The Lifetime Health Cover Loading Explained
The Lifetime Health Cover Loading Explained
The Lifetime Health Cover (LHC) loading is an Australian government initiative, introduced in July 2000, to incentivise people to purchase private hospital cover before the 1st of July following your 31st birthday. This financial loading requires you to pay an additional 2% for each year you are over 30, up to a maximum of 70%.
If you’ve been paying the LHC loading fee for a couple of years, you might be wondering how you can get rid of it. OR maybe you’re considering moving to Australia and wondering how this loading will affect you.
This article aims to provide you with all the information you need concerning LHC loading and how you can avoid it. We’ll also look at LHC loading tips and examples.
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What is Lifetime Health Cover loading?
The Lifetime Health Cover (LHC) loading exist is to ease the financial pressure placed on Australia’s Public Health system (Medicare). Essentially, it is there to encourage you to purchase and maintain your private hospital cover from an early age.
Essentially, if you purchase hospital cover, it does not count if you only take out extras, when you turn 30 you’ll avoid the LHC. If you purchase hospital cover after you’re 31 you’ll have to pay a rate of 2% extra on top of your premium.
The amount you’ll have to pay depends on how old you are. Meaning, the longer you delay the more you’ll have to pay.
However, the good news is your LHC loading can be removed. The bad news is it only gets removed once you’ve been paying for private hospital cover for 10 consecutive years.
How much is the Lifetime Health Cover loading?
The extra fee you’ll have to pay on top of your premium is calculated on the age you were when you purchased private hospital insurance.
For example, let’s assume you are 37 years old, registered for Medicare and want to calculate your LHC before deciding whether it’s worth purchasing health insurance. Using the PrivateHealth.gov.au lifetime health cover loading calculator you’ll pay an estimated extra 12%.
If you wait until you turn 50 you can expect to pay up to 40% LHC loading, that’s about $400 extra a year.
Note: Any travel insurances, overseas student-, visitor- or health-cover that was provided by an international policy is not considered relevant for the purposes of avoiding the loading.
If you were born on or before 1 July 1935, the LHC loading will not apply to you. Also, some veterans and members of the Australian Defence Force are exempt from paying the loading.
To calculate your LHC as a couple or family, you simply need to complete the calculator separately for each individual adult and work out the average.
How can I avoid the LHC loading?
The only way you can avoid LHC loading is to take out hospital cover before the 1st of July in the year you turn 31. Keep paying the instalments and you won’t have to pay the 2% annual loading.
Having private health insurance provides you more control regarding who, when and where you receive medical services and treatment:
How can I get rid of my LHC loading?
According to the Private Health Insurance Act of 2007, the only way to get rid of your LHC loading is to continue paying for your hospital insurance for 10 successive years.
However, during these 10 years, you are allowed to “give up” your hospital cover for up to 1094 days. This is known as Days of Absence and mostly apply during:
How long do I have to pay the loading for?
Once your LHC loading has begun, you will have to pay it for the next 10 years. Your loading can only be removed once you have maintained your hospital cover for 10 continuous years.
Is the Lifetime Health Cover Loading worth avoiding?
Every person’s financial circumstances are different. We can’t tell you whether it is worth avoiding or not but before you make a decision consider your options carefully. Above all else make sure you compare policies so you don’t invest in a poor value health fund just because you want to avoid the loading.
LHC loading vs no loading
I just turned 31 and I don’t have private health insurance
If you have just turned 31 and don’t have hospital cover, then now might be a good time to consider it. You have until 1 July following your 31st birthday. If you haven’t met the deadline, you will have to pay a 2% LHC loading fee.
I was overseas and turned 31 when the LHC was brought in on1 July 2000
If you are a permanent Aussie resident or Australian citizen who was overseas on the 1st of July following your 31st birthday, and if your birthday falls after July 2000, you might not have to pay LHC loading.
All you have to do to be eligible for this exemption is to purchase hospital cover by the first anniversary of the day you return to Australia. If you decide not to do so during this grace period but would prefer to do so later, the loading will be applied and be based on your age at the eventual date of your joining.
I recently migrated to Australia; does the LHC loading apply to me?
Yes, LHC loading does apply to you as a migrant to Australia if you are over 31 years old. The good news is that if you purchase private hospital cover before the first anniversary of your completed Medicare registration, you won’t be liable to pay LHC loading.
All you need to do now is compare various health insurance options that are available; review each one by looking at the benefits, features, exclusions and waiting periods. You can save time and money when you use a comparative insurance service
If you haven’t turned 31 yet, you might want to consider taking out hospital cover before 30 June of your 31st birthday and avoid the LHC loading. If you are over 31, you might find it is better to take out hospital cover sooner rather than later in order to minimise the annual 2% loading per year you will have to pay.
Start comparing health funds and avoid or reduce your LHC loading. If you have any more LHC loading questions that weren’t answered in this post, please leave a comment below.
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