Incentives To Take Out Health Insurance
Australias current health care system comprises of both public and private institutions
, where private health insurers and Medicare work together to provide affordable health care services for all Australians. Although Medicare is the basis of public health care, it is never meant to be a standalone scheme. This is why the Federal Government provides incentives and surcharges to encourage Australians to take out private health insurance and reduce the demand on our public health system.
The Australian Government has designed the following incentive programs:
Federal Government 30% Rebate Private Health Insurance
Medical Levy Surcharge
Lifetime Health Cover
The first initiative rewards Australians for taking out health insurance in the form of a rebate. Under the Federal Government 30% Rebate Private Health Insurance scheme, the Government will give back at least 30 cents for every dollar contributed to your private health premium. The rebate applies to both hospital and Extras policies, provided the health insurance company is a registered health fund. In other words, any Australian who is eligible for Medicare and is a member of registered health fund, is able to receive a minimum of 30% rebate on their health insurance costs. This ensures that Australians who have health insurance are rewarded for utilising the private health system, reducing the strain on Medicare.
In addition to this, a Medicare Levy Surcharge is applied to Australian tax payers who earn above $77,000 and do not have hospital cover from a private health insurer. These individuals are required to pay a surcharge of 1% of their taxable income on top of the Medicare Levy of 1.5%, which is paid by most Australians. Therefore individuals who earn above the threshold and who do not use the private health system are taxed an additional 1% of their income. For couples or families, the income threshold is a combined taxable income of greater than $154,000. Again, couples and families above this threshold who do not have private hospital cover are required to pay the Medicare Levy Surcharge. To be exempt from the surcharge, Australians earning over the income thresholds must have hospital cover with a registered health fund; this does not include Extras only or ancillary policies. Thus you must take out a private health insurance package that covers fees and charges for a hospital stay to be exempt.
Another initiative designed by the Government is Lifetime Health Cover (LHC). This program promotes taking out insurance earlier in life by applying a loading (an additional percentage on the cost or premiums) for hospital cover every year after age 30. For individuals who do not have hospital cover on the 1st of July following their 31st birthday and decide to take out hospital cover late in life, they will be required to pay a 2% loading on top of the premium for every year they have waited over the age of 30. For example if you wait until you are 35 years old, you will need to pay an additional 10% on your premium; if you wait until you are 40 years old, you will need to pay an additional 20% and so on. The maximum loading that may be applied is 70%. Therefore, in order to pay a lower cost for health insurance, Australians should take out their hospital cover before 1st July after their 31st birthday. Individuals with hospital cover before 30 will pay less for their premiums than those who take out health insurance later in life. Further to this, once an individual has paid the LHC loading for 10 continuous years, the loading will be removed as long as the individual keeps their hospital cover. This feature rewards Australians who retain their cover for over 10 years, thus helping to sustain Australians health care system.
These key initiatives were designed to protect Australias health care system. The Federal Government introduced these programs to ensure that all Australians have access to quality and affordable health care services. With the aging population, the increase in cost for medical and general treatments as well as medical advancements, the demands on the public health system continues to increase, thus requiring a push for Australians to use the private health system.
by: Vikram Kumar
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