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Last Updated on 24 February 2019

Health Insurance Over 30: Lifetime Health Cover

The community rating system of Australian private health insurance more or less equalizes rates for similar insurance products, regardless of medical conditions or claims history. However there are other aspects that can affect premiums.

Age in particular starts becoming a significant factor when you get past 30 years old and you still haven’t taken any private hospital cover. This is due to a policy established by the federal government in July 2000 called Lifetime Health Cover (LHC). LHC and how it could affect your insurance costs is something to consider when you compare health insurance from the various private health funds.

Image by Mike Baird

How Lifetime Health Cover Works

The LHC policy basically means that anyone who doesn’t have any private hospital cover by the 1st of July after their 31st birthday, and then decides to take one after this date, will be subject to certain financial loadings on their health insurance premiums. The implication is that if you plan on getting hospital cover from the private side of the health system, you should do it early – preferably before you hit 30, if you allow for the waiting periods that apply to some conditions. Otherwise the only choice you may end up with is to either stick to Medicare and its somewhat limited options, or pay higher premiums for private hospital cover.

The additional cost of the LHC is 2% of the premium for every year above the age of 30. To illustrate, a 35 year old then who just purchased private hospital cover for the first time would actually be paying 10% more than a 30 year old who already has such coverage taken at earlier period and maintained.

The loading is cumulative, but it has a maximum of 70%. This surcharge applies for ten continuous years and then it will be removed, provided that private hospital cover is retained. If for some reason the policyholder discontinues his or her hospital cover policy and then takes out another policy in the future, the loading may re-apply and all the years above 30 will be counted again as a basis. This 10-year limit is a recent amendment to the LHC policy. It used to be that the loading remained for life.

Short gaps where a person technically doesn’t have hospital cover are allowed without affecting Lifetime Health Cover. The specific maximum length is 1094 days in total. This is to accommodate circumstances such as switching private health funds. In cases where someone voluntarily suspends his or her membership to a health fund, the hospital cover is considered to be still maintained.

Exemptions and Special Circumstances

Like most rules, there are exceptions listed in the LHC policy, and particular situations have been outlined where the loading may not be applied:

  1. People who were born on or before July 1, 1934 are exempted from the surcharge.
  2. People who were outside the country on the 1st of July after their 31st birthday won’t be subjected to the loading as long as they purchase private hospital cover within a year of their return.
  3. If you happened to be abroad on July 1, 2000 and were already 31 years old or above at that time, then upon your return you’ll be given the short gap limit of 1094 days to take out private hospital cover. If you only return to Australia for short visits (up to 90 consecutive days) then you may still be counted as being overseas.

Finally members of the Australian Defence Forces (ADF), and Department of Veterans’ Affairs Gold Card holders, are considered to have hospital cover. If you happen to be discharged from the ADF after the LHC deadline, you’ll also have 1094 days to purchase private health hospital cover before the loading becomes applicable. Meanwhile if your Gold Card was cancelled for some reason, you can still claim past membership as periods of hospital cover.

The Lifetime Health Cover is one of several ways the government encourages citizens to not just opt for private health insurance early, but to maintain their health insurance long term. When you compare health cover from different private health funds, keep the points above in mind and know what to expect from the LHC.

Disclaimer: The above information is correct and current at the time of publication

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