Many Aussies misunderstand how health insurance is priced. Namely, they believe that health insurance is more expensive if they’re older, or if they have a pre-existing condition.
This isn’t necessarily true.
While numerous factors affect your health insurance premium, you may be surprised to learn that it’s a simple product when it comes to how insurers calculate your premiums.
Does age affect health insurance premiums?
The industry’s community rating system ensures that every person – regardless of age, health and claim history – can purchase the same health insurance policy at the same base price, with the ability to switch to a new policy without penalty.
The main factor that your age will play into when it comes to your health insurance premiums is whether or not you have a Lifetime Health Cover (LHC) loading. If you intend to take out private hospital insurance, it may be beneficial to purchase when you’re younger to avoid this loading.
Lifetime Health Cover Loading
The Australian Government introduced LHC loading as an incentive for Aussies to take out private cover at a younger age by charging a loading to people who decide to purchase a private hospital policy after 1 July following their 31st birthday.
As a result, your private hospital insurance premiums will attract a two per cent loading on your premiums for every year you don’t hold hospital cover after 1 July following your 31st birthday. However, you only need to pay it once you take out hospital cover.
Taking this into consideration, someone aged 40 would have to pay 20% LHC loading (unless an exemption applies) on top of their usual premium if they purchase private hospital cover for the first time after 1 July following their 31st birthday.
The maximum loading amount is 70%, and your loading will be dropped altogether once you’ve held hospital cover continuously for 10 years.
So, if you ever intend to take out private hospital cover, it’s essential that you continue to hold some form of hospital cover to avoid the LHC loading. Though, once you take out hospital cover, you are allowed 1,094 Days of Absence (one day less than three years) without hospital cover before your loading will start increasing again.
What about the age-based discount?
The age-based discount is available to Aussies aged 18-29. This discount is part of an Australian Government incentive to encourage younger Australians to take out hospital cover earlier in life and help ease the strain on the public system.
If you take out an eligible policy from an insurer that offers this incentive, you could benefit from a discount of up to 10% on your premiums each year. You could even retain your eligible discount each year until you’re 41 if you hold your policy continuously.
Here’s how much the discount is worth, depending on your age: