Why Pre-paying Your Health Cover is a Smart Choice

You may be aware that as of 1 July 2012, the Private Health Insurance rebate will be means tested and health insurance policyholders will no longer be guaranteed the minimum 30% rebate. You may also be wondering how the changes will affect you, and whether it still makes sense to continue paying for private health insurance. 

The simple answer is yes. But don’t just take our word for it; here are some more key reasons why continuing your HIF health cover is a smart choice.

1. Paying in advance will help avoid the impact of the means testing for longer.

All health funds, including HIF, are naturally concerned for their members now that the change to the rebate is nearly upon us, particularly for those high income earners who are likely to lose their rebate completely. In those instances, the cost of those members’ health policies may increase by up to 43% for those who currently receive the 30% rebate. For more information on the new rebate “tiers” plus some handy FAQs, please refer to the Rebate Changes in 2012 page.

There is, however, a way that HIF members can avoid the rebate change for a little longer. Until Saturday 30 June 2012, under HIF’s Fund Rules, members can pre-pay for up to 12 months and continue to receive the existing 30% rebate for this extended period. All you need to do is simply get in touch, instruct us that you would like pay your premiums in advance and your current rebate will be locked in for that period.

FOR EXAMPLE:
John and Jane currently hold HIF GoldStar hospital cover and Premium Options ancillary cover (family policy) and pay their premiums monthly. However, they also have a combined family income of $270,000 which means they’ll lose their entire 30% rebate on 1 July 2012. So, by making the maximum payment available, they could save nearly $2,000

In addition to extending the advantage of your 2011/2012 private health insurance rebate entitlement, you may also be eligible for an advance payment discount, so you’ll save even more! Just call us on 1300 13 40 60 or email info@hif.com.au and we’ll confirm the amount of contribution you can make and any discounts you may be eligible for.

If you're not currently a HIF member but would like to join today, use our handy product selector tool to find the right cover for your needs and budget, then you can sign up online instantly!

Important, please note: Our call centre will be open for business on Saturday 30 June between 8.30am and 6.00pm (WST). However, please be aware that end of financial year is a very busy time and delays may occur. To avoid the rush and secure your rebate advantage, we recommend you call us and make your advance payment prior to 30 June 2012. If paying via Australia Post, Postbillpay, Bpay or cheque, we recommend you complete these transactions no later than Friday 22 June.

2. Dropping your health cover now could result in you paying more at tax time.

It’s true. In addition to the changes to the rebate itself, the Medicare Levy Surcharge (MLS) will also be progressively increased based on annual income levels. Currently, the MLS is 1% of annual income for individuals earning over $80,000 per year or couples/families earning over $160,000 per year. From 1 July 2012 however, the recent changes in Government policy will mean that some Australian’s may be required to pay up to 1.5% extra in tax each year if they don’t hold private hospital cover.

FOR EXAMPLE:
Sally is a single woman living in Perth and earning $130,001 per year. Sally doesn’t have private hospital cover though, which means that from 1 July 2012 Sally will be required to pay an additional 1.5% in tax and that equates to a massive $1,950!

In comparison, if Sally had joined HIF and taken out one of our popular hospital cover options she would have peace of mind that her health is covered, and saved a significant amount of money in the process…

3. Retaining your health cover means you'll continue to avoid public hospital waiting lists.

With many consumers currently reviewing their health insurance cover, it is inevitable that a proportion of those policyholders will cancel their cover altogether. The result, however, will be a significant increase in pressure on the public health system and public hospital waiting lists, particularly for elective surgery procedures, will increase substantially.

A report produced by Deloitte in 2011 highlighted a number of key facts on this topic. For example, Deloitte estimates that:

• As people withdraw from their private cover they become more reliant on the public healthcare system. Between 2012 and 2016, 845,000 additional admissions will occur in public hospitals as a consequence of the means testing of the rebate.
• Between 2012 and 2016, additional admissions that occur in the public system as a result of the policy change will cost the Government (and hence the taxpayer) an additional $3.8 billion in cumulative recurrent costs over the five years. 

So if you wish to continue avoiding hospital waiting lists, as well as retaining the option to choose your own hospital and/or specialist when necessary, renewing your HIF hospital cover is a smart choice.

For even more reasons why HIF is the smart choice for health cover, visit the Why Choose HIF page.

Not a member yet? Get a quote and join (or switch) today.

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