According to the Private Health Insurance Ombudsman's (PHIO) latest Quarterly Bulletin, many people around Australia are a little confused when it comes to Lifetime Health Cover.
In June 2013, the number of people visiting the PHIO website shot up to over 92,000.
Between April 1 and June 30, the PHIO received a record number of enquiries – 551 in all – which is up on the 380 enquiries that were received during the preceding quarter.
A whopping 15 to 20 per cent of these enquiries were in regards to Lifetime Health Cover.
So, what is Lifetime Health Cover?
It all began in 2000, and was designed to encourage Australians to take out a health insurance policy earlier in life.
Lifetime Health Cover, it should be noted, only applies to hospital cover – if you just possess general treatment cover, you are exempt.
According to the Department of Health and Ageing, Lifetime Health Cover is a "loading" or extra fee that people who do not organise a private health insurance policy before a certain date are required to pay on top of their premiums.
That date is July 1 in the year following their 31st birthday. If you purchase Australian health insurance before this time, you will not have to pay the loading.
However, if you wait until after this all-important date has passed, Lifetime Health Cover may apply to you. It equates to paying 2 per cent extra on your premium for every year you are over the age of 30.
To use the Department of Health and Ageing's example, if you take out family health insurance when you're 40 years old, you may be required to pay your ordinary premium PLUS an added 20 per cent (2 x 10 = 20).
So, you can save a huge amount of money by getting a policy organised earlier.
This loading can also apply to recent migrants who are over the age of 31 and have not taken out a health insurance policy within the first 12 months of living in Australia.
Despite its name, Lifetime Health Cover will not apply to you for the rest of your life. Once you have held hospital cover for a minimum of 10 years, you won't have to pay the loading anymore.
For more information about Lifetime Health Cover, or for a health insurance comparison, get in touch with HICA.