Consumers told to hold on hospital cover:

Choice has crunched the numbers on the impact of the means test for private health insurance rebates, finding that consumers affected by the upcoming means test who are thinking of dumping private health insurance will probably save money by holding on to their hospital cover.

The people’s watchdog says most people, including higher income earners, will save money if they keep their hospital cover because the alternative means paying 1% -1.5% of their income on the higher Medicare Levy Surcharge (MLS).
 
“If you’re a higher income earner and things are getting tight, don’t rush to dump your private hospital cover. If you do, you’ll be hit with the higher Medicare Levy Surcharge that comes on top of the Medicare Levy most people pay,” says Choice spokesperson Ingrid Just.
 
From the 1^st of July 2012, singles earning more than $84,000 a year and couples or families earning more than $168,000 a year will pay more for hospital and extras cover because their current rebate will be reduced. At the same time, the MLS will be increased for higher income earners who don’t have hospital insurance.
 
Choice says some people who have extras as part of their private health insurance find that they’re not getting value for money, particularly if their claims are minimal.
 
“If the money you’re paying for extras is a lot more than the amount you’re getting back in claims, you’ll be better off keeping your hospital cover but dumping your extras and putting that money into a separate account for those medical expenses.  
 
“If you’re in the high income range, another way to save is to pre-pay your yearly premium before June 30 this year, thereby benefiting from the existing rebate and avoiding the means test for another 12 months,” says Ms Just.
 
Choice says consumers are confused by private health regulation, and that the federal government and private health companies need to help people understand how the means test and higher Medicare Levy Surcharge may affect them.
 
In a survey of 2558 Choice members, Choice found most people have little understanding of the health insurance rebate, Lifetime Health Cover and the Medicare Levy Surcharge.
 
The lack of understanding about private health insurance regulations means that consumers are putting a lot of trust in a system they find bewildering.  
 
“With more knowledge, they can make the system work for them – not the other way around,” says Ms Just.
 
For an explanation of private health insurance jargon and to read more about Choice’s private health survey, visit www.choice.com.au/healthinsurancerebate.