The 5 circumstances that affect the value of your healthcare cover

When it comes to health insurance, you’re probably concerned about getting the right cover for your needs and whether you’re paying too much. While premium increases typically reflect industry averages, actual changes for customers depend on their fund, policy, and other factors. We’ll explore the most important factors affecting the amount you pay for healthcare insurance. Understanding these can help you explore what you could do to manage your costs while balancing cover requirements budget considerations.

1. Your income

The Australian government has incentives and surcharges in place to encourage people to take out hospital insurance. Your income can affect how these incentives and taxes apply to you and so your overall healthcare-cover-related costs.

You need to pay the Medicare levy unless your income falls below a given threshold regardless of whether you have hospital insurance or not. In addition, you’ll pay the Medicare levy surcharge (MLS) if your income is above a certain level and you don’t have private hospital cover. Singles and families (or couples) earning $90,000 or less and $180,000 or less, respectively, won’t pay any MLS.

The three other income tiers attract 1%, 1.25%, and 1.5% of your income in MLS, with the top-tier income thresholds currently at $140,001 and above (individuals) and $280,001 and above (families and couples). Most Australians don’t incur the MSL and so don’t really save tax or their overall healthcare cover costs in this way.

2. Your age when signing up and Lifetime Health Cover changes

Lifetime Health Cover (LHC) loading is a loading on top of your premiums, paid to your insurer, and it applies to people who delay taking out private hospital insurance after the 1st July following their 30th birthday. LHC is designed to encourage people to take out hospital cover earlier in life, when they’re less likely to have serious illnesses. LHC doesn’t discriminate based on age. Instead it’s time-based: the longer you delay taking out hospital insurance, the higher your premiums will be.

For every year after the 1st July after turning 30 you delay taking out hospital cover, you pay a 2% loading on your premium. Someone who wait until they turn 40 to obtain hospital insurance could pay 10% for example. The loading maxes out at 70%.

The LHC rules have had a few changes since their introduction in 2000, and one of these included the 10-year-loading-removal rule. This rule removes your loading once you’ve maintained 10 years of continuous hospital cover. Previously LHC loading was intended to be never removed.

3. Your family circumstances

Your healthcare cover needs usually change as you enter different life stages, and when you family circumstances change, you’ll likely need to switch to the type of policy designed for your specific circumstances.

For example, when kids previously covered under the family’s policy as a dependent stops becoming a dependent, they’ll need to arrange their own cover. Insurers can vary in definition of dependent but age 25 is a common maximum age for dependents. This will obvious change how much they need to pay. Getting married might mean you switch to a couples’ policy, and this could mean you pay less if the fund has discounts for combining policies.

As you plan to have children, you might upgrade to a policy with pregnant and other related services, which typically means you’ll pay more. When the kids arrive, you might upgrade to a policy with more extras benefits for things like dental and optical items.

4. Where you live

Health insurance funds don’t discriminate based on policyholder’s location. However, access to facilities could affect the cost of your premiums, and this typically is factored in on a state or territory basis. This is because the amount of hospitals in your state, the cost of healthcare, and other state- or territory-related factors can affect the value you’re getting from your policy. For this reason people who move interstate can find their premiums or benefits changing even when they maintain the same policy.

Additionally, people living in rural areas might not get as much value out of their health insurance policy because they live far away from cities and only 16% of the facilities outside major cities are private facilities.

5. When you re-evaluate your policy

Finally, your health-cover costs could change when you re-evaluate your policy and decide to upgrade or otherwise change your coverage. For example, you might decide adding extras is a good idea, or you could upgrade to a higher tier hospital policy as you get older.

Options for managing health-cover costs

You do have additional options to better balance your needs with the costs of healthcare cover. For example, you can keep maintaining hospital cover to keep your LHC status and avoid the MLS, but move to a cheaper option to stay within your budget. Another option to choose a higher excess to lower your premiums.

You could also opt for a lower tier for your extras cover, which you don’t need to maintain to keep you LHC and avoid paying the MLS. However, make sure you understand the benefits, conditions, restrictions, and other terms before switching. Always shop around, know your needs, and review your cover regularly.

Your income, age when signing up, family circumstances, residence, and decision to re-evaluate your policy can all impact how much you end up paying for health insurance and related taxes and levies. While it’s important to make sure you can afford your policy, it’s equally important to choose the right policy for your lifestyle and needs.

At It’s My Health, 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.

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