Confused about the changes to your health insurance rebate? We're here to help.

You may have heard in the media that as of 1 July 2012, the Federal Government Rebate on Private Health Insurance rebate will be means tested and health fund members will no longer be guaranteed the minimum 30% rebate.
In addition, the Medicare levy surcharge (MLS) will also be progressively increased based on annual income levels. This means high income earners could potentially be taxed up to the maximum of 3% (1.5% Medicare levy + 1.5% MLS) of their income if they do not have private hospital cover.

How means testing the rebate will affect your health cover.

The new policy change introduces three ‘Private Health Insurance Incentive Tiers’ based on income thresholds which will continue to remain indexed to wages. For low and middle-income earners, the existing 30, 35 and 40 per cent private health insurance rebates will remain in place.  Higher income earners will receive a lower rebate if they choose to hold private health cover, but will face a higher Medicare Levy Surcharge (MLS) if they choose not to hold private hospital cover (having ancillary cover doesn't exempt people from the MLS). Please see the FAQ section below for more details.

New Private Health Insurance Rebate Tiers to take effect 1 July 2012:

Frequently asked questions

• How will I be affected by the means testing of the private health insurance rebate? If you're single and earning $84,000 and below per annum / if your family earns $168,000 and below per annum, your rebate remains the same - 30% if you're under 65, 35% for 65 - 69 year olds and 40% for 70 year olds and over. (For high income earners, please refer to the table above).

• How will HIF know which rebate amount to apply to my health insurance premium? If you are an existing HIF member, you will need to complete the government's updated rebate form and submit it to HIF after July 1. We anticipate Medicare will provide the update forms in due course and once available, it will be placed on our website for your convenience. If you are not a current HIF member but choose to join us after July 1, you will be asked to nominate your salary bracket to enable HIF to calculate the appropriate rebate tier within your quoted premium.

• What happens if I choose the wrong rebate level? We believe there is no government imposed penalty for choosing an incorrect rebate level. In many circumstances it will be difficult for individuals and families to accurately forecast their future income circumstances. Any rebate amount either due to you as a refund or required to be repaid to the Government, will be calculated with the lodgement of your income tax return and settled at that time.

• What is the difference between the Medicare levy and the Medicare levy surcharge? The Medicare levy refers to the standard 1.5% of our taxable income that all Australian tax payers contribute in taxes to be eligible for Medicare benefits. The Medicare levy surcharge is an additional tax that will be applied to singles who earn more than $84,000 per annum or families who earn more than $168,000 per annum, and who do not have private hospital cover. Having ancillary cover does not exempt people in the above income brackets from the surcharge. This surcharge ranges from 1% through to 1.5% (please refer to the table above). 

• HBF is allowing me to pay premiums up to 18 months in advance. Can HIF do the same? HIF members can pay up to a maximum of 12 months in advance which, if paid before 1 July, allows our members to avoid the means testing for another year. The 12 month maximum prepayment period is the industry standard. Prepayments of longer than 12 months can have negative effects on revenue that could require health funds to increase prices at a higher rate than they would normally. HIF is focused on keeping health insurance premiums affordable for its members. For WA members rate increases have been below the industry average (and below HBF’s) for six years in a row. The ATO and Department of Health are keeping a close watch on the prepayment situation to ensure health funds are financially responsible and act as fairly as possible to all members. Given this scrutiny from the Federal Government, it may be worthwhile waiting until the end of June to pre-pay your premiums – just in case things change. For more information, check out our latest news article on why pre-paying your health cover is a smart choice