Health insurance rebates and incentives: how do they impact you?

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MLS, LHC and ‘the rebate’. How do they impact you?

Now is as good a time as any to take care of your usual life admin, including reviewing your private health insurance to make sure it’s doing the hard yards when it comes to you, your lifestyle and your family.

And to do that, you’ll need to be across the various incentives and rebates that can help keep the cost of your cover down.

It helps to know how your private health insurance may potentially impact you as the financial year ends (and a new one begins).

The Medicare Levy Surcharge (MLS) and the Australian Government Rebate on private health insurance (commonly referred to as ‘the rebate’) are the main things you need to be across.

And if you’re turning 31, you’ll want to be across the Lifetime Health Cover loading (LHC) and how it can impact you if you don’t have hospital cover.

These incentives and rebates don’t apply to everyone all the time, so you can use this explainer to help you on your way.

Medicare Levy Surcharge (MLS)

What is it? Commonly called MLS, the Medicare Levy Surcharge was created to take the pressure off the public health system by encouraging higher-earning Aussies to take out private hospital cover. It’s an additional surcharge (up to 1.5 per cent of your taxable income) that you’ll pay at tax time if you earn over a certain amount and if you don’t have hospital cover.

Who needs to know about it? Anyone earning more than $97,000 a year (for singles) or $194,000 a year (for couples and families). If you earn more than these thresholds and want to avoid paying the MLS, you need to hold eligible hospital cover through the financial year.

Want to know more? There are a lot of specific rules that may affect your personal situation, so you need to take care when getting the info you need. That’s why we recommend checking out the ATO website for more information, including who is considered a dependant for MLS purposes.

The Australian Government Rebate on private health insurance

What is it? The ‘rebate’ is a government incentive that helps Aussies with the cost of their private health cover (for both hospital and extras). For most people, the rebate is the percentage of your health cover that the government pays for you as an incentive for taking our private health cover. It’s means tested, so the amount you’re able to receive depends on things like your income, your age and the number of dependants you have.

Most people get their rebate as a reduction on their premiums (we can help you with this application when you join or at any point you’d like to change) or claim it as a tax offset at the end of each financial year.

Who needs to know about it? Anyone with private health cover, or anyone looking at taking up private health cover.

Want to know more? Just like MLS, there are a lot of specific rules and elements that may impact your personal situation, so it’s best to get the most up-to-date information directly from the ATO website.

Lifetime Health Cover loading (LHC)

What is it? LHC is an incentive designed to encourage people to take out private hospital cover earlier in life. From 1 July following your 31st birthday, you’ll pay a 2% LHC loading on top of the usual premium for each year you haven’t had hospital cover since turning 30. LHC can be charged up to 70%.

The good news is you don’t have to pay LHC forever; it will be removed from your premium payments after 10 continuous years. LHC loading only applies to hospital cover, so you won’t pay it on extras or ambulance only cover.

Who needs to know about it? Anyone approaching 30 who doesn’t want to pay more for their hospital cover. Plus, if you’ve previously had cover since turning 31 (but let it lapse), you’ll want to be in the know about LHC.

Want to know more? Get the full details on LHC on the ATO website.

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