How does Lifetime Health Cover work?
Lifetime Health Cover was introduced by the Australian Government in July 2000. It is designed to encourage people to take out and maintain health insurance earlier in life.
Lifetime Health Cover requires health funds to charge a loading when an individual takes out hospital cover. This loading is based on the age of the member and does not apply to Extras or Ambulance ancillary covers.
Who pays loading?
The loading applies to those who do not have private hospital cover on 1st July in the year following their 31st birthday. This loading is a 2% amount for every financial year they go without private health insurance following their 31st birthday.
For example, if a person who is turning 40 in December 2013 is taking out private hospital insurance for the first time in their life, then if he or she does so before 1st July 2014 after their birthday they will pay 18% loading. This is based on the 9 years he or she went without private hospital insurance.
How long does loading apply for?
The Lifetime Health Cover loading applies for 10 continuous years, so the policy holder will pay the extra loading amount on their hospital insurance premiums for 10 years from when they start taking out hospital cover. Loading is capped at 70%.
Days without hospital cover
To cover small gaps, such as switching from one fund to another, you are able to be without hospital cover for periods totalling 1094 days (i.e. three years less one day) during your lifetime, without affecting your loading. This is known as 'Days of Absence'. If you use up your Days of Absence - that is, you have a total gap period of 1095 days - you will pay a 2% loading on re-joining private hospital cover. The loading will increase by 2% for every year after that without cover. You can only access your Days of Absence if you have held hospital cover at some point on or after your Lifetime Health cover base day. For most people, your base day is the later of 1 July 2000 or the 1 July after your 31st birthday.
Are there exemptions?
Yes. Anyone born on or before 1st July 1934 is exempt from having to pay any loadings. Others who may be exempt include migrants, refugees, former members of the Australian Defence Force, Australians returning from overseas and other special circumstances as determined by the Australian Government.
Norfolk Island - time spent on Norfolk Island is classified as time spent overseas and this can have different effects depending on the actual dates you were resident on Norfolk Island.
Australian citizens and permanent residents living overseas on the 1st July following their 31st birthday will not need to pay LHC loading if they take out hospital cover within a year of returning to Australia. Short trips of up to 90 days back home are not counted as a return for LHC purposes.
Suspension of membership - if you apply with CBHS to suspend your hospital cover for a short period, and we agree, this period of suspension does not affect your LHC loading (you are considered to be maintaining your cover).
Department of Veterans' Affairs (DVA) - if you hold a Department of Veterans' Affairs (DVA) Gold Card you are considered to have hospital cover. If you have held a Gold Card at any time since 1 July 1999, and the card was subsequently withdrawn by the DVA, you may claim the period you held the card as a period with private health insurance.