Tax time is generally when Australians take out health cover for the first time, either to avoid the Medicare Levy Surcharge* or the Lifetime Health Cover Loading, however each year, more than 20,000 Aussies will waste more than $26.4m in total on “junk” policies.
Basic tier hospital cover is often the cheapest policy that people can buy when looking to avoid tax penalties but according to financial marketplace and advice company Compare Club, they offer extremely limited cover and for just a few dollars more a month, a more comprehensive Basic or Bronze tier policy presents significantly better value for money.
Analysis from Compare Club suggests the current average cost of a Basic policy is $101.33 a month, with some policies costing as little as $79.15 a month.
However, many of these Basic level policies only offer ambulance cover and a small number of restricted services, giving the holder very little value for money.
But Compare Club has also found more comprehensive Basic Plus and Bronze Plus hospital cover that cost $91 and $97.87 a month respectively. These are both significantly less than the average, and could provide better cover while saving people between $42 to $125 each year.
Included in policy
Cheapest Basic Cover
Accident Protection and Emergency Ambulance only. 3 restricted items**
Most expensive Basic Cover
Ambulance Cover for NSW & ACT residents, Accident Protection, Hospital accommodation in a public hospital. All other items restricted
14 items including hernia, dental surgery, gynaecology and tonsils. 3 restricted items
32 full items including all items found in Basic+ as well as items such as joint reconstructions, kidney & bladder, breast surgery, and diabetes management. 2 restricted items
Compare Club Senior Health Insurance Broker Eli Boroda says it’s easy for people taking out health insurance to get confused, but it is possible to avoid taxes and still get value for money.
“Health insurance can be really confusing if you’re trying to figure out what cover you need to avoid tax. We’ve spoken to people who’ve just been told to get the cheapest policy but have no idea that it’s got no real value beyond just tax savings.
“This often leads to customers becoming disenfranchised with the whole system, as when they come to use their policy, they find they’re not even covered for common treatments such as wisdom teeth or tonsil removal.
“In reality there are lots of affordable policies that are great value for money and in some cases cost less than a very limited Basic policy. People are often shocked that a much more comprehensive level of cover only costs at worst a few dollars more a month than a junk Basic policy.
“To avoid falling into this trap we advise Australians to speak to a broker like Compare Club to help them sort through the jargon and easily compare a number of policies side by side.”
ELI'S TOP TIPS FOR TOP VALUE HEALTH COVER
Don't take out extras on its own, if you're looking to avoid taxes. You can only avoid the Medicare Levy Surcharge and Lifetime Health Cover loading with hospital or combined cover.
Avoid policies that only offer ambulance and accident cover.
Think about what you'll need in the future. If you haven’t had your wisdom teeth out, look for a policy that covers dental surgery, while many Basic+ and Bronze policies cover common procedures such as gynaecology, hernias and tonsil removal.
For more information visit https://compareclub.com.au/health-insurance/medicare-levy-surcharge/
Notes for the editor:
*The Medicare Levy Surcharge is applied when you earn over $90k or $180k as a couple. This threshold will increase to $93k and $186k respectively from 1 July.
**Restricted services only attract partial benefits, which means you are only partially covered for those treatments or services.
With restricted services, you may also have to pay significant out-of-pocket expenses.
All costs calculated are for a Single, 31 year old in NSW with an excess of $750. Policies correct as of 09/06/2023.
^Policy comes with no excess
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