Health cover is in your court

Pay-off: Insurance absorbs some of the pain when injuries occur. Photo: Rob HomerI’m an accountant, but at the moment I feel like an insurance salesman. That’s because many people are only now seeing the effect of the recent changes to the private health insurance rebate when they lodge their tax return. The two questions I’m asked most are ”What is this all about?” and ”Do I really need private health insurance anyway?”

Like most good politicians, I don’t like to give a yes or no answer. Instead, I tell a story that, hopefully, will help my clients decide.

When I was in my 20s, I made a decision not to take up private health insurance. I was young and healthy, but I was playing netball and I’m also a klutz. So I decided that instead of paying private health insurance premiums to an insurance company, I’d put the equivalent amount each month on my mortgage as my own self-funded insurance.

This worked until I turned 29 and suffered a serious ankle injury playing netball. Choosing a surgeon was important to me, so the operation set me back thousands of dollars. As I had been paying the premiums into my home loan, I had the money to pay for the operation, so it wasn’t a big deal; it just hurt to hand over such a large sum.

However, at that point I was at a crossroad. With my buffer gone, I could continue paying my health insurance allocation into my mortgage and hope not to suffer an injury for another five years, or I could take out private health insurance. As I was 30, not taking up cover also meant I would pay an additional 2 per cent for each year that I delayed, so I made a calculated decision/gamble to take out private health insurance.

With the changes to the private health insurance rebate last year, I have removed the rebate completely from the premiums I pay, just in case I earn too much and have to pay it back at tax time.

Not everyone will make the same decisions, but here are the key points.

1. If you choose not to take up private health insurance, make sure you put away a regular amount so you have options if you suffer injury or illness.

2. Turning 29 is a good time to reconsider private health insurance if you have not taken it up already. If you choose not to, you will be charged an extra 2 per cent a year for each year you delay.

3. If you don’t have private health insurance and your income is rising, you should weigh up the costs of private health insurance against the Medicare levy surcharge. If you can find the necessary hospital cover for about the cost of the 1 per cent surcharge, you should take it: by paying the surcharge, you won’t receive any special treatment if you go to hospital, but the same amount paid to hospital cover should give you some benefits.

4. If your income is approaching the threshold for the reduction of the 30 per cent rebate, make sure you contact your private health insurance provider and ask for the rebate to be reduced or removed. That way you won’t have to pay back any rebates that you weren’t entitled to come tax time.

Of course, the rules for private health insurance may again change but this doesn’t mean you should do nothing. The most important thing is to make a conscious decision about private health insurance and not have your decisions removed from you if you are injured or forced to pay surcharges at tax time.

Melissa Browne is an accountant, adviser and author.

Twitter: melbrowne_

The original release of this article first appeared on the website of Hangzhou Night Net.

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