In 2009, the Labor Government announced plans to means-test the Government Rebate. If passed, the changes mean that not everyone will receive the 30% (minimum) Government Rebate that we do today. Using a means-test, higher income earners will receive less Government assistance (the rebate) for their private health cover.
Singles who earn up to $75,000 and couples/families who earn up to $150,000 won't be affected, and will continue to receive the full 30% health insurance rebate that Australians have become accustomed to. However, those who earn above these thresholds will receive less assistance for health cover on a sliding scale, and singles who earn over $120,000 and couples and families who earn over $240,000 will receive no rebate at all on the cost of their health insurance.
The Government recently announced that the implementation date for these changes is now expected to be 1 July 2011.
The tables below show how your health insurance premium could be affected, based on your income (before tax).
|
Single income |
Health insurance rebate for under 65s |
Health insurance rebate for 65-69 years |
Health insurance rebate for over 70s |
Medicare Levy Surcharge |
|
Up to $75,000 |
30% |
35% |
40% |
nil |
|
$75,001-$90,000 |
20% |
25% |
30% |
1% |
|
$90,001-$120,000 |
10% |
15% |
20% |
1.25% |
|
$120,001+ |
no rebate |
no rebate |
no rebate |
1.5% |
|
Combined income |
Health insurance rebate for under 65s |
Health insurance rebate for 65-69 years |
Health insurance rebate for over 70s |
Medicare Levy Surcharge |
|
Up to $150,000 |
30% |
35% |
40% |
nil |
|
$150,001-$180,000 |
20% |
25% |
30% |
1% |
|
$180,001-$240,000 |
10% |
15% |
20% |
1.25% |
|
$240,001+ |
no rebate |
no rebate |
no rebate |
1.5% |
All income thresholds are indexed to wages and will be adjusted for families with more than one child in the same manner as the Medicare Levy Surcharge thresholds, which are increased by $1,500 for every dependent child after the first.
The more people who exit health insurance because of the lowered rebate, the heavier the strain will become on the public health system, so the Government has accordingly increased the Medicare Levy Surcharge (tax penalty for not having hospital cover) to cover off that possibility. In essence, this means that higher income earners will face a greater tax penalty if they don't take out or keep their health insurance.
The health insurance rebate means-test reflects the idea that those who earn more can afford to receive less assistance from the Government. The obvious question for many higher income earners will then be: 'Can I afford to keep my health insurance?' However the real question should be, 'Can I afford not to keep my health insurance?'
If you've taken up health insurance only to escape the Medicare Levy Surcharge, but decide that it's no longer worth it for you, then it's totally within your prerogative to dump your health cover. However, if like the majority of people with health insurance, you joined a health fund to ensure the best health care for yourself and your family, then it's worth the extra dollars it'll take to keep your health insurance active. Also keep in mind that taking up health insurance again later in life can incur Lifetime Health Cover penalties if you're over the age of 30.
The benefits and quality of private health care won't change – in fact it'll become even more valuable as the strain on public hospitals increase, because you know you've got a guaranteed bed as a private patient, can choose your own hospital and doctor for treatment, and won't be stuck at the end of a long waiting queue for surgery. Also, keeping private hospital cover means that you keep your Lifetime Health Cover benefits.
If this is a tough financial time for you, there are other alternatives to dumping your health cover:
Are you paying for health insurance features you don't need? The easiest way to reduce your health cover costs is to get rid of the excess baggage. Removing some health insurance features you don't need and aren't likely to use could help reduce your health insurance premium considerably. For example, a young single person in Victoria could save around $65 a month on their premium by removing features like joint replacements and hearing aids. In extreme cases, you could even save around $150 on your health insurance premium per month by downgrading from a comprehensive health insurance policy to a more basic policy, while still retaining health cover as private patient in a private hospital. Read more about switching your health cover.
If you're happy with your health fund and don't want to change, then consider these other changes:
The easiest way to keep all the benefits of Lifetime Health Cover while avoiding the Medicare Levy Surcharge is to drop or downgrade your Extras cover, as Hospital Cover only is necessary in both cases. Keep in mind that lengthy waiting periods will apply on things like Major Dental if you decide to take Extras cover again after dumping it altogether, so consider downgrading to an Extras plan that gives you lower benefits in exchange for a lower health insurance premium, but will avoid new waiting periods when you are ready and able to increase your level of Extras cover again.
Excess and Co-payment options are available to lower the price of your up-front health insurance premium. For example, a NSW family that increases their Excess from nil to $500 would save approximately $40 per month on the cost of their health insurance premium, which is a total of $480 at the end of the year. Remember you can safely increase your Excess to $500 for singles and $1000 for couples and families without affecting the Medicare Levy Surcharge.
Case study: saving on singles health insurance
Case study: saving on couples health insurance
Case study: saving on family health insurance
If you experience involuntary unemployment, some health funds will offer to cover you for up to 12 months. If you've been retrenched or made redundant from full-time employment, contact your health fund to see if they can help out with unemployment cover so you can keep the benefits of your health insurance policy.
If your health fund does not offer or you are not eligible for unemployment cover, try to arrange a suspension period for your health insurance while you're facing financial hardship. During suspension, you will not need to pay your health insurance premium and you may not claim on your health cover. The benefit of a suspension is that in most cases, no new waiting periods will apply upon reinstatement of your health cover. Ask your health fund for details.
If private health cover is important to you, then consider every possibility before dumping your health cover. There's no better time to review your existing health insurance and see if you can find a better deal. Let moneytime help you find health insurance that suits your circumstances and budget - start searching and saving today. For more help, call our toll free number 1300 88 26 36 (Mon-Fri 8.30am-5.30pm EST).
