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It’s one of the most common mistakes we hear about at healthslips.com.au – people taking out the cheapest health insurance to avoid the Medicare Levy Surcharge (MLS), but not checking what the policy includes. As a result, they end up with a ‘junk policy’ – one that provides so little cover it’s ineffective. The good news is that there are plenty of Hospital Cover policies that cost less than the MLS and provide good-value cover.
So what is the Medicare Levy Surcharge? Once you earn over a certain income threshold you’ll have to pay the Medicare Levy Surcharge (MLS) if you don’t have Hospital Cover. Make sure you check the latest income thresholds because they change every year. The MLS is a levy of 1%, 1.25% or 1.5% of your income, charged at tax time. That’s in addition to the Medicare Levy, a separate levy which almost everyone has to pay, but which isn’t influenced by health insurance.
What’s the cheapest health insurance to avoid the Medicare Levy Surcharge?
To avoid the Medicare Levy Surcharge (MLS), you must have Hospital Cover that:
covers you and all members of your household (i.e. your kids and partner – unless your partner has a separate policy to cover themselves)
has an excess of up to $750 or less (for a single adult) or $1,500 (for couples, single parents and families).
The cheapest health insurance to avoid the MLS would need to cost less than your levy. For example, if you’re a single adult earning $120,000 in the 2025-26 financial year and you don’t have Hospital Cover, the MLS on your tax return would be around $1,500 (1.25%, not including your income from other sources). Using the healthslips.com.au calculator, which compares every policy in Australia, we found 18 Basic policies and 17 Basic Plus policies for one adult in NSW that would cost less than the MLS. As at June 2026, the cheapest policy was a Basic Hospital Cover policy for $1,231.20 a year, with a $750 excess, which only covers 3 out of 38 clinical categories (at a restricted level). But if you spent a bit more and got the cheapest Basic Plus policy, you can get cover for 12 out of 38 clinical categories, for $1,339.20 a year – still less than your MLS.
Do your research, and you’ll be able to save money on the MLS and get effective cover. Instead of choosing the cheapest Basic policy, a Basic Plus or Bronze policy that provides better cover could help you twofold – less tax, and a good level of Hospital Cover if you need it.
How do I find the cheapest Hospital Cover in Australia?
Use the healthslips.com.au calculator to make sure you’re comparing every policy that could save you money (most other comparison sites only search a small selection of insurers). Next, enter who you want cover for, where you live and the type of cover you want. Within seconds, you’ll be shown every policy in Australia that meets your criteria, without bias – and you won’t have to enter any contact details to get the results. Search for a new policy on the healthslips.com.au calculator or compare your current policy to all others available.
healthslips.com.au does not provide general or personalised advice. Your particular circumstances are likely to impact the accuracy, completeness and relevance of the information or results. Take this into account before making a decision and talk to an expert for financial advice.
Trudie McConnochie
Writer and Researcher
Knowledge is power – that’s the guiding principle behind everything Trudie writes, and it’s a philosophy she brings to her work at healthslips.com.au. By breaking down complex information into easy-to-understand blogs and stories, she aims to empower Australians to make the best choices and an informed decision around private health insurance.
Trudie understands firsthand some of the complexity of private health insurance having moved to Australia from New Zealand and having to navigate a vastly different public healthcare system and health insurance structure.
Trudie holds a Bachelor of Communication Studies (journalism major) from the Auckland University of Technology.
