How Lifetime Health Loading (LHC) Works

Turning 31? Getting your private health cover sorted could see you avoid paying the Lifetime Health Cover Loading.

You’re in your 30’s and life is becoming a little busier these days. You’re working hard to establish your career, saving for your first home and settling down with your life partner. You may even be thinking about starting a family sometime soon.

With so much going on, it’s no wonder you haven’t had time to think about the implications of not having private health insurance. Once you’ve blown out those 31 candles, you’ve got until June 30th to take out hospital cover. Otherwise, you’ll be paying a loading on top of your insurance premium known as Lifetime Health Loading.

What is Lifetime Health Cover Loading?

Lifetime Health Cover (LHC) Loading is a Federal Government initiative designed to encourage more Aussies to take up private health insurance at a younger age and continue to maintain it long term.

It’s simply a levy that’s charged on top of your premiums every year you don’t have hospital cover in place after turning 31.

Should you choose to ignore the LHC loading or delay getting adequate cover, you may have to pay an additional 2% on top of the base rate of your health cover each year. LHC caps at a maximum of 70% and is removed once you’ve held hospital cover for a period of 10 continuous years. After that, the loading remains at 0% as long as you continue to hold private health cover.

How does LHC loading affect me?

Once you’ve turned 31, the implications of LHC become real because if you don’t take out hospital cover before your Lifetime Health Cover Base Day (1 July 2000 or 1 July following your 31st birthday), you’ll incur a 2% premium increase every year, capped at 70%.

While 2% on top of your premium doesn’t seem much, once the years start stacking up without hospital cover, you’ll be potentially losing a significant amount of money to LHC.

Take this example:
  • You’re 34 and you’ve never considered private health insurance before.
  • Now that you’re considering starting a family, you’ve decided private hospital cover might suit your current and future health care needs.
  • So, you commit to take out a hospital policy with the base rate premium of $1,400. You’ll also have to pay a LHC loading of 8% (4 years x 2%). This will increase your premium to $1,512.
  • Leave it until you’re 39 years old, and you’ll have to pay an additional 18% on top of your premium.
  • What until you’re 50 and you’ll have to pay an increase of 40%. Yikes!

The good news is, once you’ve held your private hospital cover continuously for 10 years, any loading will be removed. However, if you decide you don’t need hospital cover at any time and cease your policy, the LHC loading will be reapplied should you take it up again.

Read enough and ready to see how you can avoid paying too much in LHC loading fees? Why not skip ahead and get started with an online quote right now?

Our comparison tool allows you to compare a range of options from health funds in just a few minutes.

What if I’m older than 31 and miss the deadline?

It’s not uncommon for people to forget to purchase hospital cover before the deadline or choose to uptake health insurance later on in life when they see its value.

However, unless you’re eligible for a special exemption - such as you recently migrated to Australia or you were travelling overseas on 1 July following your 31st birthday - you’ll have to pay the loading. If you’re able to use any Days of Absence you may also be exempt from paying the loading for some of the ten year period.

Thankfully, picking up hospital cover as soon as you can will at least prevent your premium from rising any further. And, the LHC loading will expire at the earliest possible date.

If numbers aren’t your strong suit, you can double check your figures with the Lifetime Health Cover calculator.

What are Days of Absence?

Days of Absence refers to the permitted days you can be without hospital cover without impacting the LHC. While you must maintain private hospital cover for 10 continuous years before the loading is removed, you’re allowed a total of 1,094 days in which you can have a break from cover. This may include:

Temporary gaps in hospital cover

If you’ve found a better value hospital cover with another fund and choose to switch, the period you’re without cover is deducted from your Days of Absence.

Temporarily suspending your cover

If your health fund agrees to temporarily suspend your private hospital cover for a short trip overseas, your LHC isn’t affected. The agreed suspension isn’t counted towards your 1,094 days.

Extended overseas travel

If you’re planning on moving overseas for a continuous period of 1 year or more, you can cancel your hospital cover without affecting your Days of Absence. You can even travel back to Australia and visit for less than 90 days without it affecting your LHC loading.

Does everyone have to pay the LHC?

