Private hospital insurance: incentives and penalties
If you’re a higher income earner or under 30, you should know about the incentives and penalties that could impact you when it comes to having private hospital insurance. Taking out cover now has benefits not just for accessing healthcare but also at tax time. Knowing about these benefits will help you make the right decisions for you when it comes to your own health.
Avoid the Medicare levy surcharge
Australian taxpayers who don't have private hospital cover and earn over $105,000 as a single, or $210,000 as a couple or family*, will need to pay a Medicare levy surcharge of between 1% and 1.5% on top of the standard 2% Medicare Levy.
This Medicare Levy goes towards supporting the funding of our national public healthcare system. And the Medicare Levy Surcharge is designed to encourage people to take out hospital cover and use the private healthcare system, which will reduce the strain on the public system.
If you earn over the income threshold, you can avoid paying the Medicare Levy Surcharge by taking out an appropriate level of private hospital cover for the full tax year. If you take out hospital cover part way through the year, you will pay the surcharge for the number of days you weren’t covered.
For more information on the Medicare Levy Surcharge, visit ato.gov.au
Other initiatives to reduce the amount you pay
There are several other initiatives to encourage private hospital cover uptake by reducing the cost. Some are age dependent, so making the most of them while you are younger can have real benefits.
- Australian Government rebate on private health insurance – this income tested rebate can be claimed either as a premium reduction, that is, you pay less upfront to your health fund, or as a tax offset when lodging your annual tax return. It helps reduce the premium you pay.
- Aged-based discount – if you are under 30, this discount can reduce the cost of taking out private hospital cover by up to 10%, depending on the age at which you join. It’s optional for health funds to apply this discount, so you should double check with a fund before you sign up. Doctors’ Health Fund supports the age-based discount and offers it for all levels of hospital cover.
- Lifetime Health Cover (LHC) loading – this loading is a penalty that can apply if you don’t take out hospital cover by your 31st birthday. Over the age of 31, you will be charged a 2% loading for each year you do not have private hospital cover. This can drive up the cost of your premiums considerably. And, once you have a loading, it applies for 10 continuous years.
Access healthcare sooner
When it comes to hospital treatment in Australia, we’re lucky to have a public health system that looks after you in the case of most accidents and emergencies. However, because urgent cases take priority, scheduled surgeries can have long wait times and may even be pushed back. In public hospitals you’ll usually have to see whichever doctor is available, rather than request your preferred doctor or specialist.
Depending on the hospital, the type of treatment, and how urgently you need it, taking out hospital cover and being treated as a private patient can help to reduce your waiting times and choose your preferred doctor.
Health insurance with Doctors’ Health Fund
Understanding private health insurance and choosing the right health fund can sometimes be overwhelming. Luckily, there’s a health fund that has been made especially for doctors and, as part of Avant, supports the medical profession.
Our friendly and expert team can explain everything you need to know about health insurance and help find the best cover for you. Contact us on 1800 226 126 or visit our website.
* Income thresholds apply for the 2025-26 income year.
Note this is general information, and it is important to always do your research before making a decision about your health insurance. More information on government initiatives for private health insurance can be found at ato.gov.au and privatehealth.gov.au.