Understanding Private Health Insurance

Government Surcharges & Incentives

The Australian Healthcare System – Public vs Private

In Australia, we’re looked after by a healthcare system that has two parts: a public system and private system. Both systems can work together effectively to provide Australians with a holistic approach to their health.

Public Healthcare System
The public system is run by the Government through Medicare, and is partly funded by Australian tax payers who all pay the Medicare Levy. Medicare gives eligible Australian residents access to things like:

  • seeing a doctor or specialist, in or out of hospital
  • medical tests like x-rays or blood tests
  • prescription medicines listed on the Pharmaceutical Benefits Scheme (PBS)
  • treatment in a public hospital ward or public emergency facility
  • select Allied Health services, where a Medicare benefit is available

Some things to remember about public healthcare and Medicare:

  • Limited choices: whilst you may not have to pay anything to be admitted into a public hospital, you also may not get to choose which hospital you are treated at, or which doctors treat you
  • Public Waiting Lists: if your treatment is not considered an emergency, you may be placed on the Public Hospital waiting list, and could face lengthy waits for your treatment
  • Out of pocket costs: Medicare doesn’t usually cover the full cost of doctor’s visits, tests and prescription medicines, so you may have to pay some money towards the costs of these things.

Private Healthcare System
The private, or non-government part of the healthcare system, is made up of private hospitals, private health insurance companies and other health specialists.

The private healthcare system can fill the gaps in Medicare’s coverage, and gives you more choice in where, when and who you receive treatment from. Private health includes coverage for things like:

  • treatment in a private hospital of your choice
  • treatment by your choice of doctor
  • Ambulance
  • General treatment where no Medicare benefit is payable for services like Dental, Optical, Physio and many more

If you require or elect to receive treatment in a private hospital as a private patient, or for general treatment services, you can do so by:

  • taking out private health insurance, which can help cover the cost of private treatments and services; or
  • self funding your treatment, in which case you do not require private health insurance, however you will need to pay for these services in full, and you are likely to receive large out of pocket costs.

Some things to remember about Private Health Insurance:

  • You can choose when you are treated – you don’t have to wait on a public waiting list to be treated
  • You can choose where you are treated – you choose what hospital you would like to be treated in
  • You can choose who treats you – you choose the Doctor who you would like to be treated by
  • Private Health Insurance will cover the cost of your doctor’s fees, up to the Medicare Scheduled Fee (anything they elect to charge above the Scheduled Fee will become an out of pocket cost to the member)

Why have private health insurance?

Everyone has their own reason to take out and maintain private health insurance, with a major one being for peace of mind.

If the unexpected happens you know that you have choices; the hospital, the surgeon, and when and where you are treated.

By taking private hospital cover, you can also reduce the length of time you might wait for treatment in the public system and also avoid possible penalties like the Medicare Levy Surcharge or Lifetime Health Cover loading.

With Phoenix Hospital Cover you can add General Treatment (Extras) Cover to your policy which will give you further savings on everyday services like dental, optical and physiotherapy treatment.

Government Surcharges & Incentives

Australian Government Rebate on Private Health Insurance
The Australian Government Rebate on Private Health Insurance is a Government incentive that applies towards the cost of Private Health Insurance cover as a reduction of premiums based on your age and income.

The table below details the different rebates.

Singles ≥ $90,000 ≥ $90,001 – $105,000 ≥ $105,001 – $140,000 ≥ $140,001
Families ≥ $180,000 ≥ $180,001 – $210,000 ≥ $210,001 – $280,000 ≥ $280,001
Rebate
  Base Tier Tier 1 Tier 2 Tier 3
< Age 65 24.808% 16.539% 8.268% 0%
Age 65 – 69 28.944% 20.674% 12.404% 0%
Age 70+ 33.079% 24.808% 16.539% 0%
Rebate levels applicable 1 April 2020 to 31 Mar 2021

There are a couple of ways you can claim the Government Rebate:

  • As a reduction in your Phoenix Health premiums; or
  • As a tax offset when lodging your tax return. This would mean your Phoenix Health premiums would have no Rebate applied, and you would pay the full rate, and claim the Rebate portion back through the ATO.

If you nominate the incorrect tier when claiming the Rebate as a reduction in your premiums, either by mistake, or you miscalculate your estimated income for the year, it will all be adjusted when you lodge your tax return. If you are unsure of which Government Rebate you are eligible for, you should contact the Australian Tax Office on 132 861.

For more information about the Australian Government Rebate, please visit privatehealth.gov.au or the ATO website ato.gov.au.

Medicare Levy Surcharge (MLS)
The Medicare Levy Surcharge (MLS) is an additional levy paid by Australian tax payers who earn in excess of the thresholds below and do not hold private hospital cover. The surcharge aims to encourage individuals to take out private hospital cover, and where possible, to use the private system to reduce the demand on public hospital admissions.

The surcharge is calculated between 1% to 1.5% of your income for Medicare Levy Surcharge purposes. It is additional to the Medicare Levy of 2%, which is paid by most Australian taxpayers.

The table below details the different MLS levels.

