What is Health Insurance? | Protecting your health

Health insurance is defined as “an insurance against loss due to ill health” (1).

It is a form of protection that allows you to reduce the financial burden that you may experience because of medical expenses you have to pay due to an illness or accident that requires treatment.

Usually, there are two areas of cover you need to consider when choosing the type of health insurance you put in place.

1. Hospital cover
Helps cover the cost of in-hospital treatment by your doctor and hospital costs such as accommodation and theatre fees.
There are varying degrees of hospital cover from basic through to comprehensive and the level of included benefits will impact your premiums.

2. General treatment (ancillary or extra cover options)
General treatment policies (also known as ancillary or extras cover) provide benefits such as physiotherapy, dental and optical treatment. They can also include chiropractic, psychology, massage, podiatry and others non-hospital related treatments.

Usually, you can have as many included options as you like with your health insurance policy. The options chosen will impact the cost of your cover.

When you’re young and healthy you can usually get away with basic cover. As you age, start a family and need more protection a comprehensive style policy may be more appropriate.

Why is health insurance important?

Firstly, it will help reduce the amount of money that you need to pay for hospital and general medical expenses covered under your insurance policy if and when they are required.

Why is this important?

Our bodies are our number one asset. Making sure that you stay healthy and can access proper medical treatment without it hurting financially should be very important to you.

Secondly, there are tax consequences if you don’t have private health insurance cover in place and earn over certain income thresholds.

The Medicare Levy surcharge is calculated as 1% to 1.5% of your income and is charged in addition to the 1.5% medicare surcharge that most Australian taxpayers already pay if you don’t have health insurance in place and earn over certain levels.

What the government will also do to help encourage people to get health insurance in place is rebate some of your premiums each year to help with the cost of cover.

This rebate along with the medicare levy surcharge amount is based on your income level earned and specific amounts are shown in the table below.

Medicare Levy Surcharge Amount

Premium Rebate*

Singles earning <$88,000 & Families earning <$176,000

0%

29.04%

Singles earning $88,001 to $102,000 & Families earning $176,001 to $204,000

1%

19.36%

Singles earning $102,000 to $136,000 & Families earning $204,001 to $272,000

1.25%

9.68%

Singles earning >$136,001 & Families earning >$272,001

1.5%

0%

*All rebate amounts shown are based on someone under the age of 65

What does it all mean?

The purpose of this article is to give an overview of what health insurance is, what sort of benefits are included or available and why having cover is important.

In summary, health insurance lowers the costs of hospital and medical expenses that you may need to pay throughout your lifetime.

Having health insurance in place will not only be good for you financially when it comes time to pay your medical bills but it will also help reduce the tax you pay each year.

As once you earn over $88,000 as a single or $176,000 as a family the ATO will slug you with extra tax each year (medicare levy surcharge) if you don’t have private health insurance in place.

So do yourself a favour protect yourself, lower your tax and help the public medical system out and get some private health insurance.

There are comparison sites you can access online that will help you compare the different providers and policies available.

As always, if you need any help please reach out to us at Wealth Enhancers and we can help steer you in the right direction and help you protect your health.

Article by Ryan Porter
Disclaimer: all information contained within this article is of a general nature. Do not rely upon it when making financial decisions. Please consult a professional financial advisor or planner (like us!) before acting.