What is LHC?

LHC stands for Lifetime Health Cover Loading. On July 1st 2000, the Australian Government introduced this legistation to take pressure off the Public System. Basically, for every year you are over the age of 30 and haven’t take out Private Hospital Cover, the cost increases by 2% for when you do. Example; if I take out Private Hospital Cover when I am 40 years old, my LHC loading penalty is 20% (10 years over 30, 2% for every year). This means the cost fof my Hospital Policy will be 20% higher. LHC will keep accruing until it reaches 70%, which can make Private Health Insurance very expensive when your at the age when you really need it!

There are alot of rules when it comes to Lifetime Health Cover Loading. Make sure you check all the rules to see how it works:

1. When you take out Private Hospital Cover, your LHC penalty locks in at the percentage you took it up at. It does not keep going up as you age. In the above example, the 40 year old would remain at 20% ongoing, even though he may turn 41, 42, 43 etc. Once you take out a Private Hospital Policy, LHC does not keep accruing.

2. Certified Age of Entry (CAE) is the age penalty that is applied to you, even though you may have become much older in physical years. Once again, in the above example; our person took up Private Hospital Cover at 40 years old. Five years later he is 45 years old, but his Certfied Age of Entry is 40 = 20%. If you were to change from fund to fund, they would check your CAE with the old fund to make sure your LHC loading is correct.

3. Everybody has a 1094 day grace period to let their Private Health Insurance policy lapse before LHC starts accruing for you again. That is one day less than 3 years. So if you drop your Private Hospital Cover, but take it up again within 1094 days there will be no extra LHC loading applied. If you let 1094 days pass, you will get hit with another 2%, and 2% every year thereafter until you take it up again. This Grace Period can only be used once per lifetime. Once you use it all up, you do not get it again.

4. Being overseas is considered the equivalent of having Private Health Insurance, so your Lifetime Health Cover loading does not accrue while abroad. Here are the rules:

If you turned 31 while overseas before July 1st 2000 and then return to Australia, you are given 1094 days to take up Private Hospital Cover before you incurr your 2% LHC loading.

If you turned 31 while overseas after July 1st 2000 and then return to Australia, you are given 12 months upon your return to take out Private Hospital cover before incurring 2% LHC.

If you are covered with Private Insurance and then go overseas, you have 1094 days upon your return take up Private Hospital Cover before LHC kicks back in (considering you havent already used your 1094 grace already). If you leave for less than 12 months, you can simply ask your fund to Suspend the policy. If it is more than 12 months, simply cancel the policy and reapply when you return.

In any of these circumstances, your Health Insurance Fund will need proof of you being abroad. You need to supply your fund with a “Movement Statement” which can be obtained through application from the Department of Immigration. Just to make life easier, here is the application you need to send off to Immigration.

5. If you are a new Australian Resident, you have 12 Months from the day you receive Full Medicare Entitlements to take up Private Hospital cover before Lifetime Health Cover Loading is applied. You must supply your new fund with an Medicare Letter of Eligibility, which can be obtained from any Medicare outlet.

6. And now the golden rule: Once you have had Private Hospital Cover for 10 consecutive years, your LHC loading is removed back to 0%. Even if you change funds in between, all you have to do in maintain the cover for 10 years to remove your Loading.

* When changing from one insurance fund to another, you need to supply your new fund with a “Transfer Certificate”from the old fund. Simply call your old fund and ask them for this Certificate. Once they send it to you, forward it to the new fund. Once the new fund receives this proof, your LHC loading will be adjusted accordingly. Companies like iSelect organise tedious tasks like this for you, so you don’t have to, even though they are a free comparison service to the public.