How the Australian Government Health Insurance Rebate Works

Families and individuals who take out private health insurance packages may be eligible for a Government rebate on that insurance.

 

The Australian Government Health Insurance Rebate applies to hospital, general treatment and ambulance cover. Every year, private health funds are given a rebate adjustment factor by the Australian Government which is applied to the premium of each customer.

Why was the Health Insurance Rebate created?

The health insurance rebate was created as an incentive for more people to take out private health insurance policies by providing a discount on their premiums. The rebate is designed to make the cost of private cover more affordable and available to more Australians.

The initiative also encourages people to look into more comprehensive cover that is better tailored to their individual needs rather than just selecting basic cover due to affordability.

What level of rebates do people get?

The health insurance rebate is available to all Australian citizens and Permanent Residents who have a private health insurance policy with a registered provider. While all types of cover fall under the rebate structure, the amount you receive is based on your age and household taxable income.

The incomes of both singles and couples/families are divided into a tier system with ‘Base Tier’ being the lowest income earners and ‘Tier 3’ being the highest. The level of rebate you’re entitled to under a couples/families cover is based on a combined income and the age of the oldest person covered under the insurance policy. The lower your income and the older you are, the higher your rebate percentage.

For example, if you’re single, 40 years old and earning $95,000 annually, you’ll be entitled to a 17.861% rebate.*

If you are a couple earning $220,000 annually and the oldest member on your policy is 55 years, you’ll be entitled to a rebate of 8.930%.*

The income thresholds are increased by the Australian Government annually and are based on the growth of Average Weekly Ordinary Time Earnings. For families with children under their private health cover, the income thresholds are increased by $1,500 per child after the first.

The rebate is calculated as a percentage of the insurance premiums paid excluding any Lifetime Health Cover loading that may be applicable.

* These rebate percentages are effective for those payments made after 1 April 2016. The rebate percentages will change on 1 April 2017.

Does the rebate apply to everyone?

The rebate applies to individuals or families who have a private health insurance policy with a registered health fund. You also must be an Australian Citizen or Permanent Resident to qualify.

As the rebate is income tested, those falling outside the tier system will not be eligible for the rebate. Singles earning an income of more than $140,000 and couples earning more than $280,000 per year are not entitled to receive a rebate on their premiums.

How do you claim the rebate?

Claiming the private health cover rebate is a quick and simple process. There are two ways you can claim your private health cover rebate:

  • Through a reduced premium; or
  • Through your ATO tax return

The majority of customers eligible for a rebate choose to claim it as an upfront sum, which reduces the amount they pay their insurer in premiums. If you choose this option, you’ll be required by your insurance provider to nominate the tier you believe you fall under when you first take out the policy.

If you join a Members Own fund through our website or by speaking with one of our health insurance experts, you will be required to nominate your rebate tier.

In the event you choose the wrong tier and end up receiving a higher rebate than you’re entitled to, you may be required to pay back the difference when you lodge your tax return. If you choose the wrong tier and receive a rebate lower than you’re entitled to, you’ll see the difference returned to you as part of your annual tax return.

For those customers choosing to receive the rebate as part of their annual tax return, they will be required to submit a private health insurance statement with their tax return. You’ll receive your rebate at the end of the financial year instead of receiving a discount on your premium.

The Australian Government Health Insurance Rebate is designed to make private health insurance more affordable and appealing to more people. If you’re a Members Own customer and want to know more about your eligibility for the rebate or how to claim, please give us a call.