It’s this time of year that we see the ads on TV shouting “sort out your health insurance before EOFY!” But what does health insurance have to with do with EOFY? And why are they always shouting?
I’ve teamed up with iSelect to break it down for you and they have some tips on what we need to do before June 30th.
When I moved to Australia from the UK a decade ago, private health insurance was a bit alien to me and I got so confused about what I did, and didn’t, need from my policy.
All I knew, back in those days, was that it was expensive, and all a bit grown up for me.
I signed up for a policy though, one that I didn’t particularly use, but it gave me peace of mind that there was something in place just in case. And when the shouty ads came on the TV, I could ignore them.
Do you have private health insurance?
We changed to a family policy when we had kids, having researched a lot at the time. We settled on a policy that had the extras we needed and cut out the ones we never used – to try and save some money.
Why do I need Private Health Insurance before EOFY?
iSelect has some advice on how to avoid being stung by levies and loading next financial year. These are the charges that the TV ads are alluding to.
Who is affected by these charges?
The two main groups of people who need to think about their health insurance before the end of the financial year are:
- Higher income earners AND
- Young Australians under the age of 31
Why? Let’s break things down for each group.
High-income Earners and the MLS
On June 30th, iSelect says that if you’re a high-income earner, you’ll need to consider having private health insurance in place to avoid paying extra tax next financial year due to the Medicare Levy Surcharge (MLS).
What is the Medicare Levy Surcharge?
I found out on the iSelect website that it was designed to encourage more people to take out private health cover to take the strain off the Medicare public health care system and relieve pressure on hospital waiting lists.
It’s a 1% to 1.5% tax that you have to pay if your annual income is over $90,000 as a single or $180,000 as a couple or family, and you’re not currently covered by a registered private health insurance policy that includes hospital cover (an extras-only policy won’t help you avoid the MLS).
Find out more about the Medicare Levy Surcharge here – Laura has a really easy to understand explanation that helped me.
They say: “If you earn more than $90,000 a year (or $180,000 for families) and don’t have private hospital cover then you’ll have to pay at least $900 extra tax due to the Medicare Levy Surcharge (MLS). Because how much MLS you pay depends on how much you earn, if you earn above $95,000 then taking out a basic hospital policy will generally cost less than paying the MLS.”
Under 30s and LHC
If you’re an Australian who has just recently or is about to turn 31 you might want to avoid being stung with higher premiums later in life due to Lifetime Health Cover (LHC) loading.
What is Lifetime Health Cover Loading?
It’s an Australian government initiative introduced on 1st July 2000 that encourages people to take out private hospital cover and again ease the pressure on the public system. LHC is designed to get Australians to take out private hospital cover earlier in life and maintain, otherwise you will incur a penalty.
Like MLS, only hospital cover will allow you to avoid paying LHC.
iSelect says: “If you don’t have hospital cover by 1st July following your 31st birthday, you’ll pay more if you do decide to take it out down the track due to Lifetime Health Cover (LHC) loading. So, if you turned 31 during the past year and don’t have private health insurance, now is the time to think about taking it out to avoid paying higher premiums later in life.”
Find out more about LHC here – Jessie has a great breakdown that’s easy to understand.
What about everyone else?
That isn’t to say that it isn’t a good time for all Aussie to audit their policy, if you already have one, and see if they can get a better deal. It’s a good a time as any or maybe even better as many funds are offering great EOFY deals to attract new customers such as months free, waiving waiting periods or gift cards.
It’s worth taking the time to review your health insurance policy and making sure you’re only paying for what you need and getting good value for money.
For example, if your family is complete, check to see if you’re still paying for pregnancy cover! This seems to be a common mistake I’ve heard about.
I hope this breakdown has helped clear up some of the confusion.
You can find out more about the health insurance policies available to your family here.
I hope you’ve learned more about what does health insurance have to do with EOFY.