Cheapest Hospital Cover to Avoid the MLS (2025–26)
If your income exceeds the MLS threshold, the cheapest qualifying hospital policy often costs less than the surcharge — this guide covers what qualifies, costs, and how to compare.
In this guide
- 1. Minimum requirements for MLS exemption
- 2. What basic hospital cover costs in 2025–26
- 3. The PHI rebate — how it reduces your premium
- 4. Break-even analysis: MLS vs cover cost
- 5. Basic vs Basic Plus vs Bronze — which tier?
- 6. Lifetime Health Cover loading
- 7. Common mistakes that still trigger MLS
- 8. Frequently asked questions
Minimum requirements for MLS exemption
Not every health insurance policy avoids the MLS. Your policy must meet specific ATO criteria to qualify as an "appropriate level of private patient hospital cover."
- Must be hospital cover — extras-only and ambulance-only policies do not count
- Must be issued by a registered Australian private health insurer
- Excess must be $750 or less for singles, $1,500 or less for couples/families
- Must cover all family members — your spouse and dependent children
- Must be held for the full financial year to avoid MLS entirely (pro-rated if not)
What does NOT qualify
For singles
You need hospital cover for yourself only. Maximum excess: $750. MLS applies when income for MLS purposes exceeds $101,000 in 2025–26.
For couples
Both you and your spouse must be covered. Maximum excess: $1,500. MLS applies to combined family income above $202,000 in 2025–26.
For families
You, your spouse, and all dependent children must be covered. Maximum excess: $1,500. Family threshold is $202,000 plus $1,500 per dependent child after the first.
What basic hospital cover costs in 2025–26
Private health insurance premiums increased by an average of 4.41% from 1 April 2026 — the largest increase in almost a decade. Even after this increase, basic hospital cover remains cheaper than MLS for most people above the threshold.
The prices below are indicative ranges based on current market rates. Actual premiums vary by insurer, state, age, and whether you have Lifetime Health Cover loading. All prices are before the PHI rebate.
Indicative pricing — before PHI rebate (April 2026)
| Cover type | Price range | Typical cost |
|---|---|---|
| Singles — Basic Hospital | $1,040 – $1,800/yr | ~$1,400/yr |
| Singles — Basic Plus | $1,300 – $2,100/yr | ~$1,600/yr |
| Couples — Basic Hospital | $2,080 – $3,400/yr | ~$2,800/yr |
| Families — Basic Hospital | $2,400 – $3,800/yr | ~$3,200/yr |
* Assumes $750 excess (singles) or $1,500 excess (couples/families), under-65, no LHC loading. Prices are before the PHI rebate and vary by insurer and state. Based on comparison data as of April 2026.
What this means in dollars
Single earner on $115,000 — comparing MLS vs basic cover
MLS costs $1,150/yr — basic cover after rebate costs ~$1,060/yr
By getting basic hospital cover, you save roughly $90/year and gain hospital coverage. The savings increase at higher incomes.
When comparing policies, use the government's privatehealth.gov.au comparison tool. It lets you filter by state, excess level, and cover type, and shows standardised policy information including clinical category coverage.
The PHI rebate — how it reduces your premium
The Australian Government provides a rebate on private health insurance premiums. The rebate is income-tested — it reduces as your income increases, and disappears entirely for Tier 3 earners. This means the people who benefit most from the rebate are those closer to the Tier 1 threshold.
PHI rebate by income tier (2025–26)
| Tier | Single income | Rebate (under 65) | Rebate (65–69) |
|---|---|---|---|
| Base | $0 – $101,000 | 24.608% | 28.710% |
| Tier 1 | $101,001 – $118,000 | 16.405% | 20.507% |
| Tier 2 | $118,001 – $158,000 | 8.202% | 12.303% |
| Tier 3 | $158,001+ | 0% | 0% |
* Rebate percentages shown are for 1 July 2025 – 31 March 2026. From 1 April 2026, the base tier rebate for under-65s reduces slightly to 24.118%. Family income thresholds are double the single thresholds.
You can claim the rebate in two ways: as a reduced premium through your insurer (they apply the discount before billing you), or as a tax offset when you lodge your return. If your income is uncertain, claiming through your insurer and reconciling at tax time avoids a potential bill.
Try this scenario
Enter your income to see your exact PHI rebate percentage and how it affects the break-even between MLS and cover cost.
Calculate your break-evenBreak-even analysis: MLS vs cover cost
The core question is straightforward: does the cheapest qualifying hospital cover cost less than the MLS you'd otherwise pay? For most people above the threshold, the answer is yes.
