Lifetime health cover loading (LHC)

Hospital cover can be tricky to understand, especially for those in their 20s or 30s who consider themselves otherwise healthy. We’ll help take you through some of the ins and outs of private hospital cover and lifetime health cover (LHC) loading.

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Private hospital cover varies between insurers, and if you don’t understand how it works, you could miss out on securing yourself a more cost-efficient health insurance policy and therefore incur higher payments in the long run – this is known as lifetime health cover (LHC) loading.

What is lifetime health cover (LHC) loading?

Lifetime health cover loading was introduced by the Australian Government in 2000 with the intention of encouraging younger Australians to apply for private hospital cover and maintain it throughout their lives.

The main reason for introducing this policy was to ease pressure on the public health system.

By purchasing private hospital cover earlier in life, and maintaining it into your 40s, 50s, 60s and beyond – you’ll avoid paying the LHC loading on top of your hospital insurance premiums, give access to the benefits of private cover to yourself and help make the public health system more accessible for others.

How does the LHC loading work?

Generally speaking, Australians who don’t apply for and maintain private hospital cover before the 1st of July following their 31st birthday face paying an annual 2% financial loading on top of their hospital cover premiums for every year they didn’t have health insurance following that date (to a maximum of 10 years). To be clear, the 2% annual loading applies to those who choose to take out private hospital cover any time after turning 31. It is basically an addition to the base rate premium for private hospital cover.

For example, if you decide to take out private hospital cover when you’re 40, you could pay an extra 20% on the cost of this cover each year for 10 years. And if you wait until you’re 50, you could pay 40% more per year for 10 years.

The maximum loading amount that can be applied to private hospital cover is 70%, but additionally, you’re only required to pay LHC loading up to a maximum of 10 years. After that point, your premiums will reflect the price set by your insurer, without the additional loading. However, that’s only if you take out and maintain your cover.

Does LHC loading apply to extras?

No, it doesn’t apply to extras or ‘ancillary’ treatments, which is a term some insurers use for general treatment.

Can I avoid paying the LHC loading with a private health insurance extras policy?

No, only having a suitable private hospital cover policy can allow you to avoid paying LHC.

Could I be exempt from LHC loading?

Yes. If one of the below categories apply to you and you’re looking for private hospital cover, you might not have to pay for LHC loading.

  • You’re under 31.
  • You have private hospital health cover before the 1st of July following your 31st birthday.
  • You’re a new migrant to Australia over 31 who had hospital cover within 12 months of being registered for full Medicare benefits.
  • You were serving in the defence force before turning 31 and continuously serving until you exit the defence force.
  • You were born on or before 1 July 1934.

If you’d prefer to avoid LHC loading in the long term, and you do plan to take out a health insurance policy at some stage, then you might want to consider private hospital cover before the 1st of July following your 31st birthday.

So if you turn 31 in October 2021, you’d need to apply for private hospital cover before the 1st of July in 2022.

What are the benefits of getting private hospital cover before turning 31?

The good thing about getting and maintaining private hospital cover before you turn 31 is that you could avoid LHC loading, which tends to increase by 2% year on year for 10 years.

Additionally, by having private hospital cover you could enjoy a range of additional benefits, such as avoiding potentially lengthy waiting times in the public health system, and being able to choose your own specialist.

If you’ve had ongoing health issues that have required specialists and hospital treatment throughout your life, it might be worth taking out private hospital cover before your 31st birthday.

What’s the difference between LHC loading and the Medicare levy surcharge?

While LHC loading is a penalty rate that applies to individuals over 31 who choose to take out private hospital cover, the Medicare levy surcharge (MLS) is different.

In short, LHC is a loading that is added to your health insurance hospital premiums and charged via your insurer if you choose to take out hospital cover, whereas the MLS is a tax.

If your taxable income is over $90,000 as an individual or over $180,000 as a couple or family and you don’t have an adequate level of private hospital cover, then you may have to pay the Medicare levy surcharge.

This surcharge is a rate of either 1%. 1.25%, or 1.5% based on the total of your:

  • taxable income;
  • total reportable fringe benefits; and
  • any amount on which family trust distribution tax has been paid.

The Medicare levy surcharge was implemented to encourage higher income earners to take out private hospital cover in order to reduce stress on the public health system.

How do I get private hospital cover?

Generally speaking, you will need to supply a range of personal details to your chosen provider that relate to your needs and requirements.

When you compare options for private hospital cover, please remember that while the Government does provide a rebate on private health insurance premiums, this rebate does not apply to the LHC loading component of a policy.

For more information, visit the ATO.

Where can I compare options?

Once you’re ready to start comparing options for private hospital cover, hop online with us at iSelect and where you’ll find a range of health insurance products and providers to choose from*. Get started online, or call our friendly team on 13 19 20.

Last updated: 15/03/2022


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