What is the Youth Discount for Private Health Insurance?
In this guide, we'll talk about the youth health insurance discount and walk you through the process calculating the age-based discount.
by Gary Andrews
Last update 15 Apr 2021
Australians aged from 18 to 29 can now be eligible to receive a discount of up to 10% off of private hospital insurance premiums.
Not all funds will offer youth discounts, but they now have the option to.
The younger you are when you take out the policy, the more you could save.
Insurers can begin offering discounted policies on a voluntary basis from 1 April 2019.
If you are an existing policyholder and your health fund starts offering a discount, your discount will be based on your age at the time the discount is introduced.
Let's say you took out a policy at the age of 25.
Your insurer introduces an age-based discount on that policy from 1 April 2019, when you are 28 years old.
Your discount will be 4%---based on the age you are on the day the discount is introduced.
Your discount rate stays in effect until the age of 41, as long as you stay on the same policy.
However, insurers can choose to recognise age-based discounts from other insurers; we'll explain more on this soon.
From the age of 41, your discount will be gradually phased out at a rate of 2% per year until it hits zero.
The discount can only be offered to those aged 18 or older, and you must be the principal or partner adult on the policy.COMPARE & SAVE
It's important to note that the discount only applies to hospital cover.
If you have combined hospital and extras cover, it will apply to the hospital portion of your cover, not the extras.
The discount is only applied to the base premium, before any rebates or Lifetime Health Cover loading is applied.
On couples or family hospital cover? Your discount is based on an average of the adults on the policy.
Here's how that works.
How much you save depends on your age and the cost of your policy.
The younger you take out cover, the more you stand to save.
Someone who takes out a discounted policy at the age of 25 can secure a 10% discount on premiums for the next 15 years before it starts to reduce.
On a $1500 policy, that's a saving of $150 each year.
Multiply $150 by 15 years, and that's a base saving of $2250.
From the age of 41, you'll continue to save on your premiums at a declining rate for the next few years.
Even someone who takes out a discounted policy at the age of 29 can benefit from a 2% saving.
On a $1500 policy, that person could save $30 per year, before any other applicable rebates or discounts are factored in.COMPARE & SAVE
The government wants to encourage Australians to take out private health insurance, because it lightens the load on the public system, Medicare.
Private cover comes with many advantages, such as more choice in your treatment, the likelihood of shorter wait times, and benefits for services Medicare doesn't cover, like optical or dental.
The problem is that the cost of health cover can be prohibitive for some, especially younger people.
Australians under the age of 30 are taking out less cover than those in other age groups, which is detrimental to all demographics.
The government previously introduced the Lifetime Health Cover loading system, which penalises people who don't take out hospital cover by the age of 31.
It works by adding a loading fee to your premium when you do eventually take out cover.
The age-based discount is a friendlier way of attracting young people to private cover, by offering a financial incentive to take it out.
Not only will you avoid the LHC loading fee, but you'll get a discount too.
Health funds are not required to offer the age-based youth discount to members.
It is entirely voluntary, though it may be advantageous to funds to offer discounted hospital products.
The discount could mean that more people take out cover at a younger age, which means more customers for health funds.
Because you can hold on to your discount until the age of 41, it might even mean better member retention.
If insurers decide to offer the discount, they must offer it on the same basis to all eligible customers, whether they are new or existing members.
HCF does not plan to offer the discount; however, they will be launching a new product range geared towards young people.
We mentioned earlier that the discount only carries through to the age of 41 if you stay with the same policy.
Your health needs change over time, and so do health insurance prices; that's why switching funds is an important option.
Fortunately, health funds have the option of recognising existing age-based discounts for customers who transfer from another fund.
If you find a better deal elsewhere, you can check with the new fund to confirm whether or not they will honour your current discount.
For your discount to move with you, you'll need to provide a transfer certificate from your current health fund and switch within a certain time frame.
Many health funds allow members to suspend their cover temporarily.
For example, if you are planning to be overseas for an extended period of time, you may be able to apply for suspension of cover.
But how does this affect your youth discount? It depends on the fund.
Some funds may allow you to suspend your cover and your discount, then resume both at the end of the suspension.
Check with the terms and conditions of each fund.
The same goes for cancelling your cover. The rules governing the youth discount stipulate that you must maintain your hospital cover in order to keep the discount.
However, some funds may allow you to reclaim your youth discount if you cancel and rejoin the same fund within a certain period of time.
If you're considering a suspension or cancellation, always ask your fund how it may affect your age-based discount before making any final decisions.
It only takes a few minutes to get a free quote, and we'll help you get the discounts you're eligible for.COMPARE & SAVE
This guide is opinion only and should not be taken as medical or financial advice. Check with a financial professional before making any decisions.