Lifetime Health Cover Loading
A change to the Rebate on Lifetime Health Cover loading - 1st July 2013
As of 1 July 2013, the Private Health Insurance rebate will not be applied to the Lifetime Health Cover loading component on any membership.
This change has been introduced by the Federal Government and the legislation applies to all health funds.
What has changed?
In the past, the Federal Government has offered a private health insurance rebate to Australians who have held eligible hospital cover. The rebate amount depended on your age and income level.
If you took out hospital cover with a private health insurer after the 1st of July following your 31st birthday, you would be paying a 2% Lifetime Health Cover (LHC) loading on top of your premium for every year you are aged over 30.
- Up until 1 July 2013, the rebate was applied to your entire premium including your loading component.
- From the 1 July 2013 onward, the rebate will not apply to your loading component.
How does this affect people?
For example, in 2012/13 a single person under the age of 65 paying a $1,000 annual premium with a LHC loading of 20% would pay a total of $1,200 p.a. If that person received a full 30% rebate their premium would be reduced to a total of $840.
In 2013/14 the same person will now be paying $900 instead of $840. This has increased because the same 30% rebate has only been applied to the $1,000 cost of your premium, rather than the full $1,200 which includes the loading component ($200). This results in $60 premium increase to the member.
What is Lifetime Health Cover Loading?
The Lifetime Health Cover (LHC) loading is a Government loading on your private hospital cover premiums. It was introduced on July 1, 2000 to encourage people to take out private hospital cover earlier, and to maintain their cover.
How does LHC work?
LHC is a 2% loading for every year you don't have hospital after you turn 30.
From the date it was introduced, anyone who joins a hospital cover of a registered health fund will be given a Certified Age at Entry (CAE) status. This CAE represents the age when they first joined a hospital cover after the 1st of July 2000.
If you joined a hospital cover before this date you are assigned a CAE of 30 and you will pay the base rate (the lowest premium) for your hospital cover. If you joined after this date with a CAE of over 30, you will pay a 2% loading for each year your CAE is above 30 to a maximum loading of 70% at age 65.
Where you have had to pay a LHC loading, and have done so for a continuous period of 10 years, the loading will no longer apply on the day after the last day of the 10 year period. People born on or prior to the 1st of July 1934 are exempt from the CAE requirement.
How much extra will I have to pay?
If you take out hospital cover before July 1, following your 31st birthday, you won't have to pay any LHC loading.
If you take out cover after July 1, following your 31st birthday, you will need to pay an extra 2% loading for every year your CAE is above 30 (2% if you're 31, 4% if you're 32, and so on).
For example: If you take out private hospital cover for the first time when you are 35, you would need to pay a 10% loading. After you've paid the LHC for 10 continuous years, the loading is removed from your cover.
Some extra rules
Gaps in cover: After you first take out hospital cover, you are able to be without it for a total of 1094 days without affecting your loading.
Suspension of membership: If you arrange with your health fund to suspend your membership for a short period of time, and the fund agrees, this period of suspension does not affect your LHC loading.
Going overseas: If you cancel your hospital insurance in order to go overseas for at least one year, the days you spend outside of Australia aren't counted towards the 1094 days you are allowed to be without private health insurance. You are even able to return to Australia for short periods of up to 90 consecutive days per visit and still be considered overseas.
New migrants to Australia: You will not have to pay a Lifetime Health Cover loading if you take out private hospital insurance within 12 months of being registered for Medicare.
Where can I get more information?
For more information on Lifetime Health Cover loading, visit the Government's LHC information page.
On this site you can also access the detailed Lifetime Health Cover calculator to help you work out whether you will need to pay the LHC based on your specific situation.