5 tips to protect your health and hip pocket before 1 July

Emily Amos, Managing Director of Bupa Health Insurance, says the 1 July deadline is an incentive for many customers to take out health insurance in order to minimise the impact of the Medicare Levy Surcharge or Lifetime Health Cover loading, both of which are the Australian Government’s initiatives to encourage high-income earners and people aged over 31 to take out private hospital insurance.

“While these regulations have been in place for many years, we know many Australians are still confused about how the Medicare Levy Surcharge and the Lifetime Health Cover loading work, and whether either or both might affect them and their families in the short and long term.

“For this reason, it’s important to seek expert advice to understand the effect a policy can have on your finances,” Ms Amos said.

While all health insurance policies are different, most private hospital cover policies help customers avoid hospital waiting periods for elective treatments and give them flexibility to choose their own doctor and place of treatment for procedures included on their policies.

“Rather than just focusing on cost or tax, customers can look for policies that provide them with appropriate cover and peace of mind for their individual circumstances,” Ms Amos said.

To cut through the complexities, Bupa has provided its top 5 tips for maximising value before 1 July.

1. What is the Medicare Levy Surcharge?

The Medicare Levy Surcharge is an additional tax placed on people without private hospital cover who earn more than $90,000 or couples and families earning more than $180,000. Depending on your income over a full financial year, the surcharge can be 1%, 1.25% or 1.5%.

What you can do

For higher income earners, the choice is to either spend money on added tax or on private health insurance. While the costs aren’t exactly the same, holding a policy may give you better value for your money through the added benefit of being able to access the private system should the need arise.

Before 1 July, it’s also a good idea to check if your income has changed over the past year. If so, speak to your insurer to check if it matches the level quoted on your policy. If your income has dropped, you may not to be getting the most out of the government rebate on your policy.

2. What if I earn less than $90,000?

You may not be liable for the Medicare Levy Surcharge but there are still significant health and wellbeing benefits to holding a private health insurance policy. This includes avoiding waiting periods on hospital procedures and minimising out of pocket costs for visits to dentists, physiotherapists and many other medical specialists.

What you can do

Don’t just take out private health to avoid on tax. Instead, look for a policy that will provide you and your family with appropriate cover for your life-stage and circumstances.

3. What is Lifetime Health Cover Loading?

Lifetime Health Cover loading is a 2% loading payable on top of your premium for every year you are aged over 31 and do not hold private health insurance. A further 2% is added to your premium for every year you’re uninsured thereafter, up to a maximum of a 70% Lifetime Health Cover loading. The Lifetime Health Cover loading is then paid every year you hold your hospital insurance premium for ten years. Once you have paid LHC loading for 10 years of continuous cover, you will no longer have to pay this loading.

What you can do

If you don’t have private health insurance and will be 31 on or before 30 June, it may be a good time to start thinking about taking out your first policy. Doing so will minimise any loading on your hospital insurance premium if you take a health insurance policy out later in life.

4. What happens if I drop my hospital cover?

The Australian Government recognises that there may be times when you need to drop your Hospital cover (for example, if you are travelling overseas for extended periods of time or are unemployed). Accordingly, you can drop your Hospital cover for up to 1,094 days in total throughout your lifetime without incurring the Lifetime Health Cover loading when you take out Hospital cover again. These are known as ‘permitted days without hospital cover’^[1].

Additionally, you could be liable for the Medicare Levy Surcharge for any periods of cancelation or suspension.

What you can do

Before making the decision to cancel or suspend your cover, speak with your health insurer to understand the financial and waiting period implications of cancelling or suspending your cover. There may be another solution available to you.

5. How can I reduce my costs while still holding onto a policy?

Private health insurance policy costs can vary significantly depending on your cover level however Bupa is committed to offering policies that suit a wide range of budgets.

What you can do

If you are struggling with affordability, you should undertake a cover review with your insurer to make sure you are receiving the appropriate cover for your budget, stage-of-life and healthcare needs.

^[1] Permitted days without Hospital cover are only available if you have held Hospital cover on or after your LHC base day and have been assigned a Lifetime Health Cover Age. Permitted days without Hospital cover do not count towards your days with continuous cover. There are certain days that we won’t count towards your 1,094 days, including when you suspended your membership in accordance with fund rule or you are overseas for a continuous period of more than one year and have not returned to Australia for a period of more than 90 days.

Media reference number: 20/076