How long can I stay on my parents’ private health policy?

If you are a young person or teenager still living at home or studying, or even if you are contemplating moving out for the first time, you may contemplate the possibility of staying on your parents’ health insurance. So does it make financial sense to stay on your family policy, or take out one of your own?

For many young Aussies, getting a job, moving out of the family home and becoming financially independent are major life milestones. However, with a cost-of-living crisis and housing being increasingly unaffordable, young people are facing a number of financial pressures.

If you are a young adult and you wish to be covered by private health insurance but are concerned about costs, then it may be possible to remain on your parents’ policy, depending on their insurance provider. Here are some important things to know.

How long can you remain on your parents’ private health insurance?

In Australia, it’s possible to remain on your parents’ private health insurance policy up to the age of 31, but only if your health insurance provider allows it. This age limit was increased from 24 in the 2020/21 federal Budget, as a means of alleviating financial strain on young adults.

While it is now possible to remain on your parents’ private health cover until the age of 31, it is not guaranteed that you will be able to. The federal government did not make it mandatory for health funds to accept dependents up to the age of 31, making this the maximum allowable age you could stay on, based on policy requirements.

Health insurance providers are free to implement their own limits for how long a dependent can stay on their parents’ policy, so the amount of time you can stay on will depend on an individual insurance provider, as well as your parents’ willingness to let you remain on their private health cover.

Which health insurance providers allow you to stay until age 31?

Although health funds are permitted to allow young adults to remain on their parents’ cover up to the age of 31, the cut-off is lower for many providers. We looked at Australia’s five largest health insurance providers (by market share) to find out the cut-off age for adult dependents and found that none allow children to stay on a family policy past the age of 25:

• Medibank: Adult children can stay on a family or single parent policy free of charge until the age of 21, or if they are full-time students, until 25. There are also options for adult children up to the age of 24 to stay on family cover at an additional cost.
• Bupa: Adult children can stay on a family policy free of charge until the age of 21, or if they are full-time students, until 25. There are also options for adult children up to the age of 25 to stay on family cover at an additional cost.
• HCF: Children can be listed on a family policy at no extra cost until they turn 22, or until they turn 25 if they are full-time students. There are also options for adult children up to the age of 25 to stay on family cover at an additional cost.
• nib: Adult children can stay on a family policy free of charge until the age of 21, or if they are full-time students, until 25. There are also options for adult children up to the age of 25 to stay on family cover at an additional cost.
• HBF: Adult children can stay on a family policy free of charge until the age of 21, or if they are full-time students, until 25.

Further terms and conditions may apply. With Medibank, for example, the ages given apply provided that young adults are not married or in a de facto relationship. With HBF, your eligibility to stay on a family policy until you are 25 will be impacted if you earn a taxable income higher than $24,500 per year.

Source: www.ombudsman.gov.au and providers’ websites – 17 May 2022.

Some smaller health insurance providers will allow young people to stay on their parents’ health insurance up to the age of 31. At the time of writing, both Health Care Insurance (HCi) and Teachers Health allow dependents to remain up to this age, and other funds may also be willing.

It is a good idea to check with your individual health insurance provider to find out their cut-off age for young adults to remain on a family policy. You may also want to read the fine print for your family health insurance cover, including the Private Health Information Statement (PHIS) that applies.

What does it cost to stay on your parents’ health insurance?

Canstar Research crunched the numbers for health insurance policies on our database to find out the average cost of a hospital and extras policy, as well as a hospital-only and extras-only policy for a couple versus a family.

We found that the annual cost difference between couples cover and family cover for each kind of policy is a small fraction of the overall cost.

For example, for Gold tier hospital and extras health insurance, an average family policy costs just $94 per year more than a couples policy. You can see the figures below.

Note that this table does not take into account certain variables, such as whether a health insurance provider charges more for dependents who are not studying full time. You will need to ask your individual provider if they charge more in this situation.

Differences in average annual health insurance premiums for families and couples

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Source: www.canstar.com.au – 13/05/2022. 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. All calculations exclude OSHC, Visitor and Corporate policies. Average premiums based on policies on Canstar’s database that have a premium available for both the couple and family profile.

What happens to health insurance when you turn 31?

In Australia, if you do not have private health insurance by age 31, then your premiums will become more expensive for each year that you do not take it out. This is because of a system known as Lifetime Health Cover (LHC) loading.

If you do not have private health insurance by July 1 after your 31st birthday, then a 2% increase will apply to your premiums for each year you wait to take it out. This caps out after 35 years with a loading amount of 70% of your annual premiums.

What does this mean for young people? If you remain on your parents’ private health insurance until you are in your 20s, and then do not immediately take out a policy of your own, you will not be faced with lifetime health cover loading until you turn 31.

Once you do turn 31, you will need to take out a policy of your own if you want to avoid paying this loading.

If you do have a gap between leaving your parents’ private health insurance policy and taking up your own, you may need to re-serve relevant waiting periods before being covered for certain services and benefits under your new policy, so this may also be a consideration for you.

Likewise, if you are earning over a certain threshold as a single or a couple and you do not have suitable private health insurance, you may need to pay the Medicare Levy Surcharge at tax time, so this is another reason you may consider taking out a health insurance policy of your own.

Cover image source: Monkey Business Images/Shutterstock.com