Need to know
- For most people under 30, there's no benefit to taking out private health insurance
- You may be able to stay on your parents' health insurance for free instead
- If you do take out a policy before you're 30, you're eligible for a discounted premium
Taking out health insurance seems like the grown-up thing to do, but you might be wondering whether it's actually a savvy financial move or a waste of precious funds.
CHOICE health insurance expert Uta Mihm answers some key questions for under 30s thinking about taking out (or dropping) health insurance.
1. Which type of insurance do I need?
The first thing you need to know is that there are two different types of health insurance; hospital cover and extras.
"Depending on your circumstances you may need only one or the other, both or neither," says Uta.
"And even if you decide you need both, you can get two separate policies from two different insurers if that gets you a better deal."
If you have hospital cover, you can get treatment at a private hospital, might be able to choose your own doctor and have shorter waiting times for elective surgery.
Younger people are less likely to need treatment in hospital and therefore less likely to benefit from health insurance than older people. That means your premiums are used to subsidise the higher cost treatment charges of older people.
Younger people are less likely to need treatment in hospital and therefore less likely to benefit from health insurance than older people
For example, according to APRA, 20–29 year olds with health insurance only got, on average, about $145 health insurance benefit for hospital stays per year, compared to over $870 on average for 70–79 year olds (12 months to March 2021).
An extras policy can help with dental costs, but it won't cover 100% of the bill.
Extras policies cover you for health care that you receive outside a hospital, and which Medicare does not cover, like dental care, glasses and clinical treatments like physiotherapy. Exactly which services are covered and how much money you get back for them will vary according to your policy.
Unlike hospital cover, extras insurance has no bearing on the Medicare Levy Surcharge or the Lifetime Health Cover loading, so you should only take it out if you think you will receive more in benefits than you will pay in premiums.
Uta recommends adding up how much money you would spend on "extra" health services per year and comparing that with the premium you would pay to see which option is cheaper. (But keep in mind that extras policies don't cover 100% of the cost.)
"If you already have extras insurance, ask your insurer for a claims statement for the last year," she recommends. "If you paid more in premiums than you received in benefits, you may want to consider cancelling your policy."
If you've been chatting to friends or family about health insurance, they may have mentioned that getting insurance when you're still young could save you money on your policy when you're older.
What they're referring to is something called the Lifetime Health Cover loading, a government initiative which means that if you take out hospital cover for the first time after you turn 31, you'll pay an extra 2% on your premiums for every year you waited. Depending on your situation, our experts have crunched the numbers and learned how you can pay the Lifetime Health Cover loading and save money.
Of course, if you're under 31, this loading doesn't apply to you and there will be no effect on your future premiums if you don't take out cover now. It also won't affect you if you never take out health insurance.
The Medicare Levy Surcharge (MLS) is a tax-time surcharge the federal government charges high income earners who don't have hospital cover.
If you're a single person earning up to $90k or a couple or family earning up to $180k, you're exempt from paying the MLS so there's no tax benefit to having health insurance.
If you're a single person earning up to $90k… there's no tax benefit to having health insurance
If you earn over the threshold and want to calculate if having hospital cover will save you money at tax time, check out doineedhealthinsurance.com.au.
If you do need to get a hospital cover policy for tax reasons, read our guide to the cheapest basic policies or use our compare health insurance tool to find the best value for money cover for your needs.
Depending on your circumstances, you may be able to remain on your parents' policy.
4. Can I stay on my parents' policy for free?
If you're under 25 and a full-time student, most health funds will allow you to remain on your parents' insurance policy for free. Conditions will apply, so you might need to live with your parents and you can't be married or in a de-facto relationship.
Age limits also vary for dependent children who aren't full-time students – for example, part time students or apprentices. It's worth talking to your parents about finding a different fund if their current fund says that adult children are no longer insured on the policy. For an extra cost, some funds also offer policies for families with dependent children who aren't full-time students.
- Medibank, Bupa, HBF and NIB offer free coverage until the child turns 21. HCF covers them until they turn 22.
- Full-time students are covered until they turn 25 by all five funds. HBF also covers adult children who don't study but earn less than $24,500
- Medibank, Bupa, HCF and NIB offer extended family cover policies for some of their policies. They cost more than normal family cover policies but cover any adult children younger than 25.
Uta says it's also worth noting that these age limits will change in the near future, with legislation just passed to increase the maximum age of dependants to 31. Health funds will start introducing these changes from now, so ask your parents to check with their fund for the latest information.
5. Am I eligible for any discounts?
If you do decide to take out health insurance before you turn 30, insurers can offer you a 2% discount off your premium every year you're under 30, up to a maximum of 10% for people aged 18–25.
Not all insurers offer the discount and not all policies are eligible for the discount, so shop around.
The good news is, if you stay on that policy, you will keep getting the full discount until you turn 41. Some funds will even let you keep your discount when you switch to a different policy, so it's worth doing your research.
You don't need to go private to have a baby, but it does give you the option of giving birth in a private hospital.
6. What if I'm planning a family or have children already?
Pregnancy and birth
Both public and private doctors provide high quality care for pregnancy and birth.
The main advantage of going private is that you can choose your obstetrician and can give birth in a private hospital which may be more comfortable.
Whereas the main benefit of going public is that you have a higher chance of having a vaginal birth and a lower chance of having a cesarean.
Read more about the pros and cons of private insurance for pregnancy. If you decide you want to go private, you'll need to take out hospital cover 12 months before you give birth because of the standard waiting period.
For two-parent families, children are included on the policy for free, so you'll likely get more value from a policy if you have kids, though Uta says children often have low health care costs.
However, single parents are penalised in the private health system, paying the same as two-parent families – or sometimes slightly less – meaning children aren't insured for free on single-parent policies.
It's worth taking into account the health care you expect your children will need in the coming year to calculate whether you want to take out health insurance.
The bottom line
If you're under 30 and not a high income earner, there's no benefit to taking out health insurance unless you actually need it now. If you do decide you need health insurance, you'll want to get the best policy for your needs.
We've created a tool to help you compare health insurance policies from all the funds – no sponsored results, no pesky phone calls, just impartial advice.