Singles — MLS vs basic cover cost (2025–26)
| MLS income | MLS rate | Annual MLS | Cover after rebate | You save |
|---|---|---|---|---|
| $105,000 | 1.0% | $1,050 | ~$1,170 | -$120 |
| $115,000 | 1.0% | $1,150 | ~$1,170 | ~$0 |
| $125,000 | 1.25% | $1,563 | ~$1,285 | $278 |
| $150,000 | 1.25% | $1,875 | ~$1,285 | $590 |
| $180,000 | 1.5% | $2,700 | ~$1,400 | $1,300 |
| $250,000 | 1.5% | $3,750 | ~$1,400 | $2,350 |
* Cover cost assumes typical Basic hospital policy (~$1,400/yr before rebate) with the applicable PHI rebate for each tier. Tier 3 earners receive no rebate so cover cost equals the full premium. Actual costs vary by insurer and state.
What this means in dollars
Single earning $150,000 without private hospital cover
$1,875/year in MLS
Basic hospital cover after the Tier 2 rebate (8.2%) costs ~$1,285/year. Getting cover saves you $590/year — and you get hospital coverage as a side benefit.
When MLS might be cheaper than cover
At the lower end of Tier 1 (just above $101,000), the MLS cost can be close to or less than the cost of basic cover — especially if you have Lifetime Health Cover loading. For example, a single on $105,000 pays $1,050 in MLS, while cover after rebate costs around $1,170. In this narrow band, paying the MLS may be the cheaper option. Use the calculator to check your exact numbers.
Try this scenario
Compare your MLS liability against the cost of basic hospital cover at your income level.
Run your break-even comparisonBasic vs Basic Plus vs Bronze — which tier?
All three tiers qualify for MLS exemption (provided the excess is within limits), but they differ significantly in what they actually cover if you need hospital treatment.
Basic
The minimum tier. Typically covers only rehabilitation, psychiatric services, and palliative care — often restricted to public hospitals. Covers as few as 2–3 of the 38 clinical categories. Cheapest premiums, but provides very limited hospital benefits. Suitable if your sole goal is MLS avoidance.
Basic Plus
Covers around 10–15 clinical categories including heart and vascular, joint replacements, eye surgery, and rehabilitation. Often only $50–$100 more per year than Basic. This is where many health industry commentators (including CHOICE) suggest the value sweet spot sits for MLS-driven purchasers — marginally more expensive but with meaningfully more coverage.
Bronze
A step above Basic Plus, covering more clinical categories with fewer restrictions. Costs more but provides broader hospital access. Worth considering if you want some genuine hospital benefit beyond pure MLS avoidance.
A common criticism of the cheapest Basic policies is that they're "junk cover" — they satisfy the ATO but provide almost no practical hospital benefit. If you can afford $50–$100 more per year, a Basic Plus policy is generally a better use of money.
Lifetime Health Cover loading
If you're taking out hospital cover for the first time and you're over 30, Lifetime Health Cover (LHC) loading increases your premium. The loading is 2% of the base premium for each year you were over 30 without cover, up to a maximum of 70%.
How LHC loading affects your premium
| Age at first cover | LHC loading | Extra cost on $1,400/yr policy |
|---|---|---|
| 30 or under | 0% | $0 |
| 35 | 10% | +$140/yr |
| 40 | 20% | +$280/yr |
| 45 | 30% | +$420/yr |
| 50 | 40% | +$560/yr |
LHC loading is removed after 10 continuous years of hospital cover. Your LHC base day is 1 July following your 31st birthday, or 1 July 2000 (whichever is later).
Even with LHC loading, hospital cover remains cheaper than MLS for most incomes above Tier 1. However, the loading does narrow the gap — particularly at lower Tier 1 incomes. Factor it into your break-even calculation.
LHC Loading Calculator
Calculate your exact Lifetime Health Cover loading based on your age and cover history.
Common mistakes that still trigger MLS
Even people who intend to avoid MLS can end up paying it. Watch out for these:
Holding extras-only cover
The most common mistake. Dental, optical, and physio cover does not satisfy the hospital cover requirement.
Excess above the limit
A policy with an $800 excess for singles or $1,600 for families won't qualify, even if it covers hospital treatment.
Gap in cover during the year
Switching insurers or letting your policy lapse — even briefly — means MLS applies pro-rated for the gap period.
Not covering your spouse
If you're in a couple or family, every member must be covered. One uncovered person can trigger MLS for the whole family.
Underestimating MLS income
MLS uses income for MLS purposes, which adds back fringe benefits, reportable super contributions, and net investment losses. Your MLS income may be higher than your taxable income.
Frequently asked questions
Calculate your exact MLS vs cover cost
The calculator factors in your income, family status, PHI rebate tier, and indicative cover cost to show whether hospital cover or paying the MLS is cheaper for your situation.
Open the MLS Calculator →To see how MLS fits into your broader tax picture — including income tax, Medicare Levy, and HECS repayments — try the Australian income tax calculator.