Need to know
- If you have turned 31 in the last financial year and earn less than $90,000, you should consider whether you really need to take out health insurance
- You may be better off paying the Lifetime Health Cover Loading and taking out a policy later in your life when you will actually need it
- If you earn more than $90,000, CHOICE experts advise that it's worth taking out private health insurance, whether that's a basic policy just to save you on tax, or a policy that will actually give you good cover
We're currently in the midst of the advertising blitz that health insurance providers inflict on us in the lead up to June 30 – the time of year when many people consider switching or changing their cover for tax reasons.
Offers bouncing around include six to eight weeks free of charge, waiting periods waived and discounts of up to hundreds of dollars.
Lifetime Health Cover
One of the groups targeted are 30–31 year-olds. This is because of a government surcharge, known as the Lifetime Health Cover, that kicks in if you don't have hospital cover by June 30 of the (financial) year you turn 31 and subsequently take out health cover any time in your future.
Although CHOICE experts advise that taking out private health insurance will save you money at tax time if you earn more than $90,000, the situation is not as clear cut for young people earning less than $90,000.
So before you rush into an agreement with a fund that's wowed you with a sparkly offer, here are some things you need to consider.
1. Lifetime Health Cover loading doesn't necessarily mean you'll pay more
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 (LHC) loading, a government initiative that means that if you take out hospital cover for the first time after you turn 31, you'll pay an extra two percent on your premiums for every year you waited.
But CHOICE health insurance experts have crunched the numbers and say that the LHC isn't as big a deal as it seems. In fact, in some cases, it's cheaper to pay the loading later than it is to buy health insurance now that you don't need. Read more about the LHC and how it will cost you over time.
2. You may still be covered by your parents' fund
Legislation passed last year means that health funds are able to increase the age of dependents from 24 to 31.
This means that if your parents have health cover and are with one of a few smaller funds such as Teacher's Health or Heath Care Insurance, which have increased the dependent age, you may still be covered by their policy until you turn 31 or 32 (there are factors that need to apply, such as you living with them and being financially dependent on them).
After that, if you decide you do want cover, you'll have to take out your own policy. But don't automatically go with the same provider your parents use – shop around to find the cheapest policy that suits your situation using our health insurance finder.
3. Even if you're planning on having a baby at some point, you may not need health insurance
If you're in your early 30s, you may be considering taking out private health cover in the event you fall pregnant.
You don't need private health insurance to have a baby. Having private health cover will mean you can deliver in a private hospital with an obstetrician of your choice who manages your care throughout your pregnancy.
The majority of people give birth in a public hospital under the care provided by Medicare
But the majority of people give birth in a public hospital under the care provided by Medicare (in 2019, three in four women who gave birth in a hospital did so in a public hospital). Read more about the differences in private versus public care when you are having a baby.
Even if you decide you want to deliver privately, it still may be worth holding off taking out cover until you really need it (see point 1, above). Keep in mind, though, that many providers have a 12-month waiting period before you can claim on pregnancy and birth services.
4. Consider one of the funds that has delayed premium increases until later this year
If you do decide you'd like to take out a policy, be mindful of when certain funds are raising their prices this year.
Usually, all health insurance funds increase their premiums by April. But this year, due to the COVID-19 pandemic, most funds have delayed the price rises until later in the year. This gives you an opportunity to take out a policy with a fund that has yet to increase its prices and – if you're able to prepay your premiums – secure a cheaper price for up to two years.
Not all policies are making their cheaper deals available to new members, but it's worth looking into. Find out more about which funds are delaying their price rises this year.
5. Will you earn more next year? Understand junk insurance
If your income is nearing the $90,000 mark and you anticipate a pay rise in the coming year, it may be worth taking out a cheap, basic policy. Some people will save money at tax time if they do so – take our quiz to find out if this is you.
Some insurers promote basic health policies as the best option if you're just looking to save on tax – these Basic policies can help you avoid paying tax if you earn more than $90,000 a year.
These basic policies are known as junk insurance, as they're often overpriced for what you get – a cheap policy that gives you very little cover. (If you anticipate actually using your cover, you should look at a Bronze policy or higher).
And remember, if you're taking out a policy to avoid tax, you only need to take out Hospital cover, not Extras as well. Read more about the difference between them.