Lifetime health cover loading
To encourage people to take out private health insurance the Australian Government created an initiative called ‘Lifetime Health Cover’. They’re asking Australians to take out private hospital cover and maintain it throughout their lifetime. This is an acknowledgement that private health insurance plays an important role in supporting the Australian health system by offering a number of benefits such as choice of doctor, timing of treatment, coverage for some services not available for free under Medicare, and shorter waiting times for some health care services.
What is lifetime health cover loading?
Lifetime health cover loading is a ‘penalty’ introduced by the Australian Government that means for each year you don’t hold private health insurance after you turn 31 you pay a two per cent lifetime health cover loading.
Every year you delay taking out private health insurance, you pay an additional two percent (up to a maximum of 70%) on top of the cost of your private health insurance premium. The loading is applied for a ten-year period.
Right. But what does this really mean?
We think this is best explained with an example*.
Consider two work mates, Grace and Ava. Grace is about to turn 31 and Ava is 39
Grace takes out our Bronze Hospital Cover before she turns 31 and pays $1,260 per year for her private health insurance. She holds continuous cover throughout her life and simply has her cover reviewed when her circumstances change.
Ava does not have private health insurance but has decided she would like it to finally get the knee reconstruction she desperately needs. Ava needs to pay a lifetime health cover loading on top of her premium. Ava is eight years over 31 so pays an extra 2% for every year.
Instead of paying $1,260, Ava pays 16% more – an extra $245. Her annual premium on exactly the same cover as Grace is $1,505.
Ava pays an additional 16% on her hospital premium for 10 years, which in this scenario is more than $2,450.
How to avoid or minimise lifetime health cover loading?
The only way to minimise or avoid lifetime health cover loading is to take out private health insurance hospital cover and hold continuous cover over your lifetime. If you’re over 31, each year you delay getting cover means you pay more in loading.
Latrobe Health has a range of budget-friendly hospital and extras packages to suit members at different life stages.
*We’ve assumed that Grace and Ava are on the same income and have the same discounts and rebates applied to their situation. They both choose to have a $500 excess and both live in Victoria. This advice is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from an accountant or financial adviser.