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Surchargers and Incentives Contents

Surchargers and Incentives

• Lifetime Health Cover
• Private Health Insurance Rebate
• Medicare levy surcharge (MLS)

Lifetime Health Cover

Lifetime Health Cover was introduced in July 2000 and involves a financial loading in addition to standard hospital cover premiums for people who delay taking out hospital cover. People who take out hospital cover earlier in life and maintain their hospital cover, will pay lower premiums throughout their life compared to someone who joins when they’re older.

To lock in the lowest premiums for life under Lifetime Health Cover, a person needs to take out hospital cover with a private health insurer by 1 July following their 31st birthday. If a person does not have hospital cover on 1 July following their 31st birthday and decides to take out hospital cover later in life, they will pay a 2% loading on top of their premium for every year they are aged over 30. For example, someone who first takes out hospital cover at age 40 will pay 20% more than someone who first took out hospital cover at age 30 or earlier.

Any Lifetime Health Cover loading that a person is required to pay will cease if the person has had hospital cover for a continuous period of 10 years.

Under Lifetime Health Cover, private health insurer members are able to drop their private health insurance cover for a cumulative period of 1,094 days in their lifetime without affecting their loading. For every 365 days without cover after that, the person's loading will increase by 2%. You can also apply to your health insurer to suspend your cover and this period of suspension counts as periods with private health insurance.

People who were born on or before 1 July 1934 are exempt from Lifetime Health Cover and are able to join a health insurer at any time in the future and pay the same premium as someone who takes out cover at age 30.

There are provisions and grace periods in place for Australians who were overseas on their 31st birthday or at the time Lifetime Health Cover was introduced, which may be applicable to you. New arrivals to Australia may also receive a grace period before the Lifetime Health Cover loading comes into effect.

For Lifetime Health Cover purposes, time spent on Norfolk Island is classified as time spent overseas and this can have different effects depending on the actual dates you were resident on Norfolk Island.

If you were a member of the Australian Defence Forces (ADF) on 1 July 2000, under Lifetime Health Cover you were granted a certified age at entry of 30. After discharge from the ADF, you will have access to your 1,094 days under the period of absence rules, to join a health insurer and still pay the base rate premium.

An amendment to the National Health Act 1953 that was current prior to the new Private Health Insurance Act 2007 extended protection from the application of Lifetime Health Cover to persons issued with a Department of Veterans’ Affairs (DVA) Gold Card from 1 July 2004. If you held a Gold Card at any time since 1 July 1999, and the card was subsequently withdrawn by the DVA, you may claim the period you held the card as a period with private health insurance. If you held a Gold card on 1 July 2000, you will generally have a Lifetime Health Cover certified age of entry of 30.

For more information about Lifetime Health Cover, check with your health insurer or visit www.privatehealth.gov.au/information/surcharges/lifetime.htm or you may wish to go directly to the Lifetime Health Cover calculator at www.privatehealth.gov.au/dynamic/LifetimeHealthCover.aspx

Private Health Insurance Rebate

30% Rebate

There is a 30% rebate for appropriate private health insurance cover.

All Australians are eligible to claim the 30% Rebate if they are eligible for Medicare and have a complying health insurance policy that provides hospital treatment, general treatment (previously called ancillary or extras) cover, or both.

The rebate is 30% of the actual cost of premiums paid, so the rebate will increase if there is any increase in the premium.

Higher Rebates for Older Australians

There are higher private health insurance rebates for older Australians. For people aged 65-69 years the Rebate is 35%, and for people aged 70 years and over the rebate is 40%. The higher rebates help with the cost of private health insurance for older Australians.

How to claim the Rebate

In order to claim the Rebate, your health insurance policy must be with a private health insurer registered under the Private Health Insurance Act 2007.

In addition, all of the people covered by the policy must be eligible, or treated as eligible, to claim benefits under Medicare.

There are three ways to claim the Rebate:

• ask your private health insurer to provide the Rebate as a premium reduction

• receive a direct payment from the Australian Government through your local Medicare office

• claim it back on your tax return, using a statement your health insurer will provide at the end of the financial year.

If your employer has paid your premium on your behalf, you are entitled to claim the Rebate.

For more information

Consumers can seek further information on the Federal Government Rebate on private health insurance by visiting the Commonwealth Department of Health and Ageing web site at www.health.gov.au

Medicare levy surcharge (MLS)

The Medicare Levy Surcharge has been in place since 1 July 1997 with the aim of encouraging people to take out private hospital cover, and where possible, use the private system to reduce the demand on the public system.

The Medicare Levy Surcharge is an additional 1% surcharge of taxable income imposed on those earning above a certain income, who are eligible for Medicare but who do not have an appropriate level of hospital insurance with a registered health insurer. The Medicare Levy Surcharge is in addition to the normal 1.5% Medicare Levy.

Who must pay the Medicare levy surcharge

You have to pay the surcharge if you earn above the income threshold and you do not have a private hospital insurance policy with a low front-end deductible or excess.

In 2010-11, the thresholds are:

• a single person with an annual taxable income greater than $77,000; or

• a family or couple with a combined taxable income greater than $154,000. The family income threshold increases by $1,500 for each dependent child after the first.

These thresholds will be indexed in future to keep pace with changes to average wages. Refer to this site to see current thresholds.

A low front end deductible or excess is defined as:

• equal to or less than $500 per annum for single policies or

• $1,000 per annum for families/couples.

You must also pay the Medicare Levy Surcharge if you are a prescribed person* with a taxable income over the threshold, and have any dependents who are not prescribed persons and who are not covered by a low front-end deductible hospital insurance policy with a registered health insurer.

* Generally, you will know if you are a prescribed person. If you need more information on prescribed persons, call the Australian Taxation Office (ATO) Helpline on 13 28 61.

Your dependents in relation to the Medicare Levy Surcharge

Providing you contribute to their maintenance (including child support payments), your dependents are:

• your spouse

• any of yor children who are under 16 years of age, or

• any of your student children who are under 25 years of age.

You do not have to pay the surcharge if:

• your taxable income is below the income threshold

• your taxable income is over the income threshold and you have hospital insurance for you and all of your dependents with a low front-end deductible with a registered health insurer

• you are normally exempt from the Medicare Levy because you are a prescribed person and you do not have any dependents. Your taxable income is not considered in this case

• you are a high income earner who had already purchased a hospital insurance product with a front-end deductible or excess greater than $500 for singles or $1,000 for families/couples, on or before 24 May 2000. In this case you will continue to be exempt from the surcharge while you maintain continuous membership to the same hospital table.

Notes about the surcharge

To be exempt from the surcharge, your hospital cover must be held with a private health insurer that covers some or all of the fees and charges for a stay in hospital. Information about whether your health insurer is registered can be obtained from the Private Health Insurance Administration Council (PHIAC) by phoning their office on 02 6215 7900.

General treatment (previously known as ancillary or extras) cover does not constitute private patient hospital cover for the purposes of the surcharge.

Low Front-End Deductible or excess

Your front end deductible or excess must be equal to or less than $500 per annum for single policies or $1,000 per annum for families/couples to be considered a low front end deductible or excess.

For more information

For more information about the Medicare Levy Surcharge, contact the Australian Taxation Office (ATO) by:

• calling the ATO Helpline
  13 28 61

• visiting the ATO Internet Home Page
  www.ato.gov.au