Lifetime Health Cover Loading
The public healthcare system in Australia i.e. Medicare, covers Australians for many health care costs. It comprises three aspects i.e. hospital, medical and pharmaceutical.
- Hospital: You can receive treatment as a public patient in a public hospital at no charge, by a doctor appointed by the hospital. Here, Medicare does not cover:
- Private patient hospital costs
- Medical and hospital costs incurred overseas
- Medical and hospital services that are not clinically necessary (e.g. undergoing surgery purely for cosmetic reasons)
- Ambulance services
- Medical: Medicare reimburses 100 percent of the Medicare Benefits Schedule (MBS) fee for a general practitioner. It also reimburses 85 percent of the MBS fee for a specialist. Medicare typically covers consultation fees, tests and examinations needed for treating illnesses, most surgical and therapeutic procedures performed by doctors etc. However, it does not cover:
- Ambulance services
- Most dental examinations and treatments
- Most physiotherapy, occupational therapy, speech therapy etc.
- Home nursing
- Glasses, contact lenses, hearing aids etc.
- Pharmaceutical: When you present your Medicare card at pharmacies, you pay only part of the cost of most prescription medicines. The Pharmaceutical Benefits Scheme (PBS) covers the remaining balance.
- 1 Why You Need to Consider Getting Private Health Insurance
- 2 What is Lifetime Health Cover (LHC)?
- 3 Who Needs to Pay the LHC?
- 4 What is the Effect of the LHC Loading on the Premium Paid by a Person?
- 5 Is there Any Way to Get Rid of the LHC Loading Once You Purchase Private Hospital Cover After Your LHC Base Day?
- 6 What is the Maximum Cap Applicable on the LHC Loading?
- 7 Can Anyone Receive an Exemption from Paying the LHC Loading?
- 8 What Happens if I Cannot Continue to Pay my Premium Because of Financial Difficulties?
- 9 What Happens if I am Returning from Overseas or Heading Overseas?
- 10 Are there Any Rebates Applicable on Purchasing Private Health Insurance?
- 11 How Does the LHC Loading Affect People with Special Circumstances?
By obtaining private health insurance, you could benefit from a wider range of health care options and more comprehensive cover. In addition, you could also receive a rebate from the Australian Government to help cover the cost of the premium.
Without private health insurance, you might:
- Be subject to the Medicare Levy Surcharge (MLS) – a tax applicable for people who:
- Earn beyond a certain amount and,
- Don’t have private health insurance
- Be subject to the Lifetime Health Cover (LHC) loading – a levy applied in addition to your basic premium
LHC is a Government initiative, which commenced from 01 July 2000. It’s aim is to encourage people to take out private hospital insurance when they are younger.
LHC loading applies to anyone without private hospital cover. The individual pays a financial loading applied on top of the base rate premium. This loading only applies to hospital cover. It does not apply to ancillary or extras cover (or private health insurance general treatment cover).
The 1st of July following your 31st birthday is your LHC base day. If you don’t have private hospital cover on your LHC base day, the LHC loading will apply. If you purchase private hospital cover after your LHC base day, you will need to pay an additional 2% loading for every year you are aged over 30. This 2% loading is in addition to the base rate premium for your cover.
- If you purchase private health cover when you are 29 years old, the LHC loading will not apply
- If you purchase private health cover when you are 40 years old, you will need to pay an LHC loading of 20% more than you would have had you purchased private health cover when you were 30 years old or under
For couples and families, the insurers calculate your LHC loading by taking your respective dates of birth and halving them.
- A couple aged 36 and 34 years would generate a loading of 12% and 8% respectively
- The final loading would be half the total loading i.e. (12 + 8) / 2 so 10%
The table below shows the effect of the LHC loading on premiums for people of different age groups. Please note that this table is for illustrative purposes only.
The older you are without having hospital cover, the greater the LHC loading will be.
Is there Any Way to Get Rid of the LHC Loading Once You Purchase Private Hospital Cover After Your LHC Base Day?
If you buy hospital cover after your LHC base day, you will need to pay the LHC loading.
You can only get rid of the LHC loading from your premium once you complete 10 years of continuous hospital cover.
The LHC loading will keep increasing with each year, until it reaches a maximum cap of 70%. People who first purchase private hospital cover when they are 65 years or older typically pay an LHC loading of 70%.
