New research by health insurance broker iSelect has revealed that the majority of Australians with private health insurance took it out before the age of 31, suggesting many are motivated by potential tax savings or a desire to avoid paying higher premiums later in life.
A national Ipsos Research study commissioned by iSelect in June revealed that 76% of privately insured Australians first took out a policy before they turned 31, which is the age when Lifetime Health Cover (LHC) loading comes into effect. LHC is a government measure designed to encourage younger and healthier Australians to take out private insurance earlier in life. Customers without hospital cover by 1 July following their 31st birthday who decide to take it out later in life will have to pay 2% LHC loading on top of their premium for every year they are without cover.
Ms Laura Crowden, spokesperson for iSelect, said that while younger Australians are more likely to nominate “to save on tax” as a reason for having private health cover, 70% of insured Aussies say they hold a policy to “protect their health”.
In addition, there is a government measure designed to reduce the burden on the public health system, which is the Medicare Levy Surcharge. MLS is an additional tax (on top of the standard 2% Medicare Levy) for those who earn over $90,000 (US$68,000) (single) or A$180,000 (couple/family) and don’t have private hospital cover. MLS ranges between 1-1.5% depending on income level.
The Ipsos Research also found that while budget or basic policies are more popular among younger customers, almost 70% of insured Australians currently hold a mid-range or top level policy.
“The fact that top level policies with minimal exclusions are most popular (held by 40% of insured Australians) highlights the fact most customers prioritise value over price when it comes to finding the right private health policy,” Ms Crowden said.
She said that while it’s often assumed that younger Australians take out cheaper policies purely to avoid tax, the Ipsos Research suggested this is not necessarily the case with 38% of those aged under 35 having made a hospital claim since turning 25 and a further 41% have claimed on extras. “Contrary to popular belief, just over 50% of 25-35 year olds have a mid or top level policy and more importantly, many are making the most of their insurance by claiming for services.”
“The vast majority (87%) of Australians have made a claim on their policy since they turned 25, including more than half (57%) claiming on in-hospital services,” she said.
Less than half (48%) of the 1,000 people surveyed by Ipsos were aware the government contributed towards the cost of their health cover. The subsidy costs taxpayers A$6.5 billion a year.
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