The federal government has sent out a word of warning to uninsured Australians. On May 4, the Department of Health posted a letter and fact sheet regarding lifetime health cover (LHC), with the aim of providing Australians with more information with which to make a decision on their private health insurance needs.
It is typically the way that people often require medical assistance to a greater extent later in life, and the cost of health insurance varies depending on a policyholder's age. Planning ahead can help ensure that any private hospital treatment is covered by health insurance benefits.
However, LHC can prove a complex issue. Not everyone understands what the term means, and it's easy to believe with the foresight of youth that medical treatment will not be necessary at any point.
With around half of all Australians covered by private health insurance, many understand the risks of going without, and there is a real reason to consider it earlier in life.
What is Lifetime Health Cover?
Lifetime Health Cover is an initiative to encourage those over the age of 30 to use the private health insurance model and avoid premium loadings.
A 2 per cent annual loading applies for any person purchasing private health insurance after July 1 following their 31st birthday, up to a maximum 70 per cent.
This soon adds up, and a person taking out health insurance for the first time at the age of 65 could see their coverage costing 70 per cent more than the same policy bought by a 30 year old.
LHC is not a part of general treatment (extras) cover, overseas visitors' cover, overseas students' cover or international health cover, so it should not be presumed that any of these policyholders will avoid the loading.
This is why, with almost 200,000 uninsured Australians approaching the 31-year milestone, the Department of Health has taken measures to help people better understand the risks by posting out a reminder.
Have you recently turned 31?
As explained above, LHC applies on July 1 after a person has reached 31. If your 31st birthday has been during the 2014/2015 financial year and you are currently uninsured, you may wish to purchase private health cover before June 30, or the first 2 per cent loading will be activated.
This is not a cost that is immediately felt; however, if you hold off until your 40th birthday before deciding that you can benefit from private health benefits, you will be paying significantly more for the same policy than you would by taking it out today.
If you have recently turned 31 and already have a health insurance policy, you will be exempt from the LHC loadings and there is no need to worry about this added cost.
Are you a migrant?
As an overseas national working in Australia on either a permanent or a 457 working visa, you will also need to consider LHC. The government also sent its mailer to 64,000 migrants who could fall into this category.
If you are over the age of 30 and have in this financial year registered for either a blue (interim) or green (full) card to receive Medicare benefits, you have until the first anniversary of your card's registration before the same LHC premium loading begins to apply.
By becoming a private health insurance policyholder, you will be covered against this 2 per cent loading being applied.
What to do next
So, if you fall into either of these two categories, have received a letter from the Department of Health, or if you simply want to become a private health insurance policyholder for any other reason, what's the next step?
Ideally, you'll want to find a policy that meets your budget – health funds tend to charge different rates, even for identical policies. You'll also need a policy that is tailored for your needs as an individual to make sure it is one of quality.
Comparing Australia's 34 health insurance providers will help you fill both of these requirements and find a suitable level of cover.
HICA is able to offer free and extensive assistance for anyone worried about their LHC loadings or looking to purchase private health insurance. Contact us today on 1300 44 22 11 for impartial and professional advice.