Lifetime Health Cover (LHC) loading
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What is Lifetime Health Cover loading?
Lifetime Health Cover (LHC) loading is an Australian Government initiative that aims to encourage Australians to take out and maintain private hospital insurance earlier in life. If applicable to you, the loading increases the cost of your hospital policy premiums by a percentage of the base hospital premium for each year that you don’t hold hospital cover after the age of 30. Your base premium is the cost of your hospital premium before any discounts, rebates or loading and your base day is the date your LHC loading comes into effect (typically 1 July following your 31st birthday).
If you purchase an eligible hospital policy before 1 July following your 31st birthday and continue to hold cover, you won’t incur the LHC loading for the length of time you hold hospital insurance. An extras-only policy won’t prevent you from incurring LHC loading.
Expert tips for the Lifetime Health Cover loading
Our health insurance expert, Steven Spicer, knows how important it can be to save a dollar, which is why he’s put together these tips on how to avoid the LHC and get great value from your health insurance.
Steven Spicer
Executive General Manager – Health, Life & Energy
Avoid repeating waiting periods
If you’ve taken ‘time out’ from having private health cover, some funds will allow the waiting periods you served with your previous fund to transfer across, despite having a gap in cover. Check with your fund, as it’s usually only applicable within a small window (e.g. 30 days since you last held cover) and you may need to follow a process to have your waiting periods applied.
Basic cover might not be enough
When you’re young and healthy, it can be tempting to cover just ‘the basics’, such as accident only cover. However, you may find that the price difference between Basic and Bronze hospital coverage isn’t much over the course of a year, and it will include hundreds more procedures.
Compare your options regularly
Over time, your needs may change. The great thing about private health insurance is you can upgrade your policy at any time and simply serve the relevant waiting periods.
How does Lifetime Health Cover loading work?
LHC loading accrues at 2% every year that you don’t hold hospital cover from the age of 30. It kicks in if you do not hold a hospital policy by 1 July following your 31st birthday (your LHC base day). To avoid the LHC loading, you need to take out hospital cover before this date. If you cancel your hospital cover after this date, you may start accruing LHC if you exceed the permitted days of absence.
The maximum LHC loading is 70%. If applicable to you, the LHC loading will be added to the base premium of your hospital policy. This means that you will pay the loading each time you pay for your private hospital cover.
For an example of how LHC loading works, at the age of 40, you would need to pay 20% more for your hospital premium if you hadn’t held hospital cover at any point since 1 July following your 31st birthday.
After 10 years of continuous hospital cover, any applicable loading will be removed. If you cancel your hospital cover after these 10 continuous years and use up all your permitted Days of Absence, you will begin to accrue at 2% LHC loading for every year you are without cover.
What if I’ve missed my LHC loading deadline?
Even if you’re one day late in taking out cover for the first time (e.g. 1 July after your 31st birthday), you’ll still accrue a 2% loading. If you take out cover a year later (e.g. 1 July after your 32nd birthday), your loading will be even higher.
Here’s an illustrative example of how much more you may need to pay annually if you’ve never had hospital cover and take out a $1,800 annual policy at the following ages:
| Age | Your LHC loading (%) | How much extra you’ll pay annually* |
|---|---|---|
| 31 | 2% | $36 |
| 40 | 20% | $360 |
| 50 | 40% | $720 |
| 60 | 60% | $1,080 |
| 65 | 70% (the cap) | $1,260 |
| *Based on a hospital policy that costs $1,800 each year (before the rebate is applied). | ||
If you take out cover before 1 July following your 31st birthday, you’ll pay the base rate premium (i.e. the price quoted by health funds), minus any rebates or discounts that you’re eligible for. This price won’t be affected by LHC as long as you hold some form of hospital cover, even if you switch health policies or funds.
Are there special circumstances and exemptions from LHC loading?
Yes, there are exemptions and special circumstances that will allow you to avoid or delay LHC loading.
You may be exempt from LHC loading if you fall under one or more of the categories below:
- Australian citizens or permanent residents who were overseas on their base date are exempt from the loading, provided they take out hospital cover within 12 months of their return. You may need to provide your new health fund with an International Movement Record to establish that you were previously abroad and therefore do not owe any LHC loading.
- New migrants to Australia aged 31 or over are not required to pay LHC so long as they take out hospital cover within 12 months of becoming eligible for Medicare.
- Current members of the Australian Defence Force (ADF) have their healthcare expenses taken care of by the ADF. Once they leave the ADF, they’ll be impacted by LHC loading if they do not hold hospital cover after 1,094 days if they’re over 31; if they’re under 31, they’ll be treated the same as any other Australian citizen in relation to their LHC loading.
- Department of Veterans’ Affairs Gold Card holders don’t pay LHC, as they’re considered covered by an equivalent hospital policy.
- Anyone born on or before 1 July 1934 is exempt from LHC.
Does my LHC loading transfer to my new policy when I switch health insurance?
Yes, it does. You’ll need to ask your current health fund for a Clearance Certificate, which details any previous LHC loading (if applicable), as well as the finer details of your cover like the type, level, join date, claims history and waiting periods served.
This is so you can pass it on to your new health fund when asked. Alternatively, if you provide your new health fund with your previous health fund’s details, they will be able to request this information on your behalf.
How are couples and families affected by LHC loading?
If either you or your partner has an LHC loading, it will be averaged across both adults on a couples or family policy.
