Government programs you need to know a little about.
Healthcare is an expensive business and the federal government strives to build both a strong public and private healthcare system. To encourage and support people in taking out private health insurance, which helps to ease some of the pressures on the public healthcare system, the government has introduced a number of programs that relate to your private health cover.
It’s worthwhile having at least a basic understanding of how these work, some of them will save you money, and some could cost you money – both good reasons to spend a few minutes reading up about them! As always, we want to make it as easy as possible for you so if you prefer to speak to a real person who can explain all of these to you and help you understand how they affect you, please give your rt member care team a call on 1300 886 123.
Federal Government Rebate on Private Health Insurance
You might have heard of this referred to as the ‘30% rebate’. Basically, the government believes that private health insurance is good for your health – so good in fact that it’s prepared to pick up some of the tab!
- If you are under 65, the government will pay for 30% of the cost of your health cover.
- If you are between 65 and 69, it’ll pay 35% of the cost.
- And if you are over 70, it’ll pay 40%.
Everyone who is a Medicare cardholder and a member of a registered private health fund receives the government rebate, no matter what your income, level of cover or type of membership.
There are three different ways that you can receive the rebate and you choose whichever suits you best:
- You can take the rebate as a reduction in your premium – so we discount the amount of your health cover by the rebate you are entitled to, and you only pay the remaining amount. The government pays the rest.
- You can pay 100% of your premium and then head into a Medicare office to claim your rebate as a refund.
- You can pay 100% of your premium and claim the amount of the rebate through your tax return.
Deciding which way to receive your rebate is probably something that is best discussed with your accountant. You can change the way you receive it anytime, so even if you choose to pay 100% and claim the rebate back, you can always change your mind and ask for it to be taken out of your premium if you decide that suits you better – whatever makes it easy for you.
You don’t have to do anything to receive the rebate, we’ll ask you for all the information we need to apply it to your membership when you join us.
If you’re interested in knowing more about the rebate, talk to us, or take a look at the Commonwealth Department of Health and Ageing website, www.health.gov.au.
Lifetime Health Cover
This is a program that the government introduced to give people a cost incentive to take out private health cover early in life and to keep it. Basically, it says that if you join private health cover for the first time before the 1st of July following your 31st birthday then you pay the ‘base rate’ premium that the health fund you join offers. And for every year you are over 31 when you join you add 2% to the base rate premium.
So, for example, if you take out private health cover for the first time when you are 40 you’ll pay 20% (2% x 10 years) more than someone who takes it out at 30. The maximum loading that anyone would ever have to pay is 70%, and that’s if they joined private health cover for the first time when they are 65.
Anyone born on or before 1 July 1934 can join health cover at anytime and will pay the base rate, the same as someone who joins when they are 30.
The age you first join health cover is called your ‘certified age of entry’ and the amount you have to pay above the base rate is called your ‘Lifetime Health Cover Loading’. If you keep your private health cover continuously you get to keep the rate that you started out on. In fact, throughout your lifetime you can drop your health cover for a total period of 24 months and still keep the same loading as when you first joined.
The government realised that while Lifetime Health Cover was a good incentive for younger people to join, it actually was a bit of a disincentive for older people, because if you joined after you were 31 you would have a loading apply to your health cover for the rest of your life. So on 1 April 2007 a new rule came into effect, which means that your Lifetime Health Cover Loading will be erased after you’ve held health cover continuously for ten years. Great news!
Lifetime Health Cover can be confusing, because apart from all of this there are a number of conditions that apply to people with special circumstances, such as if you’re going overseas. Rather than try to spell it all out for you here, we’d love to talk to you if you’d like to know more, so please call your rt member care team on 1300 886 123. If you are interested in reading more, take a look at the Commonwealth Department of Health and Ageing website, www.health.gov.au.
Medicare Levy Surcharge
Most of us pay a Medicare Levy through our income tax, it’s 1.5% and it’s automatically deducted from our pay packets. It helps to fund the public health system. People who earn over certain amounts, and who don’t have private hospital cover (extras cover doesn’t count in this instance) have to pay an additional 1%, which is called the Medicare Levy Surcharge.
If you earn more than $73,000 as a single person or over $146,000 as a couple or family, and you don’t have private hospital cover, you’ll probably have to pay the surcharge. There are some special conditions that apply depending on whether you have kids, and how many you have.
Not all types of private hospital covers will exempt you from paying the surcharge, but both of rt’s hospital covers will. Sometimes the cost of having the hospital cover is even less than the amount you would have to pay for the surcharge, plus you get all the benefits of having private hospital cover in case you ever need it.
Call us or visit the Australian Taxation Office at www.ato.gov.au for more information.
