How does Lifetime Health Cover Loading actually work and will it affect you?
Ben Thomas,
Customer Experience Manager
Health Insurance Expert, who’d sign up for that job title? Ben Thomas did in 2008 and hasn’t looked back.

When making any decision about private health insurance you want to make a smart choice. It’s not just about avoiding an annual tax when you turn 31, it’s about getting the coverage and benefits for your needs.

 

Lifetime Health Cover Loading is not as scary as it sounds if you know the facts

So you’ve probably heard that if you don’t take out private hospital cover before you turn 31, but do take it out later in life, you’ll be faced with a 2% loading on top of your policy premium for each year that you didn’t have cover.

That’s a bit of a mouth full, so let’s break it down and help you understand how it all works. Maybe you’re looking for private health insurance for the first time or you just want to understand if it applies to you.

First things first, why should I consider private health cover?

Health insurance provides you with more choice, control and peace of mind when it comes to your healthcare. Currently, 50% of Australians hold a private health policy. Of course, even without health insurance all Australians have access to the public health system.

When making any decision about your own health you need to feel confident you’re investing wisely. It’s not just about avoiding tax, it’s about getting the coverage and benefits you deserve with your private health insurance.

How does the 2% loading work when I don’t have private health insurance?

This is called the Lifetime Health Cover (LHC) loading and was introduced to encourage more Australians to take out hospital insurance earlier in life and reduce the pressure on the public hospital system.

For example, if you wait until you’re 34 to arrange private hospital cover for the first time, you could pay an additional 8% on top of your premium (2% per year x 4 years).

Wait until you’re 50 to get hospital cover and your LHC loading could be 40% on top of your annual premium payment. The maximum LHC loading that can be charged to you as an individual is 70%.

How is my Lifetime Health Cover loading calculated?

For those with a couples or family policy, your loading percentage is calculated as an average between the individual loading of the adults covered. For example, if one policyholder has a 20% loading and the other policyholder has 0% loading, the total LHC loading applied to the joint policy is 10%.

Privatehealth.gov.au includes a handy tool that calculates whether the LHC loading applies to you.

How do I pay the loading?

If you’re required to pay the LHC loading, your health fund includes it as part of your premium. The health fund then passes those funds to the Government. The LHC loading only applies on the hospital component of your cover and not on your extras.

Does my Lifetime Health Cover loading last forever?

If you have to pay LHC loading, the good news is that it doesn’t last forever. Once you’ve continuously held a hospital cover policy for 10 years, the loading is removed and you don’t have to pay it again provided you maintain your hospital cover.

What happens if I get private health insurance and cancel or suspend my hospital cover?

You can drop or suspend your hospital cover policy for a total sum of three years (1094 days) during your lifetime without incurring any change to your Lifetime Health Cover loading status.

In most cases, if you drop your policy for longer than a total of 1094 days you’ll be required to pay a higher LHC loading fee when you take out hospital cover again in the future.

What does the ‘permitted days without hospital cover’ mean?

This is where your loading won’t increase if you don’t have an active private health insurance hospital, for things such as:

  • Small gaps in your hospital cover, such as cancelling your cover with one fund and re-starting it with another a short time later. These gaps do count towards the 1094 days.
  • Suspending your hospital cover for a period of time, such as for an overseas holiday. This doesn’t count towards your 1094 days.
  • Cancelling your hospital cover to travel overseas for more than one year continuously. This includes any visits home for up to 90 days. This doesn’t count towards your 1094 days of absence, unless you spend more than 90 days consecutively in Australia.

I’m turning 31 soon and want to get an idea of my options

Once you know whether you want hospital or extras cover, or a combination of both, you need to think about which health insurer will give you the best peace of mind and best value.

Going with a not-for-profit health fund is a really smart move. Unlike the for-profit insurers, Members Own health funds spend zero time looking after the financial interests of their investors and overseas shareholders – because there aren’t any.

At Members Own, we don’t promise the world, just health insurance that delivers better coverage, more benefits and make you happier.

If you’re looking for health insurance for the first time and have a firm budget in mind, here’s a checklist to help make the decision easier.

You can use our clever online comparison service to do most of the work for you. Or you can also call us on 1300 34 34 36, and we’ll help you find the best health cover for your current lifestyle.

When you’re with a Members Own fund, your health is in safe hands