- All Australians have the same basic cost for Medicare and private health coverage. However, the premium prices vary depending on specific factors.
- A private insurer can decide the price of premiums based on specified parameters which are then mentioned in the agreement once the policy is signed.
- Insurance companies alter insurance premiums every April after they send a review of particular things to the Minister of Health.
In a hybrid healthcare system like Australia’s, it is not surprising that many residents do not fully understand how public and private healthcare work, mainly when it comes to policy expenses and what factors could increase the costs.
All Australians share the same standard rate for private health. However, depending on specific circumstances, some individuals may pay a higher price than the others – even if they both joined the same private health company. That happens because one person might need to pay for higher insurance premiums.
What are insurance premiums?
Insurance premiums, or simply premiums, are costs that third-party members pay to the insurer. The insurance company then agrees to cover for all required expenses that the member had previously claimed. At the same time, individuals settle on paying the whatever premium was agreed beforehand.
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Once both parties sign the contract, the new member gets the terms and conditions for insurance premiums that the company can charge.
What factors lead to higher health insurance premiums?
Australia has a healthcare law that takes care of the legal aspects of health, such as issues that can affect the insurance premium price. Under the law, there are only six things that could affect the premiums:
Age when signing up for the private insurance policy
Every person that resides in Australia, no matter what age, has the right of getting the standard healthcare policy at the same price. Private insurance companies are also not allowed to tailor the premiums if the individual has shown a broad claim history or has more health difficulties.
However, insurance companies can charge more for the premiums if one does not hold a Lifetime Health Cover (LHC) loading. LHC is a government project that is trying to get more young people to sign up for private insurance. By implementing LHC, Australian government imposed new rules for all future premiums that one will need to pay once they get the private policy. All individuals will need to spend two per cent more on top of the existing premium fee if they have not signed up before 1 July when they turn 31.
That said, LHC is the only factor that affects insurance premiums due to the member’s age. Private insurance companies can charge up to three times more for someone older because of this government initiative.
For example, the private insurance members could pay 20 per cent of LHC loading if they have not signed up by the age of 40. For someone who is 50, they could pay 40 per cent more.
The maximum LHC loading is set on 70 per cent. However, private insurance companies cannot charge extra premiums for more than ten years – once the member paid out ten years of hospital cover, the normal rate of premiums applies.
Individual income can significantly affect the final price of insurance premiums, but not on a discriminatory basis.
Every Australian needs to pay for the Medicare levy, unless their income is lower than required by law. Singles that earn as little as A$22,801 or less annually do not need to pay for the levy. For pensioners and seniors that receive the tax offset, the rate is A$36,056 or lower for singles.
A partial Medicare levy payment will be required for singles that earn between A$22,801-A$28,501, while the same rate for seniors and pensioners is at A$36,056-A$45,069 yearly.
In some cases, the whole household’s income may impact the Medicare levy fee.
On the other hand, singles and families will need to pay for an additional Medicare levy surcharge (MLS) if their gross income is above the established level. Singles that earn A$90,000 a year or less and families that have A$180,000 or less annually will not require the MLS payment.
As with many other things, there are several plan categories that one can choose from. From budget policies (the cheapest) to comprehensive (the most expensive), Australians can opt for the policy that best suits their needs and health conditions.
Different levels of those categories will have less of a monthly fee, but higher out-of-pocket costs when the hospital bill comes. On the contrary, policies that cost more money cover more medical treatments and procedures.
One should always check their policy coverage before undergoing a serious and possibly expensive procedure.
Private insurance policies can cover singles, de facto couples, families, and single families (one adult and children). Families often get lower prices as more people are under the same private healthcare.
In a family and a single-family policy, dependants aged 25 or less can be considered under the same insurance. However, when their situation changes (either they move out or stop studying full-time), they need to find their insurance deal.
Where the individuals reside is essential because they might be surrounded by health facilities or they could live far away in rural areas. About 84 per cent of all private hospitals are located in the city, so those that live in rural and regional parts of Australia might not get the best service.
That is why insurance companies take the place of residence in consideration, as it would not be fair to charge the same price to people that have barely any access to private facilities and those that have hospitals and pharmacies across the road.
Last but not least, insurance companies can charge higher insurance premiums of up to 50 per cent for tobacco users. Australia is widely known for having the most expensive tobacco tax as a plan for forcing people to quit smoking. It comes as no surprise that private insurers want to do the same, mainly because smokers tend to have more health problems as they age.
Do insurance premiums change over time?
Private insurers change their premium conditions annually, usually on 1 April every year. The premiums change after private insurance companies review specific things (salaries for medical staff, hospital equipment and tech, and expenses for complicated procedures in private hospitals).
Once the private insurer checks the criteria mentioned above, it submits a report to the Minister of Health for increased premiums.