Some of the reasons people apply for private health insurance may include avoiding waiting lists for certain treatments, gaining the benefits of extras such as dental cover, and the possibility of choosing your doctor or hospital. Other common reasons include minimising tax by avoiding the Medicare Levy Surcharge, and avoiding Lifetime Health Cover Loading.
Benefits of private health
Private health insurance may help avoid waiting lists
You will always be able to receive emergency treatment or surgery for life threatening conditions through the public system. However for elective surgery you may have to go on a waiting list and for some people this could mean waiting for 6 months or more for treatment.
It is important not to confuse the term elective surgery with cosmetic or non-urgent surgery. Elective surgery includes surgery for everything that isn’t life-threatening for example a hip replacement, physiotherapy or cataract surgery. So it is possible that you could be in pain or suffering some disability whilst you wait to be treated.
With private health insurance in Australia you can circumvent public waiting lists and have your surgery performed in a private hospital. You can also choose an available date to have your surgery, whilst in the public system there is a risk you could be bumped if there is someone who needs treatment more urgently.
Private health gives greater choice
Private health insurance also gives you the ability to choose your doctor and hospital, as well as a range of available accommodation options, for example a private room with private bathroom.
In the public system your doctor is appointed by the hospital and you may not get a choice as to when or where you’re admitted.
Only private health insurance covers dental
Dental treatment is not covered by Medicare, so if you get a toothache or you just want to go for an ordinary old check-up but don’t have private health insurance, then you’ll have to foot the entire bill.
With the average trip to the dentist costing around $300, the costs can really start to mount up.
You may be able to visit a state run public dental clinic but they may only be available to pensioners or other concession card holders. There are over 500,000 Australians on dental waiting lists and the average waiting period is over 27 months!
Private health may help minimise taxes and penalties
Medicare Levy Surcharge
For the tax conscious, private health insurance may be cheaper than paying the Medicare Levy Surcharge (MLS).
Most people already pay the 1.5% Medicare Levy. However, as of July 2012, if you earn over a certain income and you don’t have private hospital cover you will be liable to pay an additional 1-1.5% of your taxable income for the Medicare Levy Surcharge.
As of July 1012, if you are a single person with no kids and you earn over $84,000; or you’re a couple with none or one child and together you’re earning over $168,000, then you will have to pay the levy. To find out more on the Medicare Levy Surcharge and how it will affect you please see our article on the 30% Health Insurance Rebate Means Test.
For those families with more than one dependent child, the amount you can earn before the levy applies increases by $1,500 for every dependent child i.e. if you and your partner have three kids then you must be earning over $171,000 for the levy to apply.
At first, 1% doesn’t sound like much, but for a couple earning $168,000 that’s an extra $1,680 in tax with no benefits. Why pay this when you can get private health insurance policies for as little as $110 for couples? This would save you over $350 in tax per year AND give you access to a number of benefits that you would otherwise be missing out on.
The cost of private health insurance may be much cheaper than paying the levy and on top of this you’ll get the benefit of choice and avoid having to wait for particular treatments.
Lifetime Health Cover Loading
Another reason to take out private health insurance is to avoid the Lifetime Health Cover Loading (LHC).
This scheme was put in place to encourage younger people to take out health insurance earlier and maintain it through to later life.
What it means is that if you don’t have hospital cover by the 1st July after your 31st birthday, then a 2% loading will apply for each year you are over the age of 30. So if you wait until you are 36 to take out cover, you will pay an additional 12% for the cost of your hospital cover (note that the loading only applies to hospital cover and not extras or the extras component of packaged cover).
The maximum loading which can be applied is 70% and once you’ve held hospital cover continuously for 10 years the loading should cease.
If you were born before 1st July 1934 you do not have to pay any LHC. There are also other circumstances where you may qualify for an exemption. Find out more in our FAQs.