Lifetime Health Cover Explained

Lifetime Health Cover (LHC) is a government initiative introduced on 1 July 2000. LHC is designed to encourage people to take out hospital insurance earlier in life and to maintain their cover.

Under LHC health funds are required to levy a loading on the basic premium of a private health insurance hospital policy. The loading is dependant on the ages of the adult members of the policy when they purchase hospital cover with a registered health fund.

The Private Health Insurance Act 2007 now includes a new provision requiring health insurers to cease including the loading to the basic premium after ten years continuous hospital cover.

Effective 1st July 2013, the Private Health Insurance Act 2007 now includes a new provision requiring health insurers to cease applying the Australian Government Private Health Insurance Rebate to the Lifetime Health Cover loading component of the premium.

The key elements of LHC are:

Certified age of entry. - All members are given a 'certified age at entry' to enable their health fund to determine what premium should be paid. Under LHC a person's certified age at entry is the age that the member is assigned for the purpose of establishing whether or not there would be a loading on their ‘base rate’ premiums.

Base rate premium

The base rate premium refers to the price of a policy excluding any rebate and/or LHC loading.

Threshold age

The system operates with a 'threshold age' of 30 years.

Loading for late entry A loading of 2 per cent on top of a member's base rate premium will apply for each year a member's LHC age is above 30 yrs when they first take out hospital cover. This is called the loading for late entry.

For example, someone taking out hospital cover at the age of 30 is entitled to pay the base rate premium, provided they maintain their cover. Someone who first takes out cover at age 40 will pay an additional 20 per cent (40yrs-30yrs = 10yrs x 2% = 20%) on top of the base rate premium for the next 10 years. Once they’ve had continuous private hospital cover for 10 years, the loading will be removed from their premium.

Maximum loading

The maximum loading allowed is 70 per cent. This translates to the maximum loading applying for a certified age at entry of 65 and applies to people who first take out hospital cover at age 65 or over.

Special provision for people born on or before 1 July 1934.

People born on or before 1 July 1934 are not affected by Lifetime Health Cover. If people in this age group take out hospital cover at any time in the future they will pay the base rate premium, with no loading for late entry.

Australians without private health insurance were given an introductory grace period commencing 1 July 1999 and ending on 15 July 2000 to join a health fund and lock in a certified age at entry of 30 prior to the commencement of Lifetime Health Cover.

Minimum period of membership

People who took out hospital cover during the introductory grace period (1 July 1999 to 15 July 2000), are required to maintain their cover for a minimum period of 366 days after 1 July 2000 in order to lock in a certified age at entry of 30.

Periods of absence

Under Lifetime Health Cover members are able to drop their cover for a cumulative period of 1094 days absence, without paying any additional loading on their premium.

Periods of suspension

Members may suspend their membership for a time, with the agreement of their fund. Periods of suspension do not count towards the ‘periods of absence’ that is allowed before a member's certified age at entry is affected.

People who joined during the introductory grace period may be entitled to suspend their membership prior to the expiration of the minimum period of membership, but only with the agreement of their health fund.

Special category

If a member is over 31yrs. and has had continuous (12 months and over) health insurance prior to or since 1 July 2000, and has gone overseas – the member can cancel their hospital insurance when they leave the country. When they return they do not pay a loading for the period that they were overseas. However, they will be required to take out health insurance within 12 months of the day they return to Australia permanently.

People in this category can return to Australia for visits of less than 90 days, and they are still taken to be overseas.

Members are able to downgrade or upgrade their level of cover on their return without affecting their certified age at entry. However, any relevant qualifying periods for pre-existing conditions would apply. More so, members are also able to transfer between funds with no variation in their certified age at entry.

LHC does not apply to extras (ancillary) benefits or ambulance cover.

Members of the Australian Defence Force will retain base premium rates as if they had hospital cover.

Based on a fictional annual hospital cover base rate premium of $1000

Age at commencement of Hospital Cover LHC Loading Join by 1st July 2000 Join after 1st July 2000
30 0% $1000 $1000
31 2% $1000 $1020
32 4% $1000 $1040
33 6% $1000 $1060
34 8% $1000 $1080
35 10% $1000 $1100
36 12% $1000 $1120
37 14% $1000 $1140
38 16% $1000 $1160
39 18% $1000 $1180
40 20% $1000 $1200
41 22% $1000 $1220
42 24% $1000 $1240
43 26% $1000 $1260
44 28% $1000 $1280
45 30% $1000 $1300
46 32% $1000 $1320
47 34% $1000 $1340
48 36% $1000 $1360
49 38% $1000 $1380
50 40% $1000 $1400
51 42% $1000 $1420
52 44% $1000 $1440
53 46% $1000 $1460
54 48% $1000 $1480
55 50% $1000 $1500
56 52% $1000 $1520
57 54% $1000 $1540
58 56% $1000 $1560
59 58% $1000 $1580
60 60% $1000 $1600
61 62% $1000 $1620
62 64% $1000 $1640
63 66% $1000 $1660
64 68% $1000 $1680
65 70% $1000 $1700
65+ 70% $1000 $1700
if born on or before 1st July 1934 0% $1000 $1000

Lifetime Health Cover (LHC) Calculation Details & Exemptions

  1. If you had continuous hospital cover between 30 June 1999 and 1 July 2000, you are not affected by the minimum period of membership requirement.
  2. If you dropped your hospital cover membership after 1 July 2000 you will still be exempt from LHC loadings as long as you resume your hospital cover within 1094 days.
  3. If you go overseas or are unemployed, the LHC system takes this fact into account - a period of absence of up to 24 months, cumulative, will be provided to anyone who has to drop his or her membership for these reasons.
  4. Members of the Australian Defence Force will retain base premium rates as if they had hospital cover.
  5. The Minister for Health and Age Care can determine in cases of demonstrated hardship and exceptions circumstances who is exempt from paying the additional contributions for taking out hospital cover after the age of 31, provided the Minister makes such a determination before 1 July 2002.

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