Lifetime Health Cover Loading Explained

Anneke Van Aswegen Updated: 07 August 2020

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 1^st 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.

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 1^st of July following your 31^st 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.

How is the LHC loading calculated?

The base day for the LHC loading is generally the 1^st of July after your 31^st 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%.

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 1^st 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.

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:

• Switching health funds: You are allowed to pause your health cover when changing health cover from one insurer to another. However, you’ll need a Hospital policy to avoid the loading.
• Suspension of membership: You could suspend your Hospital cover, and loading, for a short period if your health fund agrees, for example, during a period of financial hardship. The suspension won’t usually count towards your 1094 days, but, terms and conditions may vary amongst 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 are 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.