Health Insurance for Young Adults

Different types of health coverage are provided by different companies in the market today. Each type of insurance caters to the different needs of the buyer, and it is therefore important to understand what each type of insurance covers and offers. Generally, there are three main types of health cover insurance. The three types and their description are as follows:

Private Hospital Cover

Private hospital cover is a health insurance policy that will cover the costs associated with going to the hospital for elective surgery. The main benefits of private hospital coverage are that you get to choose the hospital and avoid public waiting lists for elective surgeries. Different companies offer a list of different hospital covers. Each of these covers slightly different medical treatments and procedures. In general, these can be broken down into 7 different categories:

1. Basic Hospital
2. Basic Plus Hospital
3. Bronze Hospital
4. Bronze Plus Hospital
5. Silver Hospital
6. Silver Plus Hospital
7. Gold Hospital

By law, if your hospital policy has the word “Basic” in its name, then that policy has to cover all of these clinical categories

• Rehabilitation
• Hospital Psychiatric Services
• Palliative Care

If your hospital policy has “Bronze” in its name, then it has to cover all the services in Basic, as well as:

• Brain and nervous system
• Eye (not cataracts)
• PEar, nose and throat
• Tonsils, adenoids and grommets
• Bone, joint and muscle
• Joint reconstructions
• Kidney and bladder
• Male reproductive system
• Digestive system
• Hernia and appendix
• Gastrointestinal endoscopy
• Gynaecology
• Miscarriage and termination of pregnancy
• Pain management
• Skin
• Breast surgery (medically necessary)
• Diabetes management (excluding insulin pumps)

If your hospital policy has “Silver” in its name, then it has to cover all the services in Bronze, as well as:

• Heart and vascular system
• Lung and chest
• Blood
• Back, neck and spine
• Plastic and reconstructive surgery (medically necessary)
• Dental surgery
• Podiatric surgery (provided by a registered podiatric surgeon)
• Implantation of hearing devices

If the hospital policy has “Gold” in its name, then it has to cover every clinical category, including:

• Cataracts
• Joint replacements
• Dialysis for chronic kidney failure
• Pregnancy and Birth
• Assisted reproductive services
• Weight loss surgery
• Insulin pumps
• Pain management with a device
• Sleep studies

You can choose any of these categories based on your needs. When you see a Basic Plus, Bronze Plus or Silver Plus policy name, that means that this policy covers everything associated with that category level but also covers at least one more surgery from the higher level. In any case, it is best to refer to your policy to have an idea of what it covers.

Extras Cover

Extras cover includes a range of out-of-hospital services like dental, optical, physiotherapy, and hearing aids. You can select the services you need and pay for them only. Such type of insurance will help you save big bucks every time you need to buy a pair of glasses, prescription lenses, dental check ups, a remedial massage, and more, but only if they are under your extras cover. When selecting an extras policy, you want to be mindful of a few things, such as:

1. What extras do you need and use?
2. What is the yearly limit on the extras? (How much can you claim in total)
3. What is the rebate on the extras? (When you swipe your card, how much do you get back)

When looking at an extras plan, you should remember that If you don’t use the medical service often, you don’t need to worry about the yearly limit; only focus on the rebate. Conversely, if you use a medical service often, look for a higher yearly limit. If you follow these rules when selecting an extras policy, you’re on the right track to finding a good value plan.

Combined Cover

Combined cover is a type of health insurance where you get both hospital and extras on the same policy. Most hospital policies have the word “hospital” in them, such as Bronze Hospital $500 Excess or Silver Plus Hospital $250 Excess, and most extras policies have the word “Extras” in the name, such as “Core Extras” or “Vital Extras”. Combined policies will generally not have the word “hospital” or “extras” in their name, so you might see a product called “Top Choice $500” or “Deluxe Package Silver Plus”, and you know it’s combined.
So, for some people, a combined cover might be best; for others, it might be just a standalone hospital or extras plan, and for others, it might be best that they have a hospital policy with one health fund and an extras policy with another health fund. It’s all about making sure you find a tailored solution to your individual health needs.

