Value of health insurance: Australia

[Murdoch]

Hi guys,
I have a specific query about private health insurance in Australia.
At what income does it become cheaper to have private health insurance than to not have it?

I've read somewhere that once gross income is over 180K per year it is cheaper, but don't really understand the medicare levy and other percentage of income based taxes etc...

I'd love an explanation from anyone in the know please:)
Cheers in advance,
Murdoch

[deborah]

Depends a bit on how much you pay for it. The cheaper it is the lower your income can be for it to be effective.

The other thing is "lifetime health insurance" if you have been in health insurance for your "lifetime" after 30 your premiums are guaranteed not to increase as you age. This could add to the worth of having health insurance.

[qwerty8675309]

Please note that the following is general financial advice, and does not constitute personal financial advice - I haven't taken into account your personal personal objectives, financial situation or needs.

You can save money by taking out private health insurance when you earn over $90k p.a. When you go above this amount, you are forced to pay the Medicare Levy Surcharge, which varies between 1-1.5% depending on your level of income:

http://www.privatehealth.gov.au/healthinsurance/incentivessurcharges/mls.htm

Lets say that you earn $90k a year. 1% of $90k is $900. This is how much you would pay to the tax man if you don't have private health insurance. This also means, if you can find private health insurance that costs less than $900 a year, you will save money. The cheapest fund for me (I'm in Victoria) is HIF Gold Vital, which is $51 a month (after government rebates), or $612 annually. This means you would save 900 - 612 = $288 a year by having private health insurance. If you are over 31, and don't have private health insurance, you might also be liable for the lifetime loading fees, which will also factor in:

http://www.privatehealth.gov.au/healthinsurance/incentivessurcharges/lifetimehealthcover.htm

And one other thing - Don't use iSelect or similar commercial websites to find your private health insurance. Use the government site instead - they don't take kickbacks from providers, and will give you more impartial results:

http://www.privatehealth.gov.au/dynamic/compare.aspx

If you earn under $90k a year, there is no cost saving in taking out private health insurance.

[Murdoch]

Thanks guys.
Qwerty, you mention 1-1.5%?
When does it become 1.5%?
Cheers
Murdoch

[Luckyvik]

Also take into account that if you don't have health insurance by the time you're 31 you will be penalised when you do take it out, the longer you leave it the longer you will be penalised.

On another note, I'm considering paying the min cover to avoid extra taxes and relying in the public health system in case we have to go to hospital as most things are not covered vs paying for top hospital cover.


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[qwerty8675309]

Qwerty, you mention 1-1.5%?
When does it become 1.5%?

It's all in this link:

http://www.privatehealth.gov.au/healthinsurance/incentivessurcharges/mls.htm

If you're single, and earn between $90000-$105000, then it's a 1% medicare surcharge. Between $105001-$140000, it's a 1.25% medicare surcharge. Above $140001, it's a 1.5% medicare surcharge. For couples, the rates differ. You also need to take into account your age. For example, if you are under 65 years of age, you get a rebate of 29.04% if you earn between $90000-$105000.

[Murdoch]

Thanks again Qwerty,
Appreciate the info. I will read the full link before asking any more questions.
Murdoch

[AdrianM]

Its over priced and overvalued.

• If you want to use it, you still have to pay the gap fees.
• Premiums go up considerably more each year than inflation.
• All the long wait times are for elderly/overweight issues.

The government is simply punishing you for being too productive.
Pay off your debts earn, less then the threshold and enjoy a simpler life.
You can still be productive but in ways that the government cannot milk you and is good for your health.

At least that's what my family has done and we are happy with the choice.

[qwerty8675309]

Completely agree with you Adrian. Sadly, we can only play by the rules that the government has set out. If it weren't for the Medicare Surcharge, I won't take out private health insurance. Call me insane, but I think our public health system is pretty good.

[Sunnymo]

For each of the last two calendar years as a couple (no kids) my husband and I actually received more in benefits/payouts from our health fund than we have paid in premiums. So irrespective of our combined taxable income we have been better off by having insurance than self insuring. This has added up to around $1,000 over those two years and we may well have the same result this year. i know for several years the situation was reversed but I have been thankful for the cover for a while now.