Private Health Insurance

Private Health insurance

Private Health insurance is insurance against the risk of incurring medical expenses among individuals.

An insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to ensure that money is available to pay for the health care benefits specified in the insurance agreement. The benefit is administered by a central organisation such as a government agency or private business.

Insurance organisations are regulated by the Federal Government to ensure affordable access to private health insurance for all through the principle of community rating. Pursuant to this principle, the insurance premium is the same regardless of the health status or claims history of a member or new member.

The public health system is called Medicare. It ensures access to hospital treatment and subsidised out-of-hospital medical treatment.   It is funded by a 1.5% tax levy on all taxpayers, an extra 1% levy on high income earners, as well as general revenue.

The private health system is funded by a number of insurance organisations. The largest of these is Medicare Private, which is government-owned, but operates as a government business enterprise under the same regulatory regime as all other registered private health funds.

Health Insurance Premium Rate Rise

At the start of April each year, health insurance funds are normally granted permission to alter their premiums. Such changes are generally required by health funds to cover the growing cost of services and claims, and increases in the cost of medical treatment brought about by rapid improvements in technology.

How does your fund's rate rise rate?

It's important that consumers understand the average premium increase percentage (5.60%) announced by the Federal Health Minister on 8 February 2013 is only an average, and that the actual percentage change for their own policy can vary.

Did you know over the past 3 years, premiums have increased by an average of 16% in total.

The Australian government has introduced a number of incentives to encourage adults to take out private health insurance plus hospital insurance.

These include:

  • Lifetime Health Cover: If a person has not taken out private hospital cover by the 1st July after their 31st birthday, then when (and if) they do so after this time, their premiums must include a loading of 2% per annum for each year they were without hospital cover. Thus, a person taking out private cover for the first time at age 40 will pay a 20 per cent loading. The loading is removed after 10 years of continuous hospital cover. The loading applies only to premiums for hospital cover, not to ancillary (extras) cover.
  • Medicare Levy Surcharge: People whose taxable income is greater than a specified amount (in the 2011/12 financial year $80,000 for singles and $168,000 for couples) and who do not have an adequate level of private hospital cover must pay a 1% surcharge on top of the standard 1.5% Medicare Levy. The rationale is that if the people in this income group are forced to pay more money one way or another, most would choose to purchase hospital insurance with it, with the possibility of a benefit in the event that they need private hospital treatment – rather than pay it in the form of extra tax as well as having to meet their own private hospital costs.
  • Private Health Insurance Rebate: The government subsidises the premiums for all private health insurance cover, including hospital and ancillary (extras), by 10%, 20% or 30%, depending on age.