HCi explains the Government incentives for health cover

Medicare is the scheme that gives Australian residents access to health care. To help fund the scheme, most taxpayers pay a Medicare Levy of 1.5% of their taxable income.

You may be liable for the Medicare Levy Surcharge (MLS) in addition to the Medicare Levy. Individuals and families on incomes above the MLS thresholds, who do not have an appropriate level of private patient hospital cover, pay MLS for any period during the year that they did not have this cover. If you become liable for MLS, your MLS rate will be 1%, 1.25% or 1.5%.

Income for MLS Purposes

The rate of MLS that you may have to pay depends on your income for surcharge or MLS purposes, which is the sum of your:

• Taxable income
• Reportable fringe benefits
• Total net investment loss
• Reportable super contributions
• Any amount on which your family trust distribution tax has been paid

If you have a spouse (married or de facto), your combined income for MLS purposes will be used. The income thresholds are varied each year by the Australian Taxation Office (ATO) for the current income thresholds please refer to the ATO Website  or your tax agent.

Appropriate Level of Private Patient Hospital Cover

An appropriate level of private patient hospital cover is generally a hospital policy with an excess of up to $750 in the case of a policy covering only one person, or up to $1,500 for all other policies, that provides private patient hospital cover for MLS purposes.

Lifetime Health Cover (LHC) is a Government initiative that started on 1 July 2000. It was designed to encourage people to take out hospital insurance earlier in life, and to maintain their cover.

LHC is a financial loading that can be payable in addition to the base rate premium for your private health insurance hospital cover.

If you take out private health cover before the age of 31 and hold it continually from that time, you will not have to pay the LHC loading. If you don’t take out private health cover by that time, or stop holding private health cover for a defined period of 1094 days, the loading will apply.

If you purchase hospital cover earlier in life, and keep it, you will pay lower premiums compared to someone who joins when they are older.

What is the LHC certified entry age and loading rate?

Under the Lifetime Health Cover Scheme, you may have additional premiums for your health cover.

Each Australian adult is assigned a “certified age at entry” for contribution rate setting purposes.

People who do not have Hospital Cover on the 1 July following their 31st birthday, or were 31 or older at 1 July 2000 and did not have cover at that time, must pay a loading. The loading is calculated as 2% per year past 31. It is charged on top of the “base rate” premium for their hospital cover.

The “base rate” is the lowest premium rate for the hospital cover chosen.

For example, John turns 31 on 1 April 2024. If he purchases hospital cover by 1 July 2024, he will pay the base fee rate. However, if he purchases hospital cover on 2 July 2024, he will pay a 2% loading for that year. And, if he further delays purchasing hospital cover, he will pay an extra 2% for each year he delays.

How many days can I go without hospital cover under LHC?

You are able to stop your hospital cover for a cumulative period of 1,094 days in your lifetime without affecting your certified age at entry. However, after the 1,094 days aggregated absence, your certified age at entry will be increased by one year.