The first and most important step is selecting a health insurance plan, not just any plan but one that works for you in terms of your budget, medical needs, and necessity. To make this decision, there are a few factors to consider:

Budget

Stepping into adult life can be scary and often financially hard with all the commitments of rent, education, and everyday living costs. This is why considering your budget and affordability before choosing a policy is the most important point to keep in mind. Your health fund will have to pay a premium based on your policy, allowing you to pay the premiums fortnightly, monthly, and so on. Each health fund has a basic policy that might work for a lot of young people who are medically healthy and do not have any special needs. However, this policy might not work for young people with specific needs or medical issues.

Medical Needs

One should always select a policy based on one’s medical needs so that the health fund policy can actually be useful to you in your time of need. Assess your overall health and what it might look like in a few years. If you believe that you are in good health and might not need a policy that covers a lot of medical treatments, then a basic policy that will cover you in case of any accidental emergency should be enough. However, if that is not the case, you might need a higher-tier policy. We always emphasise the importance of reading the fine print of your policy, as this will help you make the right decision and make sure that you are not caught off guard in any situation.

Policy Benefits

Always consider what are the benefits of the health insurance policy and, which health fund is offering what sort of benefits might be useful for you. Some policies offer discounts on dental and optical treatments, some offer an initial few months free when starting a policy, and some might offer you discounts on other types of insurance. It is, therefore, very important to compare the policies and waiting periods and browse the market before deciding on a policy. Health Deal’s insurance comparison tool comes in handy in these situations. You can use this tool to find the policy that works for you while making it the most cost-efficient and beneficial for yourself.

Staying On a Parent’s Policy vs. Getting Individual Coverage

As a young adult in Australia, you might already be on a private family policy under your parents’ names, but is it better that you stay on that policy or get individual coverage for yourself? Well, it depends on a few factors. Firstly, according to Australian regulations, young people are permitted to stay on their parent’s family policy until the age of 31 under the new reforms if they are financially dependent on them or are full-time students. Staying on a family policy can be beneficial for you as it will give you access to a wide variety of services like choice of doctor or a private room that may not be included in a basic policy.
However, some health funds require additional premiums in case of a family policy to cover adult children. Once you turn 31, you no longer meet the dependency clause and should take out your own policy. This can benefit you as you can get a policy that suits your needs the most.

Focusing On Cost and Coverage Differences

When getting a policy, it is best to pay good attention to the cost and coverage of the policy. Even though basic policies may be cost-effective, they may come with higher out-of-pocket costs, reduced benefits, and fewer services. On the contrary, expensive policies may offer a large number of covered medical services, but there is a high chance that you may have no use for them at this stage of life. So, finding a balance between these two extremes is the way to find the policy that works for you.

Adequate coverage

As explained earlier, each policy offers some sort of coverage. For example, a basic policy generally offers coverage in case of an accident, but if there is no accident and you need elective surgery, this is why it is very important to get adequate coverage for yourself, keeping in mind what your future health can look like. Based on this, choose a policy that will not leave you paying hefty fees from your pocket.
Please consider the above-listed points to find the policy that works for you. In addition to them, keep your eye out for promotional offers and discounts that the health funds might offer. Additionally, lots of health funds offer age-based discounts to young people when they take out a policy. So, before settling on a policy, make sure you have considered all of these points.

Previously, the age limit for a young adult to be dependent on a parent was 25. In 2021, this limit was increased from 25 to 31, meaning that young people can remain on their parents’ health fund policy until 31. However, each health fund has the freedom to set its own limit for keeping dependents on a family policy. It is, therefore, suggested that you check in with the health fund covering your family policy. This will help you plan your health fund policy.
Family policies often cover two individuals and their dependent children, whereas single-parent policies cover single parents and their dependent children. The same age limit applies here, and health funds have the same freedom to choose and apply their dependent cut of age to the policy.

Private health fund cover comes with a range of benefits for policyholders. These benefits are exclusive to private health cover and can come in very handy. The benefits include the following:

Access to Broader Health Services

Having private cover gives you access to broader health services that are not covered under Medicare. The exact health services you will have access to depends on your policy.

Reduced Waiting Times

Waiting times in public hospitals are very long, but if you have a private health fund with hospital cover, you will have shorter wait times for elective surgery.

Private Room Options (Where Available)

When you get any hospital treatment or surgery done in a public hospital, your pre and post-surgery room will be a shared room separated by curtains or dividers. However, you might get a private pre- and post-surgery room if you have a private hospital cover. This comes in very handy if you need to spend a few nights in the hospital.

