Our insurance experts reviewed all the Basic health insurance policies available in Australia to find the cheapest ones to suit people who have health insurance for tax reasons.

With the cost of living steadily rising and incomes not keeping pace, you might think about downgrading your health insurance. If you decide you don't need cover but want to avoid extra tax due to earning over $97,000 or $194,000 for couples, single parents and families, these policies may be an option for you.

Check our advice on health insurance financial incentives below to see what impact they may have on your tax bill.

On this page:

• What does Basic hospital insurance cover?
• How much do the cheapest Basic policies cost?
• What are the different levels of health cover?
• Financial incentives for health insurance

What does Basic hospital insurance cover?

Basic hospital insurance policies offer the lowest tier of health cover at the lowest price point. All Basic policies must cover treatment in a public hospital for palliative care, rehabilitation and psychiatric care. 

These policies are good for avoiding tax and loadings, but they provide very little cover, so we don't recommend them for health cover.

There are two types of Basic policies: accident policies and public hospital policies.

Accident policies

These cover accidents and ambulance. As a government requirement, they also must cover rehab, palliative care and psychiatric care in a public hospital – which means nothing more than you can choose your own doctor. And regardless of your cover, it's very hard to get a place in a public hospital for these services. All other services and illnesses are excluded.

Accident policies can also have restrictions. For example, HCF's Accident Only policy covers you for the initial treatment if you go to emergency within 24 hours after the accident, but you're not covered for any follow-up treatment.

Public hospital policies

These provide cover in a public hospital only. The only difference between this cover and what you get under Medicare is that you can choose your own doctor. You'll still have to join public hospital waiting lists, and generally, you get the same treatment as public patients.

What if I need a higher level of cover?

While the policies we share in this article are good for saving money on tax, we don't recommend you rely on them for cover. If you want health cover and you're looking for the best policy, you can use our tool to compare thousands of policies from 49 insurers.

You'll save money and get better cover with health insurance policies recommended by CHOICE. Unlike other insurance comparison websites, we don't get paid by any of the insurers we're comparing. CHOICE is nonprofit, so your membership fees help us fight for fair consumer rights, and empower you to get the best products.

How much do the cheapest Basic policies cost?

The government's private health insurance rebate, which is based on your income, affects how much you'll pay for a health insurance policy.

We've compiled annual premiums for the cheapest policies in each state, with the rebate applied for a range of incomes.

What are the different levels of health cover?

• Basic covers very little, if anything, in a private hospital. Basic policies only cover rehab, palliative care and in-hospital psychiatric treatment in a public hospital; some also cover treatment after an accident, but often don't cover follow-up care.
• Bronze offers low cover but includes thousands of treatments such as surgery for breast, skin and prostate cancer; miscarriage and abortion; broken bones and stroke.
• Silver is medium-level cover and includes all Basic and Bronze services and additional high-cost treatments such as heart attack, lung cancer surgery and bone marrow transplants.
• Gold covers all treatments in a private hospital, for example, rehabilitation, hip/knee replacements, cataract eye surgery, and pregnancy and fertility treatments.

Basic Plus, Bronze Plus and Silver Plus policies will cover at least one service more than normal Basic, Bronze or Silver policies.

Financial incentives for health insurance

The government has come up with a few carrots (or are they sticks?) to encourage people to have private health cover, depending on your age and income.

Lifetime Health Cover

For every year you don't have hospital insurance on 1 July following your 31st birthday, you'll pay a Lifetime Health Cover (LHC) loading of 2% of your hospital cover premium up to 70% (extras cover isn't needed). After 10 years of continuous cover the loading will be removed. Here's how you can pay the LHC loading and save.

Medicare Levy Surcharge

A 1% tax applies on your income in the 2024/25 financial year if you don't have hospital insurance and you earn more than $97,000 as a single (or $194,000 for couples and families). If you earn more than $113,000, you pay 1.25% and if you earn more than $151,000, you pay 1.5%. If you take out hospital insurance, you're exempt from the tax, and in many cases it's cheaper to pay for hospital insurance than to pay the tax.

Private health insurance rebate

You get a 24.6% rebate on your private health insurance premium in the 2024/25 financial year if you earn up to $97,000 a year as a single (or $194,000 for a couple or family). For singles earning above $97,000, the rebate steps down incrementally until it reaches 0% for people earning over $151,000 (or families or couples earning over $302,000). Often health funds deduct the rebate directly from the premium, otherwise claim it at tax time.

Stock images: Getty, unless otherwise stated.

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