The table below shows how current Australian government policies affect the cost of private hospital insurance by age and income, separately for singles and families.
In compiling this table I focused on private hospital insurance because (1) most government policies only apply to private hospital cover not extra care; and (2) extra cover is much cheaper relative to hospital cover and easier to decide – you can easily compare how much you gain from extra cover (e.g., dental, optical, and physio care) and how much it costs you.
The calculation above starts with median premium costs for a moderate private hospital cover at $180/month for single coverage and $250/month for family coverage. Premiums are obtained from https://www.privatehealth.gov.au/dynamic/search/start as of October 19, 2020. If you need more generous hospital coverage, you will need to pay higher premiums.
Actual premium costs after government rebates and age-based discount are reported by income and age. Potential savings from avoiding additional taxes for Medicare Levy Surcharge (MLS) purposes are calculated for each income thresholds.
The numbers above do not capture Lifetime Health Cover (LHC) loading. If you did not have private hospital insurance when you turned 31 and buy private hospital insurance when you are older, you need to add loading of 2% on the hospital component of your premium for each year you are over 30. LHC is removed once you’ve held appropriate private hospital cover for 10 continuous years. The maximum LHC loading that can be applied is 70%. Despite LHC loading, for young people with low income and low expected use of private hospital care, it may still make sense to wait to buy PHI until you need to.
This table will be updated periodically with most updated numbers as the government adjusts rebate levels and income thresholds. The current rebate levels are applicable from 1 April 2019 to 31 March 2021. The income thresholds are indexed and will remain the same to 30 June 2021. Current rebate levels are available here.
Professor Yuting Zhang is the recipient of an Australian Research Council Australian Future Fellowship award funded by the Australian Government (project ID FT200100630) to study Australian private health insurance.