Additional Perks

Private health cover also offers additional perks like gym memberships and mental health services that aren’t available through public health options. However, the exact type of additional perks will depend on your policy and your insurance provider.

Mental Health Support:

Mental health support is very important and often overlooked in most cases. With private health cover, young people can access mental health support services that will not only help them live their lives to the fullest but also help them achieve their goals. Different health fund policy tiers offer mental health support as a covered service. Make sure to check out the annual limits on the service and what it can mean for you.

Potential Tax Benefits

The Medicare Levy Surcharge is a levy that is paid by an Australian taxpayer who currently earns above a certain income and does not hold private hospital insurance. However, if you have a private hospital cover, you gain potential tax benefits as you will avoid the Medicare Levy Surcharge.

There are a few ways that young Australians can save money and maintain adequate private health insurance. Here we discuss the two most important ones:

Age-Based Discounts for Young Persons

Private health insurance is not always cheap and is an added expense for young people when they take up their own policy. A few different costs are associated with a health fund policy, but the most important among them is the premium. Health insurance premiums are the regular payments you pay to maintain the policy coverage. You can choose to pay them fortnightly, monthly, quarterly or yearly. The amount of your premium will depend on your insurance provider, what sort of coverage you have, what services are covered, and the excess level. It is important here to note that once you stop paying your premium, your coverage will cease. Some health funds will give you an extra discount if you pay yearly, and some will give you a discount if you pay via direct debit, so it’s worth asking when you sign up if you are entitled to any of these discounts.
In addition, young people are eligible for age-based discounts. This is a government incentive to offer young people some relief on their insurance premiums. The allowable youth discount is 2 percent for each year that a person is aged under 30, to a maximum of 10 percent for 18- —to 25-year-olds. These age-based discounts do not apply to young people aged 18-29 years who are covered as a dependent on a family or single-parent policy. A person can either have their own policy and be eligible for an age-based discount or be covered as a dependent, but not both. If a policy offers age-based discounts, they are available to both new and existing policyholders.

So when you turn 41, the age-based or youth discount is reduced by 2%. If you previously had an existing 10% discount, it will reduce to 8% when you turn 41. For each further year, the youth discount will be reduced by a further 2% until it reaches 0%.

Strategy to Avoid the Medicare Levy Surcharge

The Medicare Levy Surcharge (MLS) is a levy paid by an Australian taxpayer who currently earns above a certain income and does not hold private hospital insurance. The MLS encourages people to take out private health insurance, which would reduce the burden on the public health care system. Generally, the surcharge is calculated at the rate of 1% to 1.5% of your income tier and family status. MLS and the private health insurance rebate have a very meaningful relationship. Both schemes work towards making private health care more appealing and accessible to the general public. You will not have to pay any MLS if you are eligible for private health insurance.

Lifetime Health Cover (LHC)

Lifetime health cover loading is the additional cost for those who take out hospital cover after the age of 31 years. This means that if you have not taken out any private hospital cover after turning 30, and later on you decide to buy one, you will have to pay a 2% LHC loading cost on top of your premium for every year you are aged over 30.
A simple example for you to understand this loading fee is that if you take out private hospital coverage at the age of 40 years old, you will then have to pay an extra 20% on the cost of this coverage per year for 10 years. Likewise, if you buy a policy when you are 50 years old, you will pay 40% more per year for 10 years. This is why it is recommended that before you turn 30, you should have private health insurance in place, which will save you a good amount of the loading fee in coming years.

The Young Persons Discount is an incentive to encourage young Australians to take out hospital cover early. It offers a discount on health insurance premiums, helping young Australians save on hospital cover costs. Young people aged 18 to 29 can receive up to 10% discount on hospital cover premiums. The youth discount decreases by 2% for every year after the age of 30 but can be locked in if you take out hospital cover before this age. The discount is available with most health funds, though confirming with the chosen provider is important. If you switch providers, the youth discount remains in place as long as the new policy includes the discount. This discount can result in substantial long-term savings, especially when combined with continuous coverage. However, not all health funds offer Young Persons Discounts, and not all policies include it.

