The Lifetime Health Cover Loading Explained

Published: May 21, 2019

The Lifetime Health Cover (LHC) loading is an Australian government initiative, introduced in July 2000, to encourage young people to purchase private health insurance to alleviate the pressure on Medicare. For each year you don’t have Hospital cover after 1 July following your 31st birthday, a 2% loading fee will be added on top of your health insurance premium.

If you’ve recently received an email from the ATO about your deadline for the LHC loading, don’t be alarmed. If you get private Hospital cover before 1 July following your 31st birthday, you won’t have to pay the penalty.

On the other hand, perhaps you’ve been overseas for a few years or you’ve migrated to Australia and are now registering for Medicare. Use this article to help you find out how the health insurance loading affects you.

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What is the Lifetime Health Cover loading?

The Lifetime Health Cover (LHC) loading is an additional 2% charge on your private health insurance premium, added for each year you did not have Hospital cover after 1 July following your 31st birthday or 12 months after your registration with Medicare. If you get Hospital cover before 1 July, you won’t have to pay the private health insurance loading.

How to avoid the health insurance loading

You need to purchase a private Hospital policy when you’re still under 30 years old. You have the option of a Basic, Bronze, Silver or Gold Hospital policy, with the latter generally the most comprehensive and most expensive. Extras cover alone, which provides a benefit for general treatments like dental and optical, is not enough to avoid the loading.

Once the health insurance lifetime loading has been applied, it can only be removed if you continually hold Hospital coverage for 10 years.

What health insurance should you get?

At a minimum, you’ll need a Basic Hospital policy. However, the private health insurance policy you choose should be based on your health, budget and unique requirements. Depending on your circumstances, you might want to combine your Hospital policy with Extras so that you’re covered for treatments and services both in and out of the hospital.

Where can you buy private Hospital insurance?

You can buy health insurance directly from the health fund or requests quotes from a variety of health insurance companies and compare their price, benefit limits and waiting periods against similar products from other insurers.

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How much is the Lifetime Health Cover loading?

The penalty you’ll pay depends on your base date for the LHC loading. You’ll pay an extra 2% for every year you were uninsured, up to a maximum of 70%. For example, you’ll have a Lifetime Health Cover loading of 8% if you were born in June 1984 so your monthly Hospital premium of $100 will cost you $108 per month.

How to calculate your health insurance loading

The base date for your health loading is determined by your:

  • Age,
  • Time spent overseas, and
  • Medicare eligibility date if you’re not a citizen.

Visit privatehealth.gov.au and use their Lifetime Health Cover loading calculator to determine your expected loading percentage.

What if you have couples or family health insurance?

Your lifetime loading will be calculated on the average between the two adults on your policy. For example, if you have a 10% loading and your spouse has no loading, then the health penalty for your couples or family policy will be 5%.

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Who is exempt from paying the lifetime loading?

You generally won’t have to pay the LHC loading if you:

  • Bought a Hospital policy before 1 July following your 31st birthday.
  • Were born on or before 1 July 1934.
  • Are a member of the Australian Defence Force or have a Veterans’ Affairs Gold Card.
  • Are an Australian citizen and was overseas on 1 July following your 31st birthday and purchased private Hospital cover before the first anniversary of the day you returned to Australia.

Amount of days you’re allowed to be without Hospital cover

You are generally allowed to “pause” your Hospital cover for up to 1094 days. This is known as Days of Absence and is only valid if you had Hospital cover before or after your LHC base day. Should your period absence be longer than 1094 days, you'll pay a loading when re-joining private health insurance.

For these Days of Absence, you cannot claim any hospital benefits, as your policy won't be active, but your health insurance loading will also not increase. Permitted breaks in the cover are generally allowed when:

Switching health funds

Changing health cover from one insurer to another. Remember you need a Hospital policy to avoid the loading.

Suspension of membership

You could suspend your Hospital cover, and LHC loading, for a short period if your health fund agrees, for example, a period of financial hardship. The suspension won’t usually count towards your 1094 days. However, terms and conditions vary among health funds.

Specific periods overseas

This only applies when you go abroad for a minimum of one continuous year, and if your visits to Australia is less than 90 days. However, Days of Absence will start to apply if you remain in Australia for longer than 90 days, with each day then deducted from your 1094 days.

Does the LHC loading apply to immigrants?

Yes, the Lifetime Health Cover loading usually does apply to immigrants moving to Australia. However, if you purchase a private Hospital policy before the first anniversary of your completed Medicare registration, you won't be liable to pay the health loading.

Is private health insurance worth it to avoid the LHC loading?

Whether purchasing private health insurance to prevent the loading is worth it, depends on your financial circumstances, stage of life and health requirements. However, having private health insurance provides you with more control regarding:

  • Your choice of doctor, specialist or surgeon.
  • The date you’d like to schedule elective surgeries.
  • Receiving benefit for treatments and services not covered by Medicare.

Another benefit of private health insurance is that you’ll receive a health insurance rebate, making your premiums more affordable. However, the rebate you’ll receive excludes the Lifetime Health Cover loading.

Alternatives to buying private health insurance to avoid the LHC loading

If you’re young and healthy and don’t feel it’s necessary to purchase private health insurance, then there is another option.

Instead, you can open an 'in case of emergencies’ savings account and every month put away the premium amount you would have paid, if you bought Hospital insurance. When you're at an age where private health insurance makes more sense (for example, you need a knee replacement, more dental or physiotherapy), you can use the money you've saved to help you pay for your policy, which would now include the LHC loading.

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Example: Daniel decides not to purchase a Hospital policy before 1 July following his 31st birthday. Daniel chooses to save the monthly premium he would have paid. Nine years later, Daniel has over $9000 in his savings account, which turned out to be $2000 more than the 18% LHC loading he would have been paying before he finally decided to buy hospital cover at age 40.

However, please consider the waiting periods. For example, most health funds require you wait 12 months before a benefit for a pre-existing medical condition will be paid.

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