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Lifetime Health Cover Loading Explained

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Anneke Van Aswegen Updated: 07 August 2020
Types of Health Insurance

About to turn 31 and have been wondering how the Lifetime Health Cover (LHC) loading affects you? Or, perhaps you’ve been overseas for a few years, or you’ve migrated to Australia and are now registering for Medicare and wondering whether you not you need to pay the loading.

The Lifetime Health Cover (LHC) loading is an Australian government initiative, which adds an additional loading fee to your health insurance premium if you don’t have hospital cover. It was introduced in July 2000, to encourage young people to purchase private health insurance before turning 31 years old, to help alleviate the pressure on the Medicare system.

For each year you don’t have Hospital Cover after the 1st of July following your 31st birthday, a 2% fee will be added on top of your health insurance premium. However, if you get private Hospital cover before the 1st of July following your 31st birthday, you won’t have to pay the penalty.

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Why have private health insurance before you turn 30?

If you want to avoid paying more for your health insurance in the future, then you may want to consider getting hospital cover before you turn 31. If you don’t have this in place before the 1st of July following your 31st birthday, an extra 2% loading will be added to your private health insurance premiums for each year that you don’t have hospital cover after you turn 30. Once the LHC loading has been applied, it can only be removed if you continually hold Hospital cover for ten years.

Another benefit of applying for private health insurance before turning 30, is the age-based discounts that you may be entitled to. As part of the Australian Government’s health insurance reforms, health funds can now offer young Australians a 2% discount on their premiums on Hospital cover, for each year they hold cover, under the age of 30. The discount does not apply to Extras cover policies.

What is the lifetime health cover loading?

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

How is the LHC loading calculated?

The base day for the LHC loading is generally the 1st of July after your 31st birthday. It is also determined by your:

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

Take note: If you have couples or family health insurance, your premium loading will be calculated according to the average loading 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%.

Who has to pay the LHC loading?

Generally, you’ll need to pay the lifetime health cover loading if you:

  • Did not purchase a Hospital policy before the 1st of July following your 31st birthday
  • Were born after the 1st of July 1934
  • Are not a member of the Australian Defence Force or a holder of a Veterans’ Affairs Gold Card.
  • Are an Australian citizen and were overseas on the 1st of July following your 31st birthday and didn’t purchase private Hospital cover before the first anniversary of the day you returned to Australia.

How to pay the Lifetime Health Cover loading

Your loading is added to your private health insurance premiums. It is an additional 2% charge on your premiums that is added for each year you did not have Hospital cover after the 1st of July following your 31st birthday or 12 months after you register for Medicare.

How long do you have to pay the Lifetime Health Cover loading?

Generally, the loading only applies for ten years. After this period, your premiums should go back to normal. However, this is only if you keep your hospital cover continuously for ten years.

For example, if you take hospital cover when you are 40 years old, you could pay an extra 20% on the cost of this cover per year for ten years. If you wait until you are 50 years old, you could pay 40% more per year for ten years. The maximum loading that can be applied is 70%. Once you have paid loading for ten years of continuous cover, the loading will be removed.

How does health insurance help you avoid the LHC loading?

By purchasing Hospital cover when you’re under 30, you’ll be able to avoid the loading. This is because the 2% loading fee is added for each year you don’t have Hospital cover after the 1st of July following your 31st birthday. Extras cover alone, which provides a benefit for general treatments like dental, is not enough to avoid the loading.

You have the option of choosing a Basic, Bronze, Silver or Gold Hospital policy, with the latter generally being the most comprehensive and therefore, the most expensive. Once the lifetime health cover loading has been applied, it can only be removed if you continually hold Hospital coverage for a minimum of 10 years.

Hospital insurance to avoid the private health insurance loading

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

You can purchase health insurance directly from a health insurer, or you can request quotes from a variety of health insurance companies and compare their prices, benefit limits and waiting periods against similar products from other companies. For example, most health funds require you wait 12 months before a benefit for a pre-existing medical condition will be paid.

If I temporarily suspend my health cover, will I have to pay the loading?

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 absence period be longer than 1094 days, you’ll generally 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. However, your health insurance loading will also not increase. Permitted breaks in the cover are generally allowed when:

Frequently asked questions

  • Do immigrants to Australia have to pay the LHC loading

    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 lifetime health cover loading.
  • Is private health insurance worth it to avoid the 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
    • You are receiving benefits 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. If you are currently paying the LHC loading, your rebate will not be applied to the LHC part or your private health insurance premium.
  • What if I miss my Lifetime Health Cover loading deadline?

    If you don’t apply for eligible hospital cover before the loading deadline, a 2% loading will be incurred for each year you did not have cover after turning 30. The maximum loading you’ll incur is 70%. Once you do apply for private health cover, the loading fee is automatically applied to your premium.
  • Is anyone exempt from pay the LHC loading?

    You may be able to qualify for an exemption from the LHC loading if you:
    • If you were born on, or before the 1st of July 1934
    • If you are a member of the Australian Defence Forces on continuous full-time services and your health insurance is provided through the ADF.
    • If you hold a Department of Veterans’ Affairs gold card
    • Are a resident of Norfolk Island who turned 31 before the 1st of July 2016 and purchased health insurance before the 30th of June 2017.
    • Are an Australian permanent resident who was overseas on the 1st of July following your 31st birthday and you purchase hospital cover one year after being back in Australia for 90 days or more.
    • Are an Australian permanent resident over the age of 31 and were overseas on the 1st of July 2000 and you purchase hospital cover any time after your return.
    • You were a new migrant when you registered with Medicare on or after the 1st of July 2009, you were aged over 31, and you were overseas on the anniversary of your Medicare registration date.
    • You cancelled your hospital cover after the age of 31 and after the 1st of July 2000 and then went overseas for at least 12 months.

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