Recent changes to health insurance policies have extended the maximum age at which youngsters can remain covered under their parents’ health insurance policies. Previously, the age limit was 25, but now young people can stay on their family policy until they are 31 or 32, depending on the health fund. The exact age limit varies by health fund, but most funds now allow dependents to stay on family cover until age 31 or 32. This extended coverage allows young people to remain on their parent’s policy longer, often at a lower cost than securing their own policy. It’s especially helpful for youngsters in transition, such as those still studying or starting their careers, as it provides comprehensive coverage without the need for immediate individual insurance.

Health funds do not have any specific policies for young adults, but you can choose a policy from either the singles or couples or the extras insurance policy category. Here we look at them and what they have to offer:

Comparison of Plans for Singles and Couples:

Singles health insurance policies include coverage for a single individual where, whereas health insurance policies for couples or people in de facto relationship include coverage for two people under the same policy. As a young adult, you can choose either of the policies based on your status. If you are taking out a single policy, your premium will be cheaper than the couple’s policy; however, your annual limits will also be lower. Both types of policies do have their perks, but your unique situation will determine which suits you best.

Extras Coverage Popular Among Young Adults:

Extra cover is very popular among young Australians in place of hospital cover. It includes coverage for dental check ups, optical, and physio services. You can get this cover on its own or in combination with a hospital cover under a combined cover category.

There is a whole process that is involved with transitioning from your family’s policy to your private policy, and here we explain it in detail:

Review Your Current Policy

The first step is to review your current policy, which is your parents’ family policy. Access what your health needs and how much you use the current policy in everyday life. What sort of benefits do you gain from being on the family policy, and what does your near future health look like?

Select a Policy

After reviewing the policy and your health needs, it is now time to select a policy. In the market today, there are many different insurance providers that provide private health coverage options for you, which can be overwhelming. This is where Health Deal’s comparison services come in. Health Deal lets you compare different health insurance policies from multiple providers quickly and efficiently. You can compare the policies based on their coverage and your tailored needs while Health Deal ensures you get affordable coverage.

Initiate the Transition

Next, contact the health insurers and set up your policy. Provide details and a start date for the policy. Also, inform your parents so they can inform their health fund of the transition.

Finalise and Set Up Payment

Lastly, finalise and set up your payment account, from which your premiums will be deducted according to your schedule. Now, you are all set with your new policy.
It is important to be mindful of waiting periods when you switch off your family policy. Ideally, you want to change while you are still covered. However, if there has been a lapse in coverage, most health funds will give you a 30-day grace period before making you re-serve waiting periods. But it depends on the health fund. Some health funds will give you a 0-day grace period, whilst others will go as high as 59 days, such as nib.

What is the best time to buy health insurance as a young adult?

The best time to get health insurance as a young adult will depend on your unique situation. However, starting as soon as you can afford basic private health coverage might be a good way to do this.

Should I get extras cover if I’m healthy?

It depends entirely on you. However, even if you are healthy, holding adequate hospital cover can give you financial benefits, and extra cover, including coverage for services like dental, optical, or physiotherapy, can be a smart choice and a way to save you money in case of anything.

How can I switch from my parents’ plan to my own?

To switch from your parents’ plan to your own, you will first need to decide on a policy, contact the policy provider, and set up the policy account. You will also have to inform your parents so they can remove you from their policy. When switching policies, make sure that you remain mindful of waiting periods and age-based discounts to ensure maximum benefits.

Can I avoid LHC loading by getting insurance now?

Yes. If you take out an eligible hospital cover before you turn 31, you will avoid paying the LHC loading.

Comparing health insurance policies for young adults is the smartest way to secure the right cover for your lifestyle and budget. Use the Health Deal Insurance Comparison tool to explore different providers, compare plans, and discover the benefits that matter most to you. For personalised health insurance advice, contact Health Deal at enquiries@healthdeal.com.au or speak with one of our experts at 1300 369 399. We’re here to help you make informed choices about your health and your future. Get in touch now to receive tailored advice and support in choosing the right health insurance plan for your needs.

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This guide is for informational purposes only and should not be taken as financial advice. While we strive to provide accurate and up-to-date information, health insurance policies and benefits may change. Always check with a financial professional before making any decisions. Health Deal compares selected products from a panel of trusted insurers but does not compare all products in the market. For the most current information, please refer to the official Lifetime Health Cover loading information provided by the Australian Government or speak with one of our health insurance experts.