Last Updated on 25 August 2020

Turning 31? How to Save on Your Private Health Cover

Entering your thirtieth year can mark a major milestone in the progress of a lifetime. In Australia, reaching that mark often includes making key decisions about private health insurance (PHI) for singles, couples and young families.

The interwoven threads of financial incentives and disincentives to taking out private health insurance (PHI) in Australia are often confusing to many young people. The segment of the population under 35 is the least likely to require health care and therefore most likely to ignore PHI and rely on Medicare as their insurance of choice. Young people may still be hospitalised. Check out this chart of hospitalisations by age.

Hospitalizations by age.

Nonetheless, young Australians who are about to or have just turned 30, whether single, married or starting a family, who have not taken out private health cover will need to confront three major issues going forward – see Table 1. We’ll look at each in turn

Financial incentives for young Australian adults to join the PHI system

Incentive Penalty/Reward Group affected
LHC Loading 2% loading fee per year Over 30s without hospital cover
Medicare Levy Surcharge 1% to 1.5% per year Incomes $90,000+


Lifetime Health Cover (LHC) Loading

The most important financial incentive to joining the PHI system by the time you reach the age of 31 is to avoid paying the LHC Loading.

LHC loading is an extra 2% on top of hospital premiums for every year over the age of 30 that you do not have hospital cover. If you do not buy hospital cover until you are 36, you pay an additional 10% on your premiums, for example.

Key facts:

  • Full name: Lifetime Health Coverage Loading (LHC Loading)
  • Affects hospital cover
  • Effective at: 1st July after your 31st birthday
  • 2% added to premiums for each year without hospital cover over the age of 30

The point of LHC loading is to encourage Australians to buy hospital cover when they are younger rather than when they are older and more likely to use the hospital system. It is a powerful incentive for Australians to take out PHI at a younger age, especially when added to other incentives.

However, the demand from younger Australians for lower-cost policies has led to a growth in so-called basic coverage PHI policies. These bare-bones plans typically offer the minimum amount of coverage prescribed by law and exclude certain types of medical services, including some commonly used by younger people – see Table 2.

Table 2 – Typically excluded treatments in basic PHI coverage

  • Assisted reproduction and IVF
  • Obstetrics and birth-related care
  • Non-cosmetic plastic surgery
  • Gastric banding and obesity surgery
  • Psychiatric care
  • Rehabilitation

Couples in their early thirties thinking about starting a family, for example, should bear in mind that bare-bones basic-coverage policies typically exclude all reproductive and obstetric care, as indicated in the table.

Medicare Levy Surcharge

A further incentive for younger taxpayers at higher income levels to buy PHI is to avoid paying the Medicare Levy Surcharge (MLS) while receiving the Private Health Insurance rebate. Each begins to impact the taxpayer at income levels around $90,000 per person.

1) Medicare Levy Surcharge

Acronym: MLS
Kind of PHI affected: hospital coverage
Effective at: $90,000 (individuals) and $180,000 (couples/families) annual income if no PHI
Tax rate: 1%-to 1.5%

You must pay the MLS if you earn $90,000 or more as an individual or $180,000 as  couple of family and do not have eligible hospital cover. This acts as an incentive on taxpayers to take out private hospital cover.

Medicare Levy Surcharge Calculator

The Medicare Levy surcharge is an additional fee paid on top of the 2% Medicare Levy Surcharge that most Australian taxpayers pay. You can avoid the surcharge if you have Private Health Insurance (Hospital Cover).

The exact surcharge level you'll need to pay depends on your income level and relationship/family status. Use the slider and dropdown menu below to determine what surcharge you're liable for if you don't have private hospital cover.

Your Medicare Levy Surcharge is 0.00% of your income, or $0.00
Singles ≤ $90,000 $90,001 - 105,000 $105,001 - 140,000 ≥ $140,001
Families ≤ $180,000 $180,001 - 210,000 $210,001 - 280,000 ≥ $280,001
Medicare Levy Surcharge
Standard Tier 1 Tier 2 Tier 3
All Ages 0.0% 1.0% 1.25% 1.5%

Extras Insurance

This refers to areas of PHI that are not typically included under the basic hospital cover demanded of the incentives programs. Consumer-information outlets like Choice  typically recommend that consumers buying PHI for tax purposes only should not include Extras policies, since these are not considered for tax purposes. In addition, Extras insurance typically only covers part of the cost of services like dentistry and optometry.

Once children, Extras cover can be invaluable. Any parent with growing children these days knows the strain that children’s dental expenses, in particular, can place on a family’s budget.

Action Plan

Avoiding the LHC loading of 2% per year accumulated is a good reason for Australians who have entered their 30th year to buy health insurance, especially for anyone earning (or likely to earn) more than the income thresholds. This is because it will remove the Medicare Levy Surcharge. It is important to remember that PHI costs are also partially subsidised by the government through the health insurance rebate.


Still have questions? Let's talk!

Confused? Not sure if this applies to your situation? Phone us on 1300 163 402 for some free, no obligation advice.


Or want to compare policies now?