Establishing that your health and wellbeing will be looked after in the long-term is something everyone desires. To that end, ensuring you do not pay too much for your health insurance cover, learning the intricacies of Lifetime Health Cover (LHC) can prove crucial if you don't want to be penalised.
In the simplest of terms, LHC is a government initiative that encourages all Australians to take out private health insurance when they are younger, and continually maintain that cover over their lifetime.
LHC was first implemented some 14 years ago – on July 1 2000 – in an effort to better reward those who have taken out private health insurance with an eye on looking after themselves into the future. If you choose to take out private health cover earlier in life, you won't be penalised as would happen if you delay implementing your cover later in life.
31 and over
The age threshold at which LHC becomes most applicable is 31. If you are approaching or have just reached that milestone, considering LHC is key. If you prolong taking out private health insurance under the terms of LHC, there is an annual loading of 2 per cent to consider.
As an example, if you waited until your 38th birthday to take out private health insurance, you could be penalised by up to 16 per cent more for a private health insurance hospital policy than someone seven years your junior. This can be a crucial consideration, as if you are looking for particularly comprehensive cover in particular, chances are the applicable penalty as a result of the loading will increase. Therefore, that potential penalty for not taking out a policy sooner rather than later are even more pronounced as time goes on.
If it's family cover you are looking for, the percentage of loading that will be due on your private health insurance is worked out as a combined figure. If one person's loading is 20 per cent and the other 10, it is effectively averaged as 15 per cent each. Whilst there are not any cost savings to this approach, being aware of how the loading is applicable to those who wish to enter into family cover is well worth considering before taking out an applicable policy.
Exceptions and days without hospital cover
There are nuances to LHC which allow the private health insurance policy holder some leeway in how the penalty works. Firstly, gaps in cover – if you are switching health funds for example – are permitted up to a period of 1094 days in the policy holder's lifetime. Providing that figure is not surpassed, the loading rate will not be altered.
Secondly, if you declare that you are going overseas for 12 months or more and subsequently cancel your policy, your LHC will not take into account the days you are out of the country from the aforementioned permitted absence period.
Taking out private health insurance should be a consideration for anyone who wants to secure their long-term health, whilst also avoiding the potential for imposed penalties. However, it is incredibly important to learn the subtleties of how it all works before entering into a policy.
Private health insurance which can oversee your health long into the future will likely be appealing, talking through all of your options with experts can be critical if you wish to find the right cover for you. To that end, call HICA on 1300 44 22 01, for reliable, impartial advice.