Lifetime Health Cover (LHC) loading explained
We’re very fortunate to have a public healthcare system, Medicare, here in Australia. However, if the whole population was to rely on it 100%, it wouldn’t be sustainable. So, to take some of the pressure off the Medicare system, the Government incentivises the population to move over to the private healthcare system. One of these initiatives is the Lifetime Health Cover loading or LHC.
What is Lifetime Health Cover loading?
LHC is a Government initiative designed to incentivise Australians (citizens and permanent residents) to take out – and maintain – private Hospital cover earlier in life. They do this by adding an additional % to the cost of private health insurance, for every year you don’t have it after a certain age.
Who has to pay a Lifetime Health Cover loading?
If you haven’t taken out private Hospital insurance before July 1 following your 31st birthday, a loading will be added on to the cost of your Hospital cover for every year you don’t have it. This extra cost is added to your policy as soon as you take out private health cover. Once you have paid LHC loading for 10 years of continuous cover, you will no longer have to pay this loading. It’s worth noting that this applies to Hospital cover only and not your Extras cover.
Calculating the Lifetime Health Cover loading
The Lifetime Health Cover loading is an additional 2% on top of your policy cost for each year you don’t have Hospital cover, up to a total of 70%. For example, if you don’t take out private Hospital cover until you’re 40, you’ll pay 20% more on your premiums than someone who took it out before their 31st birthday.
If you have a couple or family policy, the loading is calculated as the average between the individual loading of both adults. So for instance, if one has a 10% loading and the other has 20%, the total loading added to your policy would be 15%.
Permitted days without Hospital cover
Unfortunately there aren’t many exemptions to the loading if you don’t have Hospital cover before July 1, following your 31st birthday. However, there are some instances when you’ll get an extension or permitted days without Hospital cover, including:
If you’re an Australian citizen or permanent resident who was overseas on 1 July following your 31st birthday that fell after July 2000 (the time LHC came into action) and have recently returned to our shores – you have 365 days to take out private Hospital cover without incurring LHC, from the date you landed. It’s worth noting you can be in Australia for a 90 day period before the countdown begins, however if you do stay over the 90 days they will be counted towards the 365.
If you’re an Australian citizen or permanent resident who was overseas and over the age of 31 on 1 July 2000, you have 1,094 days to take out private Hospital cover from the day you return to Australia. The 1,094 is a lifetime limit. You have periods of 90 days where you can visit Australia and it’s not counted towards the 1,094. However, as soon as you stay past 90 days, the days will start to be counted towards the 1,094 (including the 90 days you just stayed).
If you migrate from a country with a reciprocal health care agreement, you’ve got 365 days from the day you’re granted full Medicare eligibility, to take out private Hospital cover and avoid LHC.
Special circumstances exempting LHC
There are some special circumstances of exemption from LHC loading and these are:
A citizen or permanent resident born before 1 July 1934 is exempt from LHC. However, you can still take out private health cover if you need it.
You’re serving in the Australian Defence Force (ADF) – if you’re currently serving on continuous full-time service, your private health cover is provided by the ADF. If you leave after 1 July following your 31st birthday, you have 1,094 to take out private Hospital cover until the Lifetime Health Cover loading is applied. But if you’re discharged before 1 July following your 31st birthday, the standard LHC rules apply.
You have a Department of Veterans’ Affairs Gold Card – if you have a Gold Card then you automatically have Hospital cover too. However, if you’ve held the card since January 1999 and it is taken away, this will be taken into account when calculating whether LHC loading affects you.
Get a Qantas Health Insurance quote today, or to learn more, call one of our experts on 13 49 60.