Health insurance explained
There are many things to consider when looking into private health insurance:
- Who is covered? You may just need to cover yourself if you are single; or if you have family living with you such as children (dependants) you may be able to purchase cover that provides for everyone.
- What is covered? In Australia, the public health system Medicare covers most Australian residents for health care. However, Medicare does not cover everything and you can choose to take out private health insurance to give yourself a wider range of health care options and more comprehensive cover.
- How does it work? There are two types of health insurance: hospital & general treatment (ancillary or extras). You can buy them separately or most funds offer combined policies. There will be limitations on what and when you can claim with any policy you buy.
- What government incentives and surcharges affect my insurance? The Private Health Insurance Rebate is a federal government subsidy for the cost of insurance, while the Lifetime Health Cover rules are designed to encourage people to purchase private health cover earlier and to stay covered. The Medicare Levy Surcharge is a tax that affects people earning above a certain threshold who don’t hold private hospital cover.
- Overseas visitors and students If you are in Australia on a temporary student visa or if you are applying for a visa subclass 457, it is a visa condition that you take out private health cover. If you are visiting Australia on any other visa, you should consider taking out some cover for the duration of your stay.
Private Health Insurance Rebate
The Australian Government introduced the Private Health Insurance Rebate (also known as the Federal Government 30% Rebate) initiative in January 1999. For every dollar that you contribute to your private health insurance premium, the Government will give you back at least 30 cents as a Private Health Insurance Rebate. The Rebate increases depending on your age:
- 30% for people under 65,
- 35% for people aged 65-69, and
- 40% for people aged 70 and over.
The Rebate is not applicable for overseas visitors health cover.
How to claim the Rebate
All Australians who are eligible for Medicare and who are members of a registered health fund, no matter what their level of cover, income or type of membership, are eligible for the rebate. The Rebate applies to both hospital and general treatment (ancillary or extras) policies.
There are three ways to claim the Rebate:
- Ask your registered health fund to provide the Rebate as a premium reduction,
- Receive a direct payment from the Government through your local Medicare office, or
- Claim it back on your tax return, using a statement your health fund will provide at the end of the financial year.
If your employer has paid your premium on your behalf, you are still entitled to claim the Rebate.
Private Health Insurance Rebate Changes
From 1 July 2012, the Government will introduce three new ‘Private Health Insurance Incentives Tiers’:
Private Health Insurance Incentive Tiers (2011-2012) with effect 1 July 2012
| Singles Families | <$84,000 <$168,000 | $84,001-97,000 $168,001-194,000 | $97,001-130,000 $194,001-260,000 | >$130,001 >$260,001 |
| Rebate | ||||
| < age 65 | 30% | 20% | 10% | 0% |
| Age 65-69 | 35% | 25% | 15% | 0% |
| Age 70+ | 40% | 30% | 20% | 0% |
| Medicare Levy Surcharge | ||||
| All ages | 0.0% | 1.0% | 1.25% | 1.5% |
Note: The thresholds increase annually, based on growth in Average Weekly Ordinary Time Earnings (AWOTE). Single parents and couples (including de facto couples) are subject to the family tiers. For families with children, the thresholds are increased by $1,500 for each child after the first.
Singles earning $84,000 or less and families earning $168,000 or less will continue to receive the existing 30, 35 and 40 per cent rebate, depending on their age.
The three Acts passed by Parliament governing the tiers are the:
- Fairer Private Health Insurance Incentives Act 2012;
- Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Act 2012; and
- Fairer Private Health Insurance Incentives (Medicare Levy Surcharge – Fringe Benefits) Act 2012.
The Acts will be available for access on the Parliamentary (www.aph.gov.au) and Commonwealth Legislation (www.comlaw.gov.au) websites soon.
Enquiries by insurers on claiming the private health insurance rebates should be referred to the Department of Human Services on 1300 554 463. Rebate claiming information can also be accessed at the Department of Human Services website.
The Department of Health and Ageing, in conjunction with Australian Taxation Office and the Department of Human Services, will soon be contacting relevant stakeholders to discuss implementation.
Information is also available on the Department of Health and Ageing website (www.health.gov.au).
Medicare Levy Surcharge
For the 2011-12 income tax year, the income thresholds for the Medicare levy surcharge were increased to $80,000 per year for singles and $160,000 per year for couples/families.
The Australian Taxation Office (ATO) has advised the three separate income thresholds for the 2012-13 income tax year (as shown in the above table).
It is important to note that under the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Act (No 2) 2008, the income thresholds are indexed each year by using indexation factors calculated for full time adult average weekly ordinary time earnings.
Enquiries by insurers on the MLS and rebate income thresholds should be referred to the Australian Taxation Office (ATO) helpline on 13 28 61.
