Self-funded health insurance means that an individual or a family pays for their own medical expenses out of pocket. Unlike traditional private health insurance, self-funded health insurance does not involve paying premiums to an insurance company to cover medical expenses. Instead, the individual or family takes responsibility for their healthcare costs by putting aside a set amount of money each month to cover their health expenses.
Find out more about self-funded health insurance and the pros and cons of opting for this type of cover here with Savvy.
Self-funded health insurance is an alternative to purchasing a private health insurance policy. Instead of buying a traditional policy, it involves setting aside money regularly to cover the anticipated cost of medical expenses. The money that is set aside can be placed in a designated savings account where it earns interest and is only used for health expenses. When medical expenses do arise, these funds are used to pay for the full cost of the healthcare treatment.
The benefits of this option are:
While there are pros of self-funded health insurance, there are also cons. The main risk is that unforeseen medical expenses can quickly exceed the amount of money set aside to pay for any necessary healthcare. This can mean that urgent or necessary health treatment can’t be accessed if there is no money left in the self-funded health account.
For example, if you were to be involved in a serious motor vehicle accident in a remote location, an ambulance may be called to transport you to hospital while you're unconscious. Should you require an air evacuation to the nearest accident and emergency department and you don’t have any ambulance cover, the air evacuation bill could run into thousands of dollars which you may not be able to afford with your health cover fund alone.
In this situation, Medicare would cover the costs of emergency hospital treatment, but there could be additional costs which aren't covered by Medicare, such as physiotherapy or remedial massage. These are the types of healthcare services that are usually covered by an extras health insurance policy.
Pay additional tax
The other main disadvantage to not having health insurance is that you may have to pay the Medicare Levy Surcharge. This is an additional tax levied by the Australian Government on higher income-earners (those who earn over $93,000 p.a.) who don’t have hospital cover health insurance. The tax is between 1% and 1.5% of income (depending on how much you earn) and must be paid in addition to the standard 2% Medicare levy.*
*Figures accurate as of May 2023 but subject to change. Check with the ATO for up-to-date information as taxation thresholds change regularly.
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