The health insurance means test and you

Because of the means-tested tiered system, the size of rebate you receive on your health insurance is dependent on your income.

The more you earn > the lower the rebate you will receive.

Eligible customers can choose to claim the rebate:

  • upfront as a reduction in your regular premium payments
  • when you lodge your tax return
  • at a Medicare office

The income thresholds for the health insurance rebate are indexed annually, in line with changes to the average health insurance premium and the cost of living. To find more information on the rebate tiers read our helpful guide Health Insurance Rebate or visit the Australian Tax Office website.

If you're concerned about how the rebate has affected the price of your health cover and you’re thinking about downgrading your policy, here are some things you should consider.

Benefits of private health insurance

You’ll still get access to private care, with your choice of participating hospital, your choice of doctor, cover for accommodation and treatment, as well as shorter waiting times and greater flexibility in scheduling elective surgery. And if your selected policy includes extras, you won’t have to pay the full amount of out of pocket expenses for these important services.

1. Dropping health insurance means you’ll pay more tax

If you are a high income earner without health insurance then you are charged the Medicare Levy Surcharge, which is up to an extra 1.5% tax on top of your regular taxes that is avoidable simply by taking out eligible hospital cover. In some cases, you can actually find hospital cover that is cheaper than the cost of the Medicare Levy Surcharge.

2. Dropping health insurance may cost you more later on

Dropping your health cover now may mean you’ll have to pay more later, based on Lifetime Health Cover criteria. Under Lifetime Health Cover, an age loading of 2% p/a is added to your health insurance premium for every year you don’t have hospital cover over the age of 30.

3. Dropping health insurance means serving waiting periods again

If you drop your health insurance now, you’ll need to re-serve all your waiting periods if you choose to take out health cover again later down the track.

But most of all, dropping your health cover will mean that you’ll miss out on all the benefits of private health insurance, like being able to choose your hospital and doctor, and accessing the best private care.

While means testing of the health insurance rebate may mean you can claim less from the Government, you’ll still get great peace of mind with private health cover, and that’s truly worthwhile.

These articles are provided as reference material to allow more informed decision making, but are not intended as being a complete source of information on any topic. All readers should make their own independent analysis on the topic to make sure they have considered the aspects that are important to them.