Private Health Insurance – the changes and how you can save $$$ now

What impact will changes to private health insurance have for premium costs?

The changes to private health insurance will only impact higher income earners. From 1 July 2012:

  • single people earning over $84,000 pa and couples/families earning more than $168,000 pa will get a lower premium rebate, which will generally increase the net cost, and
  • the Medicare levy surcharge will increase for singles earning more than $97,000 pa and couples/families earning over $194,000 pa who don’t have appropriate private health insurance.
Income Private health insurance rebate Medicare levy
Single Couples/families <age 65 Aged 65-69 Aged 70+ surcharge rate
< $84,000 < $168,000 30% 35% 40% 0%
$84,001 – $97,000 $168,001 – $194,000 20% 25% 30% 1%
$97,001 – $130,000 $194,001 – $260,000 10% 15% 20% 1.25%
> $130,001 > $260,001 0% 0% 0% 1.50%

Despite the lower premium rebate, it will generally be more cost-effective for higher income earners to have private health insurance than to not have cover and get hit with the Medicare levy surcharge.

Save $$$ now

If your rebate is about to drop, then it could also be worthwhile paying the premiums for the next financial year before 30 June. This will mean you can qualify for the higher rebate in the 2011/12 financial year and avoid the surcharge increase on 1 July 2012.

Avoid a private health insurance liability

Although there is no penalty for claiming a higher rebate, you can avoid a private health insurance liability (tax bill) from the 2012-13 income year by changing the amount of rebate you receive from your insurer. You can do this by simply estimating your income and then calling your private health insurer to nominate a rebate tier.

If you overestimate your income, then you can still claim back the difference later.

So is it worthwhile keeping the cover?

When deciding whether to have private health insurance, it’s important to think about more than just the net premiums. For example, if you are likely to claim on your policy, due to health or other factors, then you are going to get greater value from having cover than someone who is less likely to claim.

Major life changes such as starting or expanding a family should be considered. Also, the choice of own doctor, the option of a private room and the potential to claim services not covered elsewhere could justify the cost.

Your decision should therefore be influenced by a combination of financial considerations and personal preferences. We hope this helps you make the right choice.