People born on or before 01 July 1934 are exempt from paying an LHC loading. This means that people within this age group can obtain private health insurance at any time. These people will only need to pay the same premium as someone who purchases private health insurance at the age of 30 years.
You won’t have to pay the loading if you had hospital cover on the 1st July 2000 and have maintained it thereafter.
New migrants to Australia also do not need to pay the LHC loading if they are over the age of 31 years. However, they need to purchase private hospital insurance within 12 months of registering for Medicare.
If you’re unable to continue paying your private health insurance premiums for various reasons, you can be without hospital cover for a cumulative period of 1094 days. This is valid throughout your lifetime. It does not affect your LHC age either, so you will not need to pay an LHC loading for up to 1094 days (or one day less than three years).
You can also use these 1094 days irregularly. Therefore, you could have a year with private hospital cover, followed by a year without the cover. However, if you exceed the 1094-day period, you might need to pay the LHC loading once you obtain private hospital cover again.
If you cannot pay your premium because of financial difficulties, consider seeking a suspension of your membership by approaching your health insurer. You can suspend your membership without having to pay a loading on your premium. However, providing this facility is at the discretion of your insurer.
Returning from Overseas
You do not need to pay the LHC loading for one year from the day you return to Australia if:
- You’re out of the country on your LHC base day
- You did not obtain private hospital cover previously
In addition, you can also return to Australia for periods of up to 90 consecutive days, without having to pay the LHC loading. If you exceed the duration of 90 consecutive days, you will be availing your 1094-day limit of permitted days without hospital cover.
If you’re going overseas, you could consider suspending your private hospital insurance or cancelling it altogether.
If you suspend your insurance:
- You won’t need to pay a loading for any period that occurs during the suspended period of your insurance
If you cancel your insurance:
- You won’t need to pay the loading for the duration you are overseas
- Once you return to Australia, the 90-day buffer will commence
- If you exceed the 90-day buffer, the 1094-day limit of permitted days without hospital cover will apply
You are entitled to receive the Australian Government Rebate on Private Health Insurance if:
- You earn under $140,001 as an individual or,
- Your partner and you jointly earn under $280,001
This rebate can reduce the price of your cover, based on your age and income. This rebate was applicable to your LHC loading until 1st July 2013. With effect from 1st July 2013, the rebate became applicable to the base hospital premium only. It no longer applied to the LHC loading component of the price of your cover.
Therefore, if you were:
- Not paying the LHC loading as of 01 July 2013, the changes in the application of the rebate would not affect you
- Paying the LHC loading with no rebate, you would not need to pay anything more than what you were previously paying
- Paying the LHC loading with a rebate, you would pay more than what you were paying previously
- For members of the Australian Defence Forces (ADF)
The ADF provides medical services to members of the ADF, which is the same as having hospital cover
If you obtain a discharge from the ADF after LHC base day:
- You will be using your 1094-day limit of permitted days without hospital cover
- You can take out hospital cover and pay the base rate premium only
If you obtain a discharge from the ADF before the LHC base day:
The normal rules of the LHC loading apply in your case as well.
- For people with a Department of Veterans’ Affairs (DVA) Gold Card
- If you have the DVA Gold Card, it is the same as having hospital cover
- If you held the DVA Gold Card at any time since 01 July 1999 before the DVA withdrew the card subsequently:
- You can claim the period in which you held the card as the period when you had hospital cover
According to Private Healthcare Australia, the peak representative body in the Australian private health insurance industry:
- Over 13 million Australians hold some form of private health insurance
- This constitutes almost 56 % of the Australian population
- As of June 2014, over 11 million Australians had private hospital cover, while nearly 13 million Australians had general treatment cover
- As of June 2014, over 1.16 million people were paying LHC loading
Healthcare expenses continue to rise – especially the older one gets. However, the stats listed above clearly show that just over half the Australian population has a private health insurance cover. As mentioned earlier, Medicare does not provide as comprehensive a cover as private health insurance does. Therefore, many people could find themselves dealing with financial hardships, in addition to suffering a serious illness. They will not have any other recourse other than to rue not having the security of a private health insurance cover. So, avoid making the same mistake. Get your private health insurance cover today.
Disclaimer: The above information is correct and current at the time of publication.
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