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NewsAre you one of 130,000 Aussies paying a 50% loading on PHI?
Are you one of 130,000 Aussies paying a 50% loading on PHI?

Are you one of 130,000 Aussies paying a 50% loading on PHI?

Tags: Private Health Insurance
Last updated by Kayley Harris on

When it comes to the issue of rising private health premiums, we’re usually quick to point the finger at the health funds. 

But according to an article written by News Corp National Health Reporter Sue Dunlevy, over a million Australians are paying up to three thousand dollars a year more for private health insurance as a result of government penalties.

Things like Government means tests, age penalties, subsidy cuts, are helping to double the cost of premiums for some people, and forcing others to drop their cover entirely.

Sue joined us on The Daily Drive this week confirming that while most of us blame the health funds for the increase, it’s government policy that can be the culprit in some cases.

In 2012, Labor introduced a means test for private health insurance so if you earn more than $90,000pa you don’t get the full rebate. This affected tens of thousands of Australians who lost some or all of their rebate.

The federal government has also cut the subsidy it provides for health insurance from 30 per cent to 25 per cent adding a further $166 to the cost of health insurance by indexing it at a rate lower than premium rises.

 

The Coalition was going to abolish the means test but changed their mind when they decided they needed the cash to help bring the budget back into surplus.

So basically, if you delay taking out health insurance until late in life you could be paying a government Lifetime Health Cover (LHC) penalty worth up 70 per cent or $2100.

Over one million Australians are paying this LHC penalty that increases the price of insurance by 2% for every year they delayed taking out cover after they turned 30.

When these charges are added to the average $4000 premium for family cover it means some Australians could be paying over $6,000 for health cover, twice as the $3000 bill faced by those not impacted by the penalties.

Many Australians are unaware they are paying these penalties.

A national Ipsos Australia survey found more than one in four Australians didn’t know whether or not they were paying a Lifetime Health Cover loading on their policy.

There are more than 130,000 Australians aged over 55 currently paying an LHC loading of at least 50 per cent.

More than 280,000 Australians who will be turning 31 this year have been sent a letter by the government urging them to take out health insurance to avoid the LHC penalty.

Health funds are asking the government to reconsider the age at which the LHC penalty started, the 10-year time frame people had to pay it and to provide a discount premium for younger people who took out health cover.

Sue’s advice? Check your income and see if the means test affects you.

If you’re turning 31 take out private health cover or you will pay a higher Medicare levy.

 

Originally posted on .

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Anna
Anna from VIC commented:

I'm 69 and it was 10 years ago that I joined a health fund. I knew about the loading, but never calculated the value. I believe it would be in the vicinity of $3000 pa. This month, finally I now receive the full rebate and the premium has dropped by close to 50%. I currently have a couples membership, with the highest hospital cover, no excess and highest extras at a cost of $350pm. Once I finally retire I'll have to re-evaluate if I should drop any part of the membership like the excess. 

Donald
Donald from NSW commented:

Unbelievable this government which USED to stand for lower spending and lower taxes is making older Australians pay the 70 percent lLHC I suggest Turnbull join the Labour Party and oust Shorten then we can be assured of the Conservatives winning the next election or better still get rid of both of them then this beautiful country would have a chance of survival regards old Australian Pensioner DW 

Karen
Karen from NSW commented:

When this loading was first brought in it was very widely reported and those of us over the age of 31 at the time were strongly advised to take up the amnesty and get private health insurance. Those that did, did and do not pay the loading. I was one of them and have not paid it ever. Seems to me every year since this is made known but seems like people do not hear. No good complaining now. All you can do is shop around for a better deal but you will still pay the loading. 

Someone
Someone from QLD commented:

When you are on a part pension it is making it very hard to keep up private health insurance 

Brian
Brian from NSW commented:

What option do we have ? I join in 2010 my penalty is 62% for the ten years, I don't beleive that Health Funds are the innocent party they are the benificiary of the penalty they wanted it but weren't prepared to cop the blame, but are happy to pocket the money. A question, at what age does this retrospective tax not apply? Brian 

Nerrel
Nerrel from NSW commented:

I'd be interested to know if and what the increase in Medicare levy one pays at taxation return time is if you do not have private health insurance? Kayley Harris, could you advise, please? 

Gertraud
Gertraud from ACT replied to Nerrel:

The amount of Medicare surcharge levy you pay depends on your income. Basically, singles with a taxable income below $90,000 and families with an income below $180,000 pay no surcharge. Follow the link for further information provided by the ATO (you may have to copy/paste): https://www.ato.gov.au/Individuals/Medicare-levy/Medicare-levy-surcharge/Income-thresholds-and-rates-for-the-Medicare-levy-surcharge/ 

Nerrel
Nerrel from NSW replied to Gertraud:

Thank you for that information, Gertraud. :) 

Gertraud
Gertraud from ACT replied to Nerrel:

The amount of Medicare surcharge levy you pay depends on your income. Basically, singles with a taxable income below $90,000 and families with an income below $180,000 pay no surcharge. Follow the link for further information provided by the ATO (you may have to copy/paste): https://www.ato.gov.au/Individuals/Medicare-levy/Medicare-levy-surcharge/Income-thresholds-and-rates-for-the-Medicare-levy-surcharge/ 

Stewart
Stewart from SA commented:

I can't think of a better way to encourage people to take out health insurance that to what a huge loading on it. 

Donna
Donna from VIC commented:

Our family was one of the ones hit with these extra costs on our PHI. A family of five and struggling to pay all other expenses we decided to stop our health insurance. Now for us to get it back it is still to expensive as a couple. It doesn't matter what we do we lose out somewhere. 

Gertraud
Gertraud from ACT commented:

Nope, I do not pay a loading on health insurance. I simply don't have private health insurance! 

Cheryl
Cheryl from NSW replied to Gertraud:

Yes you do. It's paid in your TAX every year! 

Gertraud
Gertraud from ACT replied to Cheryl:

You are wrong on two counts. Firstly, you are confusing the loading on the PHI premiums with the Medicare Levy surcharge. Secondly, whilst everybody who taking out PHI after the age of 30 will pay some or all of the PHI loading on their premiums, the Medicare Levy surcharge applies to individuals with a taxable income of more than $90,000 and families with a taxable income in excess of $180,000 only. As a self funded retiree my taxable income is well below the threshold, consequently, I do not pay any Medicre surcharge. 

Someone
Someone from NSW commented:

In the realm of unintended consequences, that the Government regularly creates, can't they see that the LHC penalty is a disincentive to take out health insurance? One would think that encouraging people to use the free universal access to hospital treatment by levying penalties is not wise. I'm sure the monetary gain from the penalties won't offset the losses when the public health system gets overloaded due the the Government's lack of logic. 

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