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 encourage Australians (citizens and permanent residents) to take out – and maintain – private Hospital cover earlier in life. If you don’t take out cover before a certain age an additional percentage is added 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 your Lifetime Health Cover base day (the later of 1 July 2000 or the 1 July following your 31st birthday) and maintain it, 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.
Lifetime Health Cover base day
Your LHC base day is the later of 1 July 2000 or 1 July following your 31st birthday. There are some special circumstances that may apply if you are a new migrant or an Australian who has been living overseas. Visit privatehealth.gov.au for more information.
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 are aged 31 and over and don’t have Hospital cover, up to a total of 70%. It is based on your age on 1 July prior to joining. 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 20% loading and the other has 0%, the total loading added to your policy would be 10%.
Permitted days without Hospital cover
Unfortunately there aren’t many exemptions to the loading if you don’t have Hospital cover before 1 July, following your 31st birthday. However, there are some instances when you’ll get an extension or permitted days without Hospital cover. During these periods your loading will not increase. These include:
Gaps in cover - during your lifetime you can have gaps between having hospital cover for a total of 1,094 days (3 years, less one day), without it affecting your LHC loading, also known as ‘Days of Absence’. An example of this is switching from one insurer to another. If you exceed the gap limit of 1,094 days then you will pay a LHC loading when you rejoin which will be an additional 2% for every year without cover after this period.
Suspension of cover - if you have been approved by your health insurer to suspend your hospital cover for a short period of time (for example travelling overseas) then the period approved will not be included in your 1,094 Days of Absence. You must check with your insurer if they offer this option and the terms and conditions that apply.
Going overseas - 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.
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.