Talk about Lifetime Health Cover (LHC)

There’s a lot of talk about Lifetime Health Cover (LHC) loading in the health insurance world, especially around tax time. This cost is different to Medicare Levy Surcharge and only affects people over the age of 30 who don’t have eligible hospital cover.

It can be a little confusing understanding the Government rules and how they impact you. We explain it in more detail below but basically:

  • For every year you don’t have hospital cover after 1 July after you turn 31, you’ll pay an additional 2% on top of your premiums, known as LHC loading
  • This amount is capped, but it’s at 70% (or 65 years old)
  • If you do have to pay any LHC, once you’ve consecutively held hospital cover for 10 years, you won’t need to pay it anymore

Hints:

  • Your taxable income doesn’t have any impact on LHC
  • It is hospital or combined cover that you need to avoid LHC, not a standalone extras cover
  • When you’re shopping around for health cover, make sure you’re taking any LHC into account. A quote tool might not include LHC so make sure you factor that in when comparing options
  • Want more info? Read on:

What is Lifetime Health Cover (LHC) 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.

Do I have to pay LHC loading?

If you take out hospital cover for the first time before July 1 after your 31st birthday, you won’t have to pay any LHC loading.

How does LHC work?

LHC is a 2% loading for every year you don't have hospital cover after you turn 30.

If you join a hospital cover now and you’re 35 years old, your LHC loading will be an extra 10% of your premium (2% x 5 years).

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 you first took out hospital cover after 1 July, 2000.

If you joined a hospital cover before this date you were assigned a CAE of 30 and 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.

Do you have to pay LHC forever?

LHC loading lasts for ten years. If you’ve paid LHC loading for ten consecutive years it will no longer apply from the first day after the last day of the ten year period.

What happens if I have to discontinue my insurance for a period?

We get that you might need to discontinue your membership for brief periods. LHC loading allows for a total of 1094 days absence before your CAE is affected. For any absences beyond the allowed period your CAE will increase by one year for every full year of absence. 

What if I suspend my membership?

Approved periods of suspension will not affect your CAE. If you need to suspend your Frank membership, contact us to discuss your options.

Does the loading apply to extras cover?

No, the LHC loading only applies to hospital cover.

Is anyone exempt from LHC?

If you were born before 1 July 1934, you don’t have to pay LHC. If you were to take out health cover today, your CAE would be the same as a 30 year old.

Exceptions and special circumstances

There are special circumstances and exceptions to the rule, so if you have any questions, we suggest you contact us or visit the Private Health website. Some of these exceptions include:

  • Norfolk Island – Before 1 July 2016, Norfolk Island was considered overseas and suspension and 1094 days applies (see above). Norfolk Island residents are now eligible for Medicare and so the Australian LHC rules now apply. Residents were given a 12 month grace period from 1 July 2016 to 1 July 2017.
  • Living overseas – if you turn 31 while living overseas, you have a year from your return to Australia to take out private health insurance and avoid LHC.
  • Australian Defence Forces (ADF) and Department of Veterans’ Affairs (DVA)– Medical services provided by ADF are considered as eligible hospital cover. If you have discharged from ADF you have 1094 days from your 1 July after your 31st birthday to take out hospital cover and then normal rules apply. Holding a DVA Gold card is also considered eligible hospital cover.

Where can I get more information?

For more information on Lifetime Health Cover loading, visit the Government's LHC information page.

The detailed Lifetime Health Cover calculator can help you work out whether you’ll need to pay LHC based on your specific situation.