As with the Medicare Levy Surcharge and the Private Health Insurance Rebate, Lifetime Health Cover (LHC) is in place to encourage young people to take out health insurance and, in doing so, reduce the burden on the public health system.
The ‘encouragement’ comes in the form of a 2% increase in premiums per year for every year after your 30th birthday that you don’t take out private health insurance. For example – a person who does not have health insurance and joins a fund when they are 40 years of age will pay a premium loading of 20% (10 years multiplied by 2%). Provided they remain covered, that loading does not increase with age – it will stay at 20%.
The ‘continuity’ benefit is transferable between funds and allowance is made for small gaps in cover. The maximum loading is 70% and that loading would apply to anyone who first takes out health insurance at age 65 or more. The loading is removed once a person has held private health insurance for 10 years.
There are exceptions or consideration to special circumstances which apply to the LHC rule:
- Persons born before 1 July 1934 are exempted from the loading rule;
- Persons overseas on 1 July 2000 or who turned 31 while overseas are exempted from the LHC rule if cover is purchased prior to the first anniversary of their return to Australia;
- A period of 1094 days of leeway is provided from when, (1) a policy is moved between one provider to another, (2) cancelling of a policy due to moving overseas as long as it is for one continuous year;
- New migrants are exempted from the LHC as long as cover is taken out within 12 months of being registered for Medicare