So, if you you’re on a couples policy and have a 20% loading and your partner has a 10% loading, your policy will attract a 15% loading.
Family policies work in the same way. If you and your partner have any LHC loading applicable, it’ll be averaged between the two of you. If you’re a single parent with a family policy, you’ll only pay your applicable LHC loading.
Can I avoid the LHC if I have an extras-only policy or ambulance cover?
No, LHC only applies to hospital cover. Holding standalone extras cover (also known as general treatment or ancillary cover) and ambulance cover doesn’t stop you from accruing LHC loading.
To avoid LHC loading on your hospital cover premiums, you must hold hospital cover with a complying health fund by 1 July following your 31st birthday.
You may also fall under an LHC loading exemption category, in which case you might not be required to take out cover immediately, if at all.
Can I take a break from being covered once I’m older than 31?
Yes, you’re granted 1,094 permitted Days of Absence that you can use if you’re unable to maintain continuous hospital cover. LHC loading won’t start accruing within this grace period, and your current loading (if any) won’t be affected. However, there’s only one set of 1,094 permitted days without hospital cover you’re granted, which never refreshes – once it’s used up, that’s it.
Once you’ve used up your Days of Absence, LHC loading will start accruing again at a rate of 2% for every year you didn’t hold hospital cover after 1 July following your 31st birthday.
What does ‘Days of Absence’ mean?
Days of Absence refers to the period where you can take a break from hospital cover and not accrue any LHC loading. This period totals 1,094 days (one day less than three years) throughout your lifetime.
Example one:
Let’s say you’re 39 years old. You’ve held your hospital policy continuously since you were 29 and therefore haven’t accrued any LHC loading.
You then take a break from your cover for two years (730 days) before resuming cover. As you haven’t used up all your Days of Absence, you haven’t accrued any LHC loading. Keep in mind that if you take another break, you’ll only have 364 permitted days before you’ll start accruing LHC loading.
Example two:
You’re 41 and already paying a 6% loading on your policy, as you didn’t take out cover by 1 July following your 31st birthday.
You’ve held cover continuously for the past eight years but decide to take a break – and you end up using all your Days of Absence. Once this grace period lapses, your LHC loading increases to an 8% loading. This will continue to increase by 2% for each year that you do not hold hospital cover.
If you’re already paying the loading, be aware that breaks in cover don’t count towards your 10 years of continuous cover. If you use up all your permitted Days of Absence, you’ll have to restart your 10 years of continuous cover from the date you resume cover.
What happens if I don’t have hospital cover and will be overseas on my LHC base day?
If you’re an Australian resident and will be overseas on 1 July following your 31st birthday, you have a 12-month grace period to purchase hospital cover before attracting LHC loading. This grace period starts from the day you arrive back in Australia.
For any return visits you make to Australia for up to 90 consecutive days, you’ll still be considered overseas for LHC purposes. If you’re in Australia for more than 90 consecutive days, your 12-month grace period will begin from your first visit back where you stayed 90 days or more.
If you don’t purchase hospital cover before this grace period ends, you’ll be charged LHC loading as per usual if you didn’t take out hospital cover during the grace period.
Can I pause my hospital cover when overseas to avoid LHC loading?
Yes, if you’re heading overseas for a short period, you can reach out to your fund and apply to suspend your membership and avoid LHC loading. If your fund agrees, this suspension period won’t count towards your 1,094 Days of Absence.
This suspension period will be treated as if you still hold cover, and you’ll not accrue any LHC loading. As this can vary between providers, though, it’s important you talk to your fund before suspending cover.
You can also cancel your hospital cover if you’re going to be overseas for at least 12 months and it won’t be counted towards your 1,094 Days of Absence. Any return visits to Australia that are longer than 90 consecutive days will be deducted from this 1,094-day period.
Will I be charged LHC loading if I’m over 31 and moving to Australia as a permanent resident?
If you move to Australia after 1 July following your 31st birthday and take out hospital cover within one year of becoming eligible for full Medicare benefits (a full or interim Medicare card), you won’t be charged LHC loading.
However, if you don’t purchase hospital cover within this one-year timeframe, you’ll be charged the full LHC loading that applies to you – that is, a 2% LHC loading for each year after the age of 30 for every year you didn’t have a hospital policy from a complying Australian health fund.
For example, if you’re 35 and didn’t take out health insurance within one year of becoming eligible for Medicare but are looking to take it out now, you would be charged an LHC loading of 10% on top of your hospital insurance premiums.
Other costs and rebates
How does LHC loading impact your Private Health Insurance Rebate?
The LHC loading you pay each year doesn’t count towards the Australian Government Rebate. This means you cannot claim the LHC loading portion of your premiums as a reduced premium or as a part of your yearly tax return.
Do I need to pay a Medicare Levy Surcharge?
You’ll need to pay a Medicare Levy Surcharge (MLS) if you don’t have eligible hospital cover and earn over $105,000 a year as a single or $210,000 a year as a couple or family. This is a tax charged on higher-income earners who don’t have private hospital cover. The purpose is to encourage Australians to take out private health insurance to reduce demand on the public health system. To see how you could be affected, try our Medicare Levy Surcharge calculator.
Meet our health insurance expert, Steven Spicer
As the Executive General Manager of Health, Life and Energy, Steven Spicer is a strong believer in the benefits of private cover and knows just how valuable the peace of mind that comes with cover can be. He is passionate about demystifying the health insurance industry and advocates for the benefits of comparison when it comes to saving money on your premiums.
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