The government has once again changed the rules around health insurance. If you are 30 years old or earning a high income, here are seven things you need to know before you pick your health cover provider.
One: Individuals earning over $80,000 or families earning over $160,000 who do not have an appropriate level of hospital cover are required to pay the Federal Government's Medicare Levy Surcharge, which is calculated at 1% of their taxable income. From July this year, this rule will change.
Two: Instead of the flat 1% levy on taxable income, the government has introduced a 'tiered income assessment' - this will be good news for some, bad news for others.
Three: The Medicare Levy Surcharge will not only change based on income but it will also be calculated on a pro rata basis, meaning it is calculated on the number of days in the financial year that an individual or family does not have adequate cover. This means the sooner you get health insurance, the less the surcharge cost is going to be.
Four: It is possible to buy basic "hospital cover" for the same amount as, or sometimes less than, the Medicare Levy Surcharge. You do need to do some research.Five: Another new government rule starting this year is the so-called "Lifetime Health Cover" initiative. With this, if you do not have hospital cover on 1 July following your 31st birthday and do decide to take it out, you will pay a 2% fee on top of your premium for every year after. Put another way, you will get penalised with a fee if you don't get cover earlier in life (or at least by the time you're 30 just to be on the safe side!)Six: As part of all these changes, such as tiered income assessments and higher surcharge, the Federal Government will now rebate a percentage of your health insurance costs, which you can reclaim off your premium or as part of your tax return. Yay! But, a big BUT, this rebate will be means tested based on your income.Seven: There is an option to prepay your insurance premium for the year ahead, before 1 July, and to receive the full 30% rebate, which can mean hundreds to thousands of dollars in savings. In other words, the Government is encouraging more people who are high income earners to get private hospital cover as soon as possible. The rules penalise those who don't get one before they turn 31 and rewards those who prepay their insurance premiums or get them sooner rather than later (the Medicare Surcharge Levy is now calculated pro-rata).Source: www.helpmechoose.com.au press release