Singles ≥ $90,000 ≥ $90,001 – $105,000 ≥ $105,001 – $140,000 ≥ $140,001
Families ≥ $180,000 ≥ $180,001 – $210,000 ≥ $210,001 – $280,000 ≥ $280,001
Medicare Levy Surcharge
All Ages 0% 1.0% 1.25% 1.5%
Source: Australian Tax Office. These thresholds apply for the 2019/2020 financial year. Single Parents and Couples (including defacto couples) are subject to Family tiers. For families with children the thresholds are increased by $1,500 for each dependant child after the first.

How to avoid the Medicare Levy Surcharge
Join any Phoenix Health Hospital cover before 1 July and maintain it for the full financial year to avoid paying the Medicare Levy Surcharge.

For more information about the Medicare Levy Surcharge, please visit privatehealth.gov.au or the ATO website ato.gov.au.

Lifetime Health Cover Loading (LHC)
Lifetime Health Cover (LHC) is a Government initiative designed to encourage people to take out Private Hospital cover earlier in life and maintain it. If you purchase hospital cover before your 31st birthday and keep it, you will pay lower premiums compared to someone who joins when they are older. The extra amount is called ‘LHC loading’.

LHC Loadings only apply to private hospital cover.

If you take out private hospital cover after 1st July following your 31st birthday, you will pay an additional Loading of 2% per year on top of the base premium, for each year you are over 30.

For example, if you are 40 when you take out Hospital cover you may pay an additional 20% on top of your base Hospital contribution rate. The maximum loading is 70%.

On Couple or Family policies, the Loading is calculated as an average of both adults Loadings. For example, if the policy holder has a 20% Loading and the partner/spouse has a 0% Loading, the overall Loading applied to the membership would be 10%.

Lifetime Health Cover Loadings are transferrable between all Australia Private Health Insurers, and as such if you are transferring to Phoenix Health, we will require a copy of your Transfer Certificate from your previous insurer to confirm your LHC details.

Certified Age of Entry (CAE)
In most cases, your CAE is the age you were on 1 July before you first joined private hospital cover. Your CAE is used to calculate your Loading. The minimum Certified Age of Entry for Lifetime Health Cover purposes is 30.

Exemptions
There are some circumstances in which you may be exempt from the LHC loading:

  • If you were born on or before 1 July 1934, you can join a health insurer at any time and pay the same premium as someone who takes out cover at age 30.
  • You have been living overseas since before 1 July 2000 or since 1 July following your 31st birthday.
  • You have migrated to Australia and became eligible for Medicare in the last 12 months.
  • You hold, or have held a Gold Card.
  • You are an active member of the Australian Defence Force.

If any of the above exemptions apply, we will require documents providing proof of exemption – for example an International Movement Statement if you have been overseas, or Statement of Medicare Eligibility if you are a new migrant to Australia.

If you are unsure, please contact the Phoenix Health team.

Permitted Days
Permitted Days (or Absent Days) are the days in which you can cancel your hospital cover without your Certified Age of Entry changing when re-joining. Permitted Days are only accessible if you hold hospital cover and locked in your Certified Age of Entry.

You can cancel your hospital cover for a total accumulative period of 1094 days (3 years less one day). Once you have exceeded 1094 days, a 2% Loading will then be applied for each year to your Certified Age of Entry.

You can cancel your hospital cover without using your Permitted Days or affecting your Certified Age of Entry or Lifetime Health Cover Loading when:

  • You have suspended your membership, or
  • You are overseas for at least 12 consecutive months. You are eligible to return to Australia for up to 90 days at a time and still be considered overseas. Any periods of more than 90 days you spend in Australia will be deducted from your 1094 Permitted Days.

Removal of LHC Loading after 10 years
If you have a LHC Loading, it can be removed once you have held private hospital cover and paid the Loading for 10 continuous years.
Once your LHC Loading is removed, your Loading will be reduced to 0%, however, your Entry Age will remain the same.

If you cancel your hospital cover after the loading is removed, you are entitled to use any remaining Permitted Absent Days, and may become liable to pay a LHC Loading again if you take out hospital cover if you exceed your Permitted Absent Days. You will then be required to pay your Loading for 10 continuous years.

How to avoid the Lifetime Health Cover Loading
Join any Phoenix Health Hospital cover before 1 July following your 31st birthday. As long as you keep your private hospital cover, you can avoid paying the 2% annual loading. Lifetime Health Cover loading only applies to the hospital portion of your premiums on a combined cover and does not apply to Extras cover.

If you need help calculating your LHC Loading, or have any questions at all, please don’t hesitate to contact a Phoenix Health Team Member – we’d be happy to help!

Age-based discount
If you are aged between 18-29 you may be entitled to a discount of up to 10% on the hospital component of your premiums. This discount was introduced to private health insurance on 1 April 2019 and is optional for all insurers and does not apply to all Phoenix Health Fund Hospital covers.

The Age-based discount is calculated at 2% to a maximum discount of 10% depending on the age you join an eligible hospital cover and it is retained until the age of 40. After the age of 40 the discount will reduce by 2% per year.

On Couples or Family policies, the discount is calculated as an average between the individual discount of the two adults. For example, if one person has a 10% discount and the other person has a 6% discount, the total discount applied to the policy is 8%.

Please contact the Phoenix Health Team if you would like to know more about the Age-based discount.