Should You Cancel Private Health Insurance? How to Decide in 2026

Whether to cancel private health insurance ultimately comes down to two questions:

1. Will you pay the Medicare Levy Surcharge if you cancel? If your income is above $93,000 (single) or $186,000 (family), cancelling hospital cover means you'll owe the MLS — 1% to 1.5% of your income.
2. How old are you? If you're 31 or over, every year without hospital cover adds a 2% Lifetime Health Cover (LHC) loading to your future premiums — permanently, until you've held cover for 10 consecutive years. Cancelling at 35 for five years means a 10% surcharge on all future premiums.

Use our Private Health Decision Tool to run a full comparison for your income and age, and our LHC Calculator to see the long-term cost of any LHC loading you might accumulate.

There are situations where cancelling hospital cover is the right financial decision:

You're under 31: No LHC consequences. If you're young and healthy with income below $93,000, the MLS doesn't apply and there's no loading penalty. The maths often favours cancelling and either saving the money or putting it toward other goals.

Your income is below the MLS threshold: If you earn under $93,000 (single) or your family income is below $186,000, you won't pay the MLS. Whether to keep hospital cover is then a pure decision about risk management and access to private treatment.

You've a large LHC loading you'll never clear: If you're 60 and have a 40% loading (20 years without cover from age 31 to 51), you need to hold cover continuously for 10 years to have it removed — by age 70. The loading will cost you more than it saves in some cases. Run the numbers carefully.

You're over 31 with no LHC loading: Cancelling means you'll accumulate 2% loading per year going forward. If you cancel for five years and return at 40, you'll pay a 10% loading on all future premiums — potentially for decades.

You're over the MLS income threshold: You'll immediately start paying the MLS, which for many people costs more annually than a basic hospital policy. At $100,000 income, the MLS is $1,000 per year. Basic hospital cover can be found for around $100-$130 per month — roughly equal to the MLS. At higher incomes, the MLS (1.25-1.5%) exceeds the cost of most policies.

You have ongoing health conditions: Private hospital cover gives you faster access to elective surgery, choice of surgeon, and private room accommodation. If you're managing a health condition requiring regular specialist consultations, hospitalisation, or procedures, cancelling may result in significantly longer wait times through the public system.

If the premiums are the problem, downgrading your cover is almost always better than cancelling entirely — particularly if you're over 31 or above the MLS threshold.

Cancel extras only: Extras (dental, optical, physio) is purely a value calculation — compare what you actually claimed last year against what you paid in premiums plus the lost government rebate. Many people's extras cover costs more than they claim. Cancelling extras while keeping hospital cover avoids all LHC and MLS consequences.

Downgrade to basic hospital: A basic or bronze hospital policy typically costs 40-60% less than gold. It still avoids the MLS and LHC loading while keeping premiums to a minimum. You'll have fewer covered treatments, but for a healthy person under 50, basic cover is often sufficient.

Increase your excess: Moving from a $500 excess to a $750 excess (the maximum allowed to avoid MLS) typically reduces premiums by 10-20% and keeps you MLS-exempt.

How do I actually cancel my health insurance?
Contact your fund by phone, online member portal, or in writing. There's no notice period legally required, but premiums paid beyond the cancellation date should be refunded. Your cover ends on the date you nominate or when you receive written confirmation.

Can I get a refund of unused premiums?
Yes — if you've paid in advance (e.g., annual payment), your fund must refund the unused portion from the cancellation date.

What happens to my waiting periods if I rejoin?
If you cancel and rejoin the same fund within two months, your waiting periods are typically reinstated. If you cancel for longer or switch funds after a break, you may need to re-serve waiting periods (typically 12 months for pre-existing conditions, 2 months for hospital, 12 months for obstetrics).

Does cancelling affect my tax return?
If you had hospital cover for part of the year and cancel mid-year, the MLS may apply for the portion of the year you were without cover. The MLS and rebate are both reconciled through your tax return.

I'm going overseas for 12 months — should I suspend rather than cancel?
Most funds allow you to suspend your policy for up to 2-3 years for continuous overseas travel. This avoids LHC accumulation and means you can resume your existing policy on return without re-serving waiting periods. Check your fund's suspension policy.