Cut health insurance costs with these age-based discounts

Those aged under 31 could have cheaper (or even free) health insurance. (Source: Supplied/Getty) (Samantha Menzies)

This is part two of a two-part series on getting top health insurance cover for the lowest cost and slashing your tax in the process. You can read part one - on why you need to urgently sign up for insurance if you earn above $93,000 as single or $186,000 as a couple - here.

Health insurance changes were one of very few positives to come out of the COVID-19 pandemic era.

With jobs shut down and Aussies locked up, many young people were forced to either stay in, or return to, their parents’ house. And that’s where the government made some health cover concessions. But the problem is not many Aussies know about it.

Dependents and big age-based discounts

Thanks to COVID, the government increased the age single Aussies can be considered a dependant under private health insurance policies. The 'dependant' age moved from 24 to 31, and the age limit for dependants with a disability was removed.

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These laws have been in place since 2021. But in a really strange move, this change was optional: an insurer can choose to define and set their own age range for dependants. This means that some have raised it to around 29, rather than the full possible 31. I’ll get to why age 31 is important when it comes to private health next.

To figure out who is a dependent under your policy, you’ll need to contact your – or your parents’ – insurer to find out what they offer. But what is straightforward is the huge discounts on offer for younger people who don’t live at home and who take out their own policy.

As of 2019, insurers have been able to offer 18-to-29-year-olds up to 10 per cent off private health premiums. They also get to keep this discount until age 41, when it will be gradually phased out.

The maximum 10 per cent is made up of an allowable 2 per cent discount for each year a person is aged under 30. Note, this isn’t relevant to people who qualify as dependants on parents’ policies above because while they’re living at home, they’re free.

So, what is it about age 31? Forget cutting cover costs by virtue of your age - the opposite will happen if you wait until then to get your own private health insurance.

The lifetime loading on 31-year-olds

Did you turn 31 this tax year? Or perhaps you are older? There is a pricing measure designed by the government to ‘persuade’ you to take out private health by this age, or pay extra. Your so-called lifetime health cover base day will be the July 1 following your 31st birthday.

If you fail to take out cover by this date, you will be slugged with a 2 per cent loading on top of your hospital premium for every year you are aged over 30. In extreme hip-pocket premium pain, the maximum loading that anyone can pay is all the way up to 70 per cent. You’ll, logically, pay this massive premium penalty if you have delayed 35 years.

The only reprieve is that increased premiums - due to the loading - do stop after 10 years of continuous hospital cover – in other words, once you have held private hospital cover for 10 straight years.

But with the cost increasing by 2 per cent every year after 31, as your needs for medical services may also start creeping up, is it worth locking in the cheapest rates while you can? With July 1 around the corner, you have no time to lose.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter and Instagram.

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