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Health Insurance for Expats in Australia

Submitted: July 2013

Australia’s private health insurance sector is regulated by the Private Health Insurance Ombudsman (PHIO) and plays an important role in national health policy. Australian health insurance providers are commonly called “Health Funds”. There are for-profit as well as non-profit Health Funds in Australia.

In Australia, it is important to know that private health insurance is divided into three parts:

  • hospital insurance
  • general treatment cover (commonly referred to as “ancillary cover” or “extras cover”), and
  • ambulance cover

The way your insurance policy is sold is regulated. There are four classifications depending on the extent of your cover: public, basic, medium, and top. A public hospital cover concerns default benefits for treatment in public hospitals only whereas a top hospital cover must concern all services covered by Medicare.

Alternatively, you may consider taking an international health insurance, especially if you do not want an Australian insurance policy, or want to remain covered outside Australia.

Private hospital insurance

Under a hospital insurance policy, your provider may contribute towards your gap or even your out-of-pocket expenses at hospital. See Doctors and Hospitals for Expats in Australia

Your hospital insurance provider may have agreements with specific hospitals to cover your possible out-of-pocket expenses. Failure to check this may sometimes result in a claim being rejected. Therefore, it might be helpful to choose an insurance provider who has an agreement with a hospital in your local area. You can check this here.

General treatment cover

A general treatment cover insures you against costs for auxiliary healthcare, which normally not or little covered by Medicare.

A general treatment cover should normally cover you only to a limited extent, and some services may not be covered at all. However, you may have no out-of-pocket expenses if your doctor has an agreement with your insurance provider. You can check this here.

Ambulance cover

Ambulances are not covered by Medicare. However, they may be covered by a taxpayer-funded programme in your state or territory of residence.

Even if you are covered by your state (e.g. Tasmania or Queensland), you should check your residence status and what happens when you cross borders. Alternatively, you might wish to take an ambulance cover from an insurance provider.

Tax treatment of health insurance

Health insurance may be tax-efficient in light of the health insurance rebate, LHC (see below) and MLS regulations. (See National Health Policy for Expats in Australia)

Employer-funded private health insurance is considered as a Type 2 fringe benefit by the Australian Taxation Office (ATO), and therefore attracts full Fringe Benefits Tax (FBT). FBT is paid by the employer at a rate of 46.5% on the cost of the benefit multiplied by 1.8692 (Type 2 benefit factor). Fringe benefits are no further taxed in the hands of the employee, but they generally must be taken into account for welfare purposes.

Pursuant to sections 58J of the Fringe Benefits Tax Assessment Act 1986, work-related health insurance is exempt from FBT. This is because work-related healthcare costs are supposed to be met by employers rather than Medicare. Hence they are excluded from the scope of Medicare.

Lifetime Health Cover (LHC)

LHC is a Government scheme which encourages Australian residents to take private hospital insurance earlier in life and permanently keep hospital cover. Under LHC, you may be charged “loadings” on your future insurance premiums if you fail to be privately insured before 1 July following your 31st birthday. There is a lifetime allowance of 1,094 days without hospital cover.

Expatriates may need careful planning to avoid being caught by LHC rules, as specific criteria apply for internationally mobile individuals:

Expatriates leaving Australia:

You are no longer within the scope of LHC rules when you leave Australia for at least one continuous year. Temporary returns to Australia up to 90 days per visit are disregarded.

Expatriates coming to Australia:

You are required to take out private hospital cover within 12 months of registering for Medicare.

 

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