do I need private health insurance?

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Written by Glen James

Host of the money money money (formerly my millennial money) & Retire Right podcasts & author of The Quick-Start Guide to Investing.

 

do you need private health insurance?

When is it worthwhile?

This question around health insurance is commonly asked by the money money money community. Let me walk you through some of the details of how private insurance works in Australia, and when you might consider private health insurance for your own needs.

The good news is if you’re sick in Australia we have a great public safety net that will care for you and cover most medical treatments and expenses. The better news is if it’s an emergency you’re not asked about any private insurance before being checked into the hospital!

The not so great news is, if you earn over $97,000 as an individual or $194,000 as a family unit, you’ll have to pay the Medicare Levy Surcharge (MLS), if you do not have private patient hospital cover (private health insurance). This starts at 1%, then 1.25% through to 1.5% based on your income.

The other not so fun news is that if you’re over 30 years old and do not have private health insurance, you will essentially have at least a 2% loading (Lifetime Health Cover) applied to your health insurance when you take out the cover. This loading is applied every year that you do not take out cover. Yikes!

 

understanding private health insurance in Australia

The system is designed to get as many people as possible out of the public health network.

Private health insurance is a great tool for elective surgery as you can choose the doctor you wish, and have a procedure on your own timeline as opposed to a public waiting list of up to 18 months (or more).

Do not get sold on the extra benefits with private health insurance like optical, dental, physio etc. These are benefits – not the sole purpose for cover. If you want to review your health insurance to save money, you could look at reducing these extras. You need to have hospital cover to avoid paying the MLS.

 

a good way to look at this question of need is as follows:

  • Under 30 and earning over $97,000 / family threshold – private health insurance is beneficial

  • Under 30 and earning under 97,000 / family threshold – private health insurance is a luxury

  • Under 30 earning under $97,000 / family threshold and have some health issues or injury prone – you may consider private health insurance

  • For those over 30, earning over $97,000 / family threshold – it’s probably a must have

  • For those over 30 earning under $97,000 / family threshold – it may be considered wise to have (even with minimal extras and higher excess to keep costs down and to avoid the lifetime loading).

Hope this helps you think about whether it’s right for you. If you are moving between insurers to save money, be sure to double check on the waiting periods for specific benefits within the new plan vs your old plan.

 
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