Earning Over $101K? Why Not Having Health Insurance Is Costing You More Than You Think

If you earn more than $101,000 as a single (or $202,000 as a family) and you don't have private hospital cover, the ATO charges you an extra 1%–1.5% of your taxable income on top of the standard 2% Medicare levy. This is the Medicare Levy Surcharge (MLS). At $120,000 income, the MLS costs you $1,500 per year.

At $150,000, it's $1,875. At $200,000, it's $3,000.

Many Australians don't even realise they're paying it — it just disappears from their tax return as a line item they never questioned. The irony? A basic hospital policy that satisfies the MLS exemption often costs less than the surcharge itself. You're literally paying more to NOT have insurance.

Here's the comparison that shocks most people. A basic hospital policy with a $750 excess costs approximately $1,100–$1,300 per year. Now look at the MLS: at $101,001–$118,000 income (Tier 1, 1.0%), the MLS ranges from $1,010 to $1,180.

At this level, the MLS and insurance cost about the same — but with insurance you actually get hospital cover. At $118,001–$158,000 (Tier 2, 1.25%), the MLS ranges from $1,475 to $1,975.

At $120,000, the MLS is $1,500 — you save roughly $200–$400 by getting insurance instead. At $158,001+ (Tier 3, 1.5%), the MLS starts at $2,370 and climbs. At $160,000, it's $2,400. A $1,200 policy saves you over $1,000 per year AND gives you hospital cover.

The crossover point where insurance becomes unambiguously cheaper is around $118,000 income.

To avoid the MLS, you need a compliant private health insurance policy with hospital cover from a registered Australian health fund. The key requirements: it must include hospital treatment cover (not just extras/general treatment), it must be with a registered health fund (not overseas cover or travel insurance), and it must cover you on every day of the financial year. Extras-only policies do NOT satisfy the MLS exemption — you specifically need hospital cover.

The cheapest compliant policies are typically 'basic' or 'bronze' hospital policies with a high excess ($500–$750). These satisfy the legal requirement even though they may not cover every hospital treatment.

The government's privatehealth.gov.au website lists all compliant policies.

So, the government also provides a rebate that reduces your premium. If you earn under $93,000, the rebate is approximately 24.6% — meaning a $1,200 policy costs you only about $905 after the rebate. Between $93,001–$108,000, the rebate drops to 16.4%.

Quick version: Between $108,001–$144,000, it's 8.2%. Above $144,000, there's no rebate.

Even without the rebate, insurance is often cheaper than the MLS at higher incomes. With the rebate, the equation is even more favourable. You can take the rebate as an upfront premium reduction (your insurer bills you less) or claim it on your tax return. Use our Health Insurance Rebate Calculator to see your exact rebate percentage.

Step 1: Use our Private Health Decision Tool to enter your exact income and see the MLS cost vs insurance cost side by side. Step 2: If insurance is cheaper (it usually is above $108K), shop for a basic hospital policy at privatehealth.gov.au or through a comparison site. Step 3: Choose the highest excess you're comfortable with ($500 or $750) to minimise the premium.

Step 4: If you're over 30, check the Lifetime Health Cover loading — each year without cover after 30 adds 2% to your premium for 10 years. Step 5: Set it and forget it.

The policy runs automatically and you'll see the MLS disappear from your next tax return. Total time to save potentially $1,000+ per year: about 30 minutes.