After much consideration, it’s time for your child to come off your health insurance policy and take out their own. So what should you tell them to best prepare for this transition? With an average singles policy (hospital and extras) coming in at $2,474, it’s crucial for young adults to understand the added expense of taking out cover and how to save on costs across GP visits, insurer discounts and so on.
Comparethemarket.com.au spokesperson and health insurance expert Abigail Koch outlines six crucial pieces of advice to pass on when your child is first introduced to their own health policy:
Break down the difference between hospital and Extras cover
Does your child know the difference between hospital and Extras cover?
Hospital cover provides a benefit towards the cost of treatment in hospital, giving your child greater control over who they’re treated by, and where and when they’re treated. The higher the level of cover, the more procedures they’ll be covered for.
Extras cover on the other hand, pays a benefit towards treatment for things that Medicare won’t cover outside of hospital. This could include services like dental, optical and physio, depending on the fund and policy they choose. With Extras, it is all about your child’s lifestyle and needs. There are two different ways that health funds will calculate benefits for Extras treatment, either as a percentage of the fee charged by the provider (e.g. 70% back for a Chiro appointment) or as a fixed dollar amount (e.g. $50 rebate per Physio appointment). Explain to them that most Extras benefits will also have a maximum annual limit for how much you can claim in year.
Find out how insurance levies/rebates will impact your child
Government levies, loadings and rebates can be hard to understand, and leave decision making increasingly difficult. Below are three current initiatives they need to consider when deciding to take out health insurance:
- Private Health Insurance Rebate: Most people with private health insurance get a rebate from the Government to help cover the cost of premiums. The private health insurance rebate is income tested and applies to hospital, Extras and ambulance policies
- Medicare Levy Surcharge: The MLS is a levy paid by tax payers who do not have private hospital cover and who earn above a certain income. The surcharge is calculated at a rate of 1% – 1.5% of their income. This is in addition to the Medicare Levy of 2%. Your child may have to pay the surcharge if they are single and have an annual taxable income greater than $90,000; or if they have a family/are in a relationship and have a combined taxable income greater than $180,000
- Lifetime Health Cover Loading: LHC is a financial loading which is added to the base rate premium for their hospital cover. If your child doesn’t have hospital cover and decides to take it out later in life, they will have to pay an additional 2% loading on top of their premium for every year following their 31st birthday (after 1st July)
Make sure they jump on insurer benefits
When your child is choosing an insurer to stick with, explain how different policies have various levels of benefits and offers. Many insurers offer incentives for first-time policyholders such as six weeks free, waived waiting periods and gift cards. Certain policies can also offer benefits such as gap free dental depending on the practice they visit.
They shouldn’t automatically choose the same policy you’re on
Don’t suggest to your child that they should take out the same policy as you. You may have taken out top health cover including services such as health aids or hip/knee replacements however; as your child is young, they probably won’t need to pay for this level of cover. Help them compare options and tailor the policy to suit their lifestyle – not your own!
Help them prepare for emergencies with ambulance cover
An ambulance trip is one of the most expensive taxis they’ll ever take so it’s especially crucial for them to check if ambulance cover is included as part of their policy. In NSW, VIC, SA, WA and ACT, your child could be forking out anywhere from $400 – $1,200 for the call-out fee alone.
Watch out for the added expense of GP visits
One of the main misconceptions of health insurance is that it covers GP consultation and specialist fees. These costs can quickly add up depending on how long the visit takes. It’s important for your child to remember that Medicare will pay a benefit towards these costs, but it won’t cover the whole amount (unless it’s being bulk-billed). They should always check the costs involved and how much Medicare will pay before they arrive for their appointment. Otherwise, they could face unexpected out-of-pocket costs.
 IPSOS Mori data (Jan 2018) commissioned by comparethemarket.com.au