Lifetime Health Cover (LHC) was designed by the Government to encourage Australians to take out private health insurance earlier in life and to maintain health insurance for the long term. When thinking about your private health insurance options, you should be aware that this applies only to hospital cover, not extras cover.
The Australian Government now requires people to take out hospital cover by the age of 31 - or age loading penalties start to apply for each year you’re above the age of 30, and then increase each year you're not covered. To avoid surcharges, you need to have hospital cover by 1 July following your 31st birthday.
How is Lifetime Health Cover calculated?
Lifetime Health Cover is calculated based on your Certified Age at Entry (CAE), which is the age you first take out hospital cover. If you take hospital cover before 1 July following your 31st birthday, you will have a CAE of 30, which is the lowest possible age of entry and entitles you to the lowest (cheapest) base rate premium for as long as you continue to hold hospital cover.
Your CAE determines your age loading for the next 10 years. For example, if you take out hospital cover at age 40, then your CAE will be 40 for the next 10 years, and your age loading will be 20% for each year of that period.
The good news is that even if you join hospital cover later in life, if you keep your cover continuously for 10 years, your age loading will be completely removed and your CAE restored to 30.
What if my partner and I have different age loadings?
If you and your partner take out a couple or family cover but you have different age loadings, your health fund will apply the average of your individual loadings to your hospital cover.
Are there any exemptions?
If you were born before 1 July 1934, you are exempt from LHC.
You are allowed to drop your hospital cover for a cumulative period totalling 1094 days (one day less than three common years) during your lifetime without impacting your LHC age loading. These are called 'Days of Absence' and can cover you for periods of unemployment or gaps between switching health funds.
If you were overseas at the time of your LHC loading deadline, you have a grace period of 12 months to take out hospital cover after you return to Australia. You can return to Australia for periods of up to 90 days during this time and still be considered to be overseas.
New migrants to Australia over 31 years of age have 12 months to apply for hospital cover from the date of their Medicare registration for a blue or green Medicare card. After 12 months, new migrants will incur 2% age loading for every year over the age of 30.
Members of the Australian Defence Force are considered to have hospital cover during their period with the ADF. If they are discharged after 1 July following their 31st birthday, they have 1094 Days of Absence to take out hospital cover without incurring the age loading.
Those who hold a Department of Veteran Affairs Gold Card are considered to have hospital cover and will not incur an age loading.
Lifetime Health Cover Calculator
To check your Lifetime Health Cover age loading, go to the Private Health Insurance Ombudsman's Lifetime Health Cover calculator.
These articles are provided as reference material to allow more informed decision making, but are not intended as being a complete source of information on any topic. All readers should make their own independent analysis on the topic to make sure they have considered the aspects that are important to them.