Need to know
- If you've turned 31 in the last financial year and earn less than $97,000, you should consider whether you really need to take out health insurance
- You can be covered on your parents' policy in some circumstances until you turn 32
- If you earn more than $97,000, CHOICE experts advise that it's worth taking out private health insurance, whether that's a Basic policy just to save you on tax, or a policy that will actually give you good cover
We're currently in the midst of the advertising blitz that health insurance providers inflict on us in the lead-up to 30 June – the time of year when many people consider switching or changing their cover for tax reasons.
Offers bouncing around include six to 12 weeks free of charge, waiting periods waived and discounts of up to hundreds of dollars.
Lifetime Health Cover
One of the groups targeted is 30–31 year-olds. This is because of a government surcharge, known as Lifetime Health Cover, that kicks in if you don't have hospital cover by 30 June of the (financial) year you turn 31 and subsequently take out health cover any time in your future.
Although CHOICE experts advise that taking out private health insurance will save you money at tax time if you earn more than $97,000, the situation is not as clear cut for young people earning less than $97,000.
So before you rush into an agreement with a fund that's wowed you with a sparkly offer, here are some things you need to consider.
1. Lifetime Health Cover loading doesn't necessarily mean you'll pay more
If you've been chatting to friends or family about health insurance, they may have mentioned that getting insurance when you're still young could save you money on your policy when you're older.
What they're referring to is something called the Lifetime Health Cover (LHC) loading, a government initiative that means if you take out hospital cover for the first time after you turn 31, you'll pay an extra 2% on your premiums for every year you waited.
But depending on your circumstances, CHOICE health insurance experts say the LHC loading may not be as big a deal as it seems. In fact, in some cases it could be cheaper to pay the loading later than it is to buy health insurance now that you don't need.
2. You may still be covered by your parents' fund
Legislation passed in 2021 means that health funds are able to increase the age of dependants from 24 to 31.
This means if your parents have health cover and are with a fund that has increased the dependant age, you may still be covered by their policy until you turn 31 or 32 (there are factors that need to apply, such as you living with them and being financially dependent on them).
After that, if you decide you do want cover, you'll have to take out your own policy. But don't automatically go with the same provider your parents use – shop around to find the cheapest policy that suits your situation using our health insurance finder.
3. Even if you're planning on having a baby at some point, you may not need health insurance
If you're in your early 30s, you may be considering taking out private health cover in the event you fall pregnant.
You don't need private health insurance to have a baby. Having private health cover will mean you can deliver in a private hospital with an obstetrician of your choice who manages your care throughout your pregnancy.
The majority of people give birth in a public hospital under the care provided by Medicare
But the majority of people give birth in a public hospital under the care provided by Medicare (in 2021, nearly three in four women who gave birth in a hospital did so in a public hospital). And you don't necessarily need an expensive Gold policy. See the cheapest policies with cover for assisted reproduction, pregnancy and birth.
Even if you decide you want to deliver privately, it still may be worth holding off taking out cover until you really need it (see point 1, above). Keep in mind, though, that many providers have a 12-month waiting period before you can claim on pregnancy and birth services.
4. Consider taking out health insurance for only a short time
If you decide you don't need health insurance now but may need it in the future, for example because of starting a family or expecting your salary will increase beyond the threshold for the Medicare Levy Surcharge, there is a simple way to reduce any Lifetime Health Cover you might be paying in the future.
Take out the cheapest Basic cover policy before 30 June and keep it for a few months, then cancel it but keep your statement.
This gives you another three years to decide if you want hospital cover. You're allowed to be without hospital cover for a total of 1094 days (i.e. three years less one day) during your lifetime, without affecting your LHC loading. This is known as 'Days of Absence'.
So if you decide to take out hospital cover within those 1094 days after you cancelled your insurance, you won't pay the LHC loading. If you don't, your loading starts at 2% in the first year.
5. Will you earn more next year? Understand junk insurance
If your income is nearing the $97,000 mark and you anticipate a pay rise in the coming year, it may be worth taking out a cheap, Basic policy. Some people will save money at tax time if they do – take our quiz to find out if this is you.
Some insurers promote Basic health policies as the best option if you're just looking to save on tax – these Basic policies can help you avoid paying tax if you earn more than $97,000 a year.
These policies are known as junk insurance, as they're often overpriced for what you get – a cheap policy that gives you very little cover. (If you anticipate actually using your cover, you should look at a Bronze policy or higher).
We've compared the cheapest Basic policies on offer.
And remember, if you're taking out a policy to avoid tax, you only need to take out hospital cover, not extras cover. Read more about the difference between them.
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