A guide to saving money on your health insurance cover
A few small changes can make a big difference
If you’re about to turn 31, you may be wondering why everyone from your mum to your accountant is speaking to you about taking out private health insurance. Well, it's all to do with the Federal Government's Lifetime Health Cover (LHC) loading. The LHC loading was put in place to encourage Australians to take out Hospital cover earlier in life and maintain their cover.
If you don't have an appropriate level of Hospital cover by 1 July after you turn 31, and decide to take out Hospital cover later, you'll pay an extra 2% on top of your private Hospital premium for each year you put it off (up to a maximum of 70%).
Special circumstances or exemptions may apply in some cases and you should check this carefully. For example, if you've recently turned 31 overseas, you may have a little extra time up your sleeve to take out private Hospital cover without incurring the LHC loading. 12 months from the day you landed back home is the general rule.
With the LHC loading lasting for 10 years and up to a maximum of 70%, it’s a good idea to consider Hospital cover sooner rather than later.
2% for each year you don’t have Hospital cover doesn't sound like much but, doing the math, if you wait until you're 40 to get Hospital cover, you'll have to pay 20% more than someone on the same cover who first joined when they were 31.
And what makes it worse is that the LHC loading applies for 10 years of continuous Hospital cover, even if you change health insurers.
You can avoid the LHC Loading by joining any nib Hospital cover before 1 July following your 31st birthday. As long as you keep your Hospital cover, you can avoid paying the 2% annual LHC loading.
The LHC loading only applies to the Hospital portion of your premiums on a combined cover and does not apply to Extras cover or Ambulance only cover. If you’re purchasing health insurance to avoid the LHC, you’ll need to take out a policy that includes Hospital cover.
Hospital cover provides benefits for your hospital stay as an inpatient, covering accommodation and patient meals, surgery fees, prostheses, nursing care, medical supplies, and prescription medication during your hospital stay1. All nib Hospital covers include nib Emergency Ambulance Cover2 which means you’ll be covered for emergency ambulance transportation in most circumstances. Keen to find out more? Head to our page What’s covered by Hospital insurance?
However, you also have the option of choosing an Extras cover that can provide you with benefits for things that help keep you feeling your best, whether it’s dental, optical, occupational therapy, physio, chiro, or osteo. For more information, check out our article Taking the confusion out of Extras cover.
A combined cover simply means a cover that includes both Hospital and Extras.
If you’re under 30, the answer is yes. nib members aged between 18-29 receive discounts of up to 10% off their Hospital cover premium.
The age-based discount means that eligible members receive a 2% discount for every year they’re aged less than 30, up to a maximum of 10% for those aged 18-25. And the best part is, if they remain on an age-based discount policy, they’ll retain that discounted rate until they turn 41, where it will then be gradually phased out at a rate of 2% per year.
For more information on the age-based discount, head to our page Discounts for people under 30.
If you earn more than $90k or are part of a family or couple earning more than $180k, you could be paying an extra 1-1.5% of your taxable income to the ATO if you don’t have Hospital cover for the full financial year. That’s because of the Government’s Medicare Levy Surcharge (MLS). This surcharge aims to encourage Aussies to take out Hospital cover, therefore reducing the load on the public Medicare system.
So, if you are under 31 and have a higher income, there’s even more reason to sign up for Hospital cover. For more information on the MLS, check out our article, Do I have to pay the Medicare Levy Surcharge at tax time?
Visit the Australian Tax Office website for specific rules for calculating income for MLS purposes.
1Subject to your chosen level of cover. Policy exclusions, waiting periods and other T&Cs apply.
2 Not available to: (i) QLD residents who have ambulance services provided by their State ambulance schemes; (ii) TAS residents who are covered under state ambulance schemes in TAS and when travelling in mainland Australia except NSW, SA or QLD; or (iii) pension and health care card holders who have ambulance services provided by State ambulance schemes (check entitlements with Centrelink if unsure).