What Is Lifetime Health Cover Loading?

Lifetime Health Cover (LHC) Loading is a feature of the Australian private health insurance system, designed to encourage individuals to obtain private hospital cover earlier in life and maintain it. This government initiative aims to reduce the burden on the public healthcare system by incentivizing private coverage. It functions as an additional cost applied to private hospital insurance premiums for those who do not secure this cover by a specific age.

Understanding Lifetime Health Cover Loading

Lifetime Health Cover Loading is an additional percentage added to the cost of private hospital insurance premiums. This loading applies to individuals who do not take out and maintain private hospital cover by July 1 following their 31st birthday.

The loading is tied to an individual’s “Certified Age of Entry” (CAE), which is the age they were on the July 1 prior to first purchasing hospital cover. If someone delays taking out private hospital cover beyond their Lifetime Health Cover base day, they will incur this loading. LHC loading only applies to hospital cover, not to general treatment (extras) cover.

Calculating Lifetime Health Cover Loading

The Lifetime Health Cover Loading is calculated as an additional 2% on top of the private hospital insurance premium for every year an individual is over the age of 30 when they first obtain private hospital cover. For instance, if a person waits until age 35 to get hospital cover, they will face a 10% loading (5 years over 30 x 2% per year).

The maximum Lifetime Health Cover Loading that can be applied is 70%. This cap is reached for individuals who first take out hospital cover at age 65 or older. The loading is frozen at the Certified Age of Entry rate, meaning it does not increase unless there are significant breaks in cover.

Situations Affecting Lifetime Health Cover Loading

Individuals are permitted a total of 1094 “days out” of hospital cover throughout their lifetime without affecting their LHC loading, allowing for small gaps like switching insurers. However, exceeding these 1094 days will result in a new loading being applied based on the individual’s age at rejoining.

Living overseas also affects LHC status. Australian citizens or permanent residents who are overseas on July 1 following their 31st birthday generally will not incur a loading if they purchase hospital cover within one year of returning to Australia. Time spent overseas for at least one continuous year does not count towards the 1094 Days of Absence, provided return visits to Australia are less than 90 consecutive days. New migrants to Australia, aged 31 or over, are exempt from the loading if they take out hospital cover within 12 months of registering for Medicare.

Individuals born on or before July 1, 1934, are entirely exempt from Lifetime Health Cover Loading. Members of the Australian Defence Force are considered to have hospital cover during their service, with specific rules applying upon discharge regarding LHC loading. For couples or families, if one partner has a loading and the other does not, the loading applied to their joint policy is calculated as an average of the individual loadings of the two adults.

Removing Lifetime Health Cover Loading

Lifetime Health Cover Loading can be removed under specific conditions, primarily by maintaining continuous private hospital cover. The loading is removed once an individual has held continuous private hospital cover for 10 years.

“Continuous cover” in this context generally means maintaining an active hospital policy without significant breaks. While the 1094 permitted Days of Absence allow for short gaps without increasing the loading, these days do not count towards the 10 continuous years required for loading removal. If cover is cancelled after the loading is removed, a Lifetime Health Cover Loading may be reapplied if new hospital cover is taken out later, depending on the length of the break. Switching health funds does not reset the 10-year period; the LHC loading moves with the individual, and their history of continuous cover is retained.