth, we’re passionate about health insurance and keeping things simple as we help you find the right cover. For further help selecting a health insurance policy that benefits you, Itsmyhealth can help you find a plan that meets all your needs.