Our insurance experts reviewed all the Basic health insurance policies available in Australia to find the cheapest ones to suit people who have health insurance for tax reasons.
We've found they're also worth considering if you're looking to temporarily downgrade your cover and save money during the COVID-19 pandemic.
CHOICE tip: If you drop or downgrade your hospital cover you'll have to re-serve waiting periods if you take it up again. Waiting periods are up to 12 months for pre-existing conditions and pregnancy.
What is Basic health insurance?
Basic hospital insurance policies offer the lowest tier of cover at the lowest price point. All Basic policies must cover treatment in a public hospital for palliative care, rehabilitation and psychiatric care.
These policies are good for avoiding tax and loadings, but they provide very little cover, so we don't recommend them for health cover.
What do the cheapest Basic policies cost?
To give you an idea of how much Basic private hospital cover will cost you, we found the cheapest policies offered in each state. The funds included are AHM (Medibank), HCF, Westfund and Frank.
What are the different levels of health cover?
- Basic covers very little, if anything, in a private hospital. Basic policies only cover rehab, palliative care and in-hospital psychiatric treatment in a public hospital; some also cover treatment after an accident, but often don't cover follow-up care.
- Bronze offers low cover but includes 1000s of treatments, for example, surgery for breast, skin and prostate cancer; miscarriage and abortion; broken bones and stroke.
- Silver is medium-level cover and includes all Basic and Bronze services and additional high-cost treatments such as heart attack, lung cancer surgery and bone marrow transplants.
- Gold covers all treatments in private hospital, for example, rehabilitation, hip/knee replacements, cataract eye surgery, and pregnancy and fertility treatments.
Basic Plus, Bronze Plus and Silver Plus policies will cover at least one service more than normal Basic, Bronze or Silver policies.
What is the problem with Basic hospital insurance?
There are two types of Basic policies, and while they may be cheap, they're very limited in what they cover.
These cover accidents and ambulance. As a government requirement, they also must cover rehab, palliative care and psychiatric care in a public hospital – which means nothing more than that you can choose your own doctor. And regardless of your cover, it's very hard to get a place in a public hospital for these services. All other services and illnesses are excluded.
Accident policies can also have restrictions. For example, HCF's Accident Only policy covers you for the initial treatment if you go to emergency within 72 hours after the accident, but you're not covered for any follow-up treatment.
Public hospital policies
These provide cover in a public hospital only. The only difference between this cover and what you get under Medicare is that you can choose your own doctor. You'll still have to join public hospital waiting lists, and generally, you get the same treatment as public patients.
The government has come up with a few carrots (or are they sticks?) to encourage people to have private health cover, depending on your age and income.
Lifetime Health Cover
For every year you don't have hospital insurance on 1 July following your 31st birthday, you'll pay a Lifetime Health Cover (LHC) loading of 2% of your hospital cover premium up to 70% (extras cover isn't needed). After 10 years of continuous cover the loading will be removed.
Medicare Levy Surcharge
A 1% tax applies on your income if you don't have hospital insurance and you earn more than $90k as a single (double that for couples and families). If you earn more than $105k you pay 1.25% and if you earn more than $140k you pay 1.5%. If you take out hospital insurance, you're exempt from the tax, and in many cases it's cheaper to pay for hospital insurance than to pay the tax.
Private health insurance rebate
You get a 25.1% rebate (1 April 2019 to 31 March 2021) on your private health insurance premium if you earn up to $90k a year as a single (or $180k for a couple or family). For singles earning above $90k, the rebate steps down incrementally until it reaches 0% for people earning over $140k (families or couples earning over $280k). Often health funds deduct the rebate directly from the premium, otherwise claim it at tax time.