Looking for a lifetime health cover loading exemption? There are some Aussies that won’t have to pay the loading on top of their premiums, including:

You’re over 81 years old

If you are an Australian permanent resident born before 1 July 1934, you’re exempt for the LHC loading should you decide to take out hospital cover. That means, if you’re in your mid 80s and want private hospital insurance you won’t have to pay an expensive loading on top of your premiums.

You turned 31 while overseas

If your 31st birthday occurred after 1 July 2000 and you were celebrating while living overseas, you don’t have to pay a LHC loading. You’re able to visit Australia for up to 90 days, but if you decide to move back, you’ll have to buy hospital cover within a year of your return to avoid being penalised.

You were overseas on 1 July 2000

The LHC loading was first introduced on 1 July 2000. If you were over 31 and travelling overseas on this date, you have 1,094 days from the time you arrive back to Australia to purchase a hospital insurance policy. After this time period, the LHC loading will apply as normal.

You’re a member of the Australian Defence Force

If you are currently serving in the Australian Defence Force (ADF), you’ll automatically receive hospital cover through the ADF and won’t need to worry about purchasing a policy.

Should you be discharged from the ADF following 1 July after your 31st birthday, you have 1,094 days to buy hospital cover. After this period, the standard LHC loading applies. If you choose to leave the ADF before your 31st birthday the standard LHC rules apply.

You hold a Department of Veteran’s Affairs Gold Card

Those holding a Department of Veteran’s Affairs Gold Card will automatically receive private hospital cover and won’t need to worry about LHC. If you’ve held the card since 1 July 1999 and it's withdrawn however, this will be taken into account when determining when the LHC loading is applicable.

You’ve just migrated to Australia

If you’ve migrated to Australia after 1 July following your 31st birthday, you’ll have 12 months from the day you register for Medicare Benefits to buy hospital cover and avoid the loading. After this period, the LHC rules apply.

LHC loading for couples and families

If you’re considering combining your policy with your partner to couple or family hospital cover and you’re both over 31, your applied LHC loading will be calculated as an average of the time you’ve both been without cover.

For example, if you were paying a 10% LHC loading and your partner was paying 4%, the loading will be averaged out to 7% on a couple or family policy.

Other tax benefits of getting hospital cover

It’s not just the LHC loading fees you could avoid by taking out private hospital cover. Once you start earning a taxable invoice of over $90,001 ($180,001 for couples and families), you’ll be subjected to the Medicare Levy Surcharge (MLS) at tax time.

Depending on your taxable income, you could be paying an additional tax for up to 1.5% for every day of the financial year that you’re without hospital cover.

So, if you’ve reached the MLS income threshold and recently turned 31, you could avoid the extra tax and premium loading by simply taking out private hospital insurance. If you choose to do so half way through the financial year you’ll only be changed for the time you weren’t covered.

Private hospital cover is definitely worth considering in this scenario as a basic policy may be cheaper than paying the additional loading and taxes, and you’ll be enjoying the benefits.

What happens if I switch health funds?

Don’t let the LHC loading prevent you from switching health funds if you’ve found a better deal. Switching insurance providers doesn’t mean there will be any Lifetime Health Cover Loading changes to your policy.

We recommend maintaining your current cover until the date you transfer to your new health fund.

This way, you’ll avoid using up any of your valuable permitted days you can be without hospital cover during your lifetime. We think it’s much better to spend those 1,094 on travel than transferring from fund to fund!

If you’re already paying LHC loading with your old fund, this will be moved with you to your new cover.

Are you ready to consider hospital cover?

While the LHC loading may seem minor at first, if you calculate the amount you need to pay in addition to your premium over the ten year period, the figures can add up significantly.

Taking the time to understand how the LHC loading affects you, may just highlight the value of hospital cover. Especially when you’re likely to be at a time in your life when you’re juggling the rising costs of living, the expensive housing costs, and potentially saving to start a family.

If you’re ready to take a closer look at hospital cover, comparing funds is the best way to compare the benefits. And if you’re expecting to pay the LHC loading on your new policy, comparing premium costs will become even more important to help you reduce the costs of health insurance.

With our comparison tool you can compare a range of extras cover options from Australian health funds. Finding the right private health insurance policy for your health needs couldn’t be any easier and takes a few minutes!

If you have any questions or queries, we have friendly staff who are all health insurance experts. You can call one of our team on 1300 806 119

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