Our Methodology
insurance·saver uses publicly available data and ATO-published formulas to calculate whether private health insurance saves you money compared to the Medicare Levy Surcharge. Here's exactly how every number is calculated.
1. Medicare Levy Surcharge (MLS)
The MLS is charged on top of the standard 2% Medicare Levy if you don't hold an appropriate level of private hospital cover and your income exceeds the threshold. The thresholds for 2025-26 are:
Income for MLS purposes includes five components: taxable income, reportable fringe benefits, total net investment losses, reportable super contributions, and share of trust net income. All five determine which tier applies, but the MLS itself is calculated only on taxable income plus reportable fringe benefits.
Family threshold adjustment: the family threshold increases by $1,500 for each dependent child after the first.
Formula: MLS = (taxable income + reportable FBT) × MLS rate × (uncovered days ÷ 365)
2. Lifetime Health Cover (LHC) Loading
LHC loading is an additional charge added to your hospital cover premium if you didn't take out private hospital cover by 1 July following your 31st birthday.
Rate: 2% for each year you were aged over 30 without hospital cover, up to a maximum of 70%.
Removal: LHC loading is removed after 10 continuous years of hospital cover.
Permitted gap: You are allowed a lifetime total of 1,094 days (~3 years minus 1 day) without hospital cover that does not count towards your LHC loading. Continuous overseas absences of 1+ years are also not counted.
Formula: LHC rate = min(years without cover after 30 × 2%, 70%)
Our assumption: When you don't specify your actual years without cover, we use a worst-case estimate of (your age − 30) years. For a more accurate calculation, you should know when you first took out hospital cover.
3. Private Health Insurance Rebate
The Australian government provides a rebate on private health insurance premiums. The rebate percentage depends on your age and income tier. For 2025-26 (1 July 2025 – 31 March 2026, RAF = 0.987):
Income tiers for rebate purposes use the same thresholds as MLS (singles/families).
4. Net PHI Cost Calculation
Important: Since 1 July 2013, the government rebate applies only to the base premium, not to the LHC loading component. This is a common misconception.
Correct formula:
Total premium = base premium + LHC component
Rebate amount = base premium × rebate percentage (rebate on base ONLY)
Net annual cost = total premium − rebate amount
Example: $2,622/yr base premium, 10% LHC loading, 16.192% rebate (Tier 1, under 65):
Total = $2,622 + $262 = $2,884
Rebate = $2,622 × 16.192% = $425
Net cost = $2,884 − $425 = $2,459/yr ($205/mo)
5. MLS vs PHI Comparison
Our core comparison calculates whether buying the cheapest qualifying hospital insurance is cheaper than paying the Medicare Levy Surcharge:
If MLS annual amount ≤ net PHI cost → PAY_MLS (surcharge is cheaper)
MLS exemption requirements: To be exempt from MLS, your hospital cover must meet these criteria: it must be from a registered Australian health insurer, provide private patient hospital cover, and have an excess of no more than $750 for singles or $1,500 for families. Extras-only cover, travel insurance, OVHC, and cover from unregistered insurers do not qualify.
6. Data Sources & Update Frequency
Product data: All health insurance product information is sourced from the Private Health Insurance Ombudsman (PHIO) data published at privatehealth.gov.au. This data is published under a Creative Commons BY 3.0 licence and is updated monthly (typically on the 1st of each month).
MLS thresholds: Published by the Australian Taxation Office (ATO) for each financial year. We update these when new thresholds are announced, typically before 1 July each year.
Rebate rates: Set by the Minister for Health based on the Rebate Adjustment Factor (RAF). Updated annually, with rates applying in two periods: 1 July – 31 March and 1 April – 30 June.
Our coverage: We include data from all registered private health insurers operating in Australia — currently 34+ funds. Unlike commission-based comparison sites (which typically cover ~30% of insurers), we show every available product.
Disclaimer
insurance·saver provides factual product comparisons based on data from privatehealth.gov.au. This information does not constitute health insurance advice or tax advice. MLS calculations are based on the 2025-26 ATO thresholds — your actual MLS amount is determined when you lodge your annual tax return. Premiums may change at any time. Coverage status and waiting periods should be confirmed with the insurer's Product Information Statement (PHIS).
insurance·saver does not receive commissions from any insurer. We search all 34+ registered health funds, not just paid partners. For personal tax advice, consult a registered tax agent.