Why Renting In Melbourne Is Seriously Affecting Your Health
For so many young Aussies, health insurance is on the ‘if and when I can afford it’ list rather than the ‘must have’ list. Between rent, phone bills, savings, travel and smashed avo, the average pay check doesn’t stretch too far for most millennials. Ironically, in our pursuit to save, we could end up costing ourselves MUCH more in the long run…
Ever heard of ‘Lifetime Health Cover’ (LHC) loading? Nope, me either. Here’s a quick rundown. LHC was introduced by the Howard government in 2000 as a scheme to encourage Aussies to get health insurance earlier in life. Thanks to the government’s LHC loading, Australians who wait until they’re over the age of 31 to take out private hospital cover will be penalised with a 2% loading on top of their premium for EVERY year they were without cover. If you wait until 35 to take out hospital cover, you’ll pay 10% more for hospital, by 40 you’ll pay 20% more and so on. Basically, not paying for private health cover in your 20s, will essentially result in an additional charge in your 30s. Bummer, right?
Unfortunately, the Howard government could not predict the housing crisis or the steep increase of the price of artisan coffee. Ok, mainly just the former, but the point is that with 57% of young Aussies listing ‘saving to buy a home’ or ‘paying off a mortgage’ as their biggest financial priorities*, there are significantly less millennials taking out health insurance because they simply can’t afford it. Health insurance experts, iSelect have seen the number of customers aged under 30 decrease by half over the last five years.**
Laura Crowden, iSelect spokesperson, said the decline in customers under 30 suggests that the LHC loading, which was originally introduced to encourage young people to take out private health insurance, may in fact be having the opposite effect 17 years later. “The average age of first home buyers is now believed to be around mid-thirties***, which means many young Australians are firmly focused on saving a deposit when they reach the LHC deadline. As a result, private health is simply not a financial priority.”
So, what now? Laura reckons education is the key, “it’s really important young people understand the implications of not having hospital cover by 31.” It’s all about making an informed decision and being aware that going without private health insurance in your younger years means you could be stung later in life, or simply unable to afford it at all. Sorting it all out is as simple as having a chat to a private health insurance expert who can explain how this whole LHC thing impacts you and which policy will help you avoid or at least reduce the burden.
In the meantime, here are some super helpful hints from iSelect for taking out private health insurance for the first time:
Think about your current and future health needs
Consult a private health insurance expert to discuss your life stage. This ensures you take out the right policy that covers you for everything you need and so you are not paying for things you don't need.
Only hospital cover delivers tax benefits
Taking out an extras only policy will not deliver any tax benefits, such as excluding you from the Medicare Levy Surcharge. If you earn over $90,000 (single) or $180,000 (couple) and are looking to save on tax, make sure your private health insurance includes hospital cover.
Review the extras
If you don't think you'll use them, why pay for them? Consider flexible extras products that combine your separate extras limits into a single annual limit or opt for an extras policy that guarantees a set percentage back (usually between 50-80% depending on how much you pay) up to an annual limit.
Make sure ambulance is covered
Not all private health insurance policies include ambulance cover and it can also vary by state. Make sure your policy includes ambulance cover or you could be left significantly out-of-pocket after an emergency.
Look for payment discounts
Some providers offer a discount for paying by direct-debit. Similarly, paying 12 months of premiums upfront can see you avoid the annual premium increase.
* In May 201 iSelect commissioned a nationally representative consumer research study with Ipsos Australia to assess the attitudes of over 1,500 Australian adults towards private health insurance and Lifetime Health Cover (LHC) loading.
**Based on iSelect sales data comparing customers under 30 from 2012 to 2017.
*** Home Start Finance (South Australian Government authority), 12 January 2017: http://www.homestart.com.au/MyStart/MyStart/Articles/Who-had-it-harder-buying-your-first-home