Health Insurance for Young Adults - Do You Need It?

Becoming an adult comes with greater financial freedom, but also more responsibility, especially around your personal health. You may be too old to remain on your parents’ health insurance policy, or be seeking your own policy that you can tailor to your needs. Health insurance is an important consideration, especially due to its potential tax implications.

Why do young adults need health insurance?

You’ll no longer be covered by your parents’ family policy when you turn 31 years old, states the Australian Government’s Private Health website. There may be situations where this cover stops earlier as you cease to be considered a dependent, like if you stop studying full-time or graduate, get a full-time job, or get married. This 31 year old age limit, however, is not a requirement for insurers, so some may have different age limits for family policies. It’s important to check with your parents’ health insurance provider for details, as policies can differ.

Due to several government incentives like the Lifetime Health Cover loading, Private Health Rebate and Medicare levy surcharge, your twenties can be a good time to take out a basic level of private health cover if it suits your needs. You can compare health insurance providers with Canstar. It’s important to note that your circumstances can change rapidly during your twenties, as you transition from student or trainee to a fully independent adult, so it’s worth understanding how a health insurance policy works, as you may need to change policies to better suit your current and future needs.

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Am I still covered by my parents’ health insurance?

This will depend on your age and the terms and conditions of the policy, which can often be found in your parents’ policy’s Product Disclosure Statement (PDS). If you are a dependent aged 31 or younger, you may still be covered under your parents’ health insurance policy.

Generally, to be covered for health insurance under your parents’ policy, you need to be:

• Not married or in a de facto relationship.

• Studying in a full-time approved tertiary course.

• Aged 31 years old or younger (note that some insurers impose a lower age limit).

• Be at least partially financially dependent on your parents.

What if I’m not studying?

If you’re not currently studying, then most health funds will remove you from your parents’ policy between the ages of 18 and 21 years old. As the rules can differ between funds, it’s always important to check with your insurance provider.

I’m almost 31 or close to finishing my studies – what should I do?

If you are approaching the point where you will no longer be covered under your parents’ health insurance policy, and you would like to remain covered, you may want to shop around for your own policy. Some health insurance providers also offer deals and sign up incentives which may be worth considering. Some funds may also waive waiting periods if you get a new policy in place within 30 days or so of exiting your parent’s policy. Since waiting periods can be up to 12 months for some pre-existing conditions, this could be worth considering.

The cost of health insurance for young adults

If you’re still covered by your parents’ policy, then you may be lucky enough to not be paying anything for that coverage. If you decide to pay your own way and get a policy of your own, then the table below shows the average annual premiums for hospital and extras health insurance for young adults by state as well as nationally.

Average Annual Health Insurance Premiums For Young Adults Per State

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Source: www.canstar.com.au – 20/11/2024. Based on all combined hospital and extras insurance policies on Canstar’s database. The Australian Government Private Health Insurance Rebate, Base Tier for under 65s, of 24.608% has been applied to premiums. National average premiums based on state averages weighted by state population of insured persons, per APRA Quarterly private health insurance statistics (June 2024). Ambulance only, OSHC, visitor and corporate policies, as well as policies from restricted funds, are excluded. “Young Adults” profile includes all plans, without any minimum cover requirement.

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Understanding the types of health insurance

It helps to have a clear understanding of the two types of health insurance coverage – hospital cover and extras cover (also referred to as ancillary cover).

Should young adults consider hospital cover?

If you do not have private health insurance and require hospital treatment, your only choice is to be admitted to a public hospital as a public patient. While the cost of clinically necessary public hospital treatment is covered by Medicare, there may be general waiting times for rooms to become available or for treatment (depending on your condition).

Private health insurance, on the other hand, allows you to be treated as a private patient in both public and private hospitals. You may also be able to choose the doctor that treats you at the particular hospital recommended by your health fund and, depending on the situation, may have added flexibility on the timing of your surgery or treatment.

For non-emergency conditions like tonsillitis, which can put you out of action for a period of time, having private cover could mean that tonsil removal happens months earlier than it would in the public system.

Hospital cover is also helpful if you require specialist treatment after, say, a stint in the emergency department at a hospital. Medicare may cover you for your initial treatment while admitted, but if you have ongoing specialist treatment such as rehabilitation, you may be out of pocket without health insurance.

Generally, once admitted to a hospital for a procedure, the cost of your treatment would be partly covered by your health fund. This includes intensive care, theatre and accommodation costs, doctors’ fees and other medical costs, such as the medication and dressings associated with your treatment.

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Should young adults consider extras cover?

Extras cover is the component of health insurance that covers you for out-of-hospital medical care. It covers some of the non-hospital treatment costs that Medicare doesn’t, such as dental, optical, physiotherapy, chiropractic, remedial massage, psychology and podiatry.

For example, with major dental cover, you can get part of the cost of having your wisdom teeth removed paid by your insurance; with optical cover, you could get help to pay for prescription glasses; and with psychology cover, you could get help to cover the cost of counselling sessions with a psychologist. If you were unlucky enough to be in an accident, physiotherapy cover could help you pay for your rehabilitation.

Exactly what you’re covered for and what your annual claim limit will be varies from policy to policy, so it’s worth taking a close look at the policy’s PDS to find out what extras are included, as well as excluded.

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Should I purchase policies separately or as a bundle?

Hospital cover and extras cover can be purchased separately, but some people opt for two-in-one hospital and extras packaged cover. Of course, everyone’s personal circumstances are different and what works for one may not work for another. It’s simply a case of honing in on what is valuable to you now, as well as what could be down the track.

How do I know what health insurance to get?

If you’re looking for health insurance for young singles or for you and your partner, there are a few factors that you will need to consider:

The cost

Probably the most important criterion for your insurance premium is also the most obvious: Can you afford it?

Depending on your situation, you may be able to afford different levels of health insurance cover. If you’re fresh out of university and not far into your first graduate job, you’ll probably go for the most basic hospital cover. On the other hand, if you have been working in your field for several years, your earnings may be enough for you to take out a more comprehensive hospital and extras packaged plan, that includes a bronze or silver product tier.

Keep in mind that government policies like the Lifetime Health Cover loading, Private Health Rebate and Medicare levy surcharge are designed to encourage you to have private health insurance if you can afford it. You may pay more in tax in your 30s and 40s if you decide not to have private health insurance now.

What your lifestyle is like

The lifestyle you lead, including how active you are, is another big factor – after all, the more strain your body goes through, the more likely you are to get sick or injured. If you work in a physically demanding job, or you play a lot of sports and love to go adventuring, you may benefit from having physio, chiropractic and podiatry cover.

If you work in a typical office environment and have a bit more of a sedentary lifestyle, you may simply need optical cover for glasses or a bit of physio cover for Repetitive Strain Injury (RSI) after working at a computer all day.

Regardless of the lifestyle you lead, dental cover can be one of the most popular extras. Although most people don’t look forward to a trip to the dentist, dental cover can help you with the cost of keeping your teeth clean and healthy.

It’s worth keeping in mind that no matter what lifestyle you lead, you may never know when you might need these extras.

Relationship status

We may not like being defined by our relationship status, but it can affect your health insurance needs. If you and your significant other are thinking about starting a family, then it may be worth planning ahead and looking into health insurance policies that offer cover for pregnancy – for example, by including obstetrics into your current policy, bearing in mind that waiting periods typically apply for this.

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Cover image source: Miljan Zivkovic/Shutterstock.com