HEALTH INSURANCE

I bet you were fed up with the ads on television in respect of health insurance. “Join now to avoid the June 30 deadline”.

You see, according to the Australian Taxation Office, they want more people covering their medical expenses, so they are not a burden on the government or society.

Here a quick run down of our health system and our obligations.

What is the Medicare levy?

Medicare gives Australian residents access to health care. It is partly funded by taxpayers who pay a Medicare levy of 2% of their taxable income. Your Medicare levy is reduced if your taxable income is below a certain threshold. In some cases you may not have to pay the levy at all. The ATO has more information about these exemptions.

If you (or your dependants) don’t have an appropriate level of private patient hospital cover for the full year, and your income is above a certain threshold, you may have to pay the Medicare levy surcharge, in addition to the Medicare levy

The thing is – say that you join a health insurance fund on 30 June of the current year and your income is over the threshold, you will be paying the Medicare levy surcharge for the number of days that you were not covered by health insurance.

So in our above example you would be subject to the Medicare levy surcharge for 364 days, even though the ads clearly say “join now to avoid the June 30 deadline”.

The ads therefore seems to be a bit misleading wouldn’t you say?

How much is the Medicare Levy Surcharge?

The MLS is income-tested and is levied at between 1% to 1.5% of your income. Again, the Medicare Levy Surcharge is an additional charge on top of the Medicare Levy most of us pay.

What are the MLS income thresholds?

If you, your spouse or your dependent children don’t have hospital cover, the income thresholds and Medicare Levy Surcharges for 2015-2016 are:

Can you avoid the MLS?

If you’re a high-income earner you can avoid the MLS (and save) by taking out private hospital cover with a hospital excess of:

• $500 or less for singles, per calendar year
• $1,000 or less for couples/families, per calendar year

Now there is something else that people who are around 30 years of age need to know and they do not have private health insurance and that is Lifetime Health Cover (LHC) loading.

Whats is LHC?

The LHC loading was introduced by the Australian Government in July 2000 to encourage people to take out private hospital insurance at a younger age and maintain it over time.

If you take out private hospital cover before July 1 following your 31st birthday, you can avoid paying Lifetime Health Cover loading.

You will pay an additional 2% a year for every year you do not have private hospital cover after the age of 30 (up to a maximum of 70%).

For example, if you take out hospital cover for the first time when you’re 40, you’ll pay 2% x 10 years, so that’s an extra 20% you’ll be paying for your hospital cover.

The loading applies only to your private hospital cover premiums, and not applied to premiums for extra cover.  Extras only cover does not count towards your 10 continuous years.

You stop paying the loading after you have held hospital cover to ten continuous years. If you cancel your private hospital cover and repurchase it again at a later date, the LHC loading may apply.

ON THE RISE

From the 1st of April each year, health insurance funds commonly increase their premiums. These changes generally said to cover the growing costs and variations of services and claims, as well as any increases in the cost of medical treatments and medical technology.  On March 2, 2016, an average health insurance premium percentage rise of 5.59% was announced by the Federal Government.

As you can see there’s alot to be aware of when looking at our health system, obligations and insurance costs.  Reviewing your families health/insurance needs and staying informed can really help save you money while ensuring you get the care when and if you need it.

ZOI YANNAKIS

Accountant – OPTIMA PARTNERS