How to avoid paying the Lifetime Health Cover loading

It’s a government penalty that increases the cost of your private hospital insurance the longer you wait to take it out after age 30. But here’s the good news: it’s totally avoidable, as long as you know how it works and when to act.

Let’s take a look at how the loading works, who it affects, and how to avoid paying more than you need to for your health cover.

The LHC loading is a government initiative designed to encourage Australians to take out private hospital cover earlier in life and stick with it.

If you don’t take out hospital cover by 1 July following your 31st birthday, you’ll pay an extra 2% on your hospital insurance premium for every year you delay. That loading stays in place for 10 continuous years of cover.

For example:

• If you wait until age 35 to take out cover, you’ll pay 10% more (5 years × 2%)

• If you wait until 45, you’ll pay 30% more

• The maximum loading is capped at 70%

This only applies to hospital cover, not extras or ambulance-only policies.

The loading affects:

• Australian citizens or permanent residents

• Aged over 31

• Who haven’t held private hospital cover before 1 July after their 31st birthday

If you’re under 31, you don’t need to worry yet, but it’s worth being aware so you’re not caught out later. If you’re already over 31 and don’t have hospital cover, you may already be paying the loading (or at risk of paying more the longer you wait).

This is the simplest way to avoid the loading altogether. You don’t need a top level policy, any eligible hospital policy will do, as long as it meets the government’s minimum requirements.

Tip from Alfie: Even a Basic Hospital policy will lock in your LHC status and help you avoid other costs like the Medicare Levy Surcharge if you earn above the threshold.

Once you’ve taken out cover, you need to keep it going without long breaks. You’re allowed:

• Gaps of up to 1,094 days (about 3 years) total in your lifetime without affecting your LHC status

• These gaps don’t need to be consecutive, just don’t exceed the total

• After 10 continuous years with hospital cover, the loading is removed automatically

Example: If you take out hospital cover at 32 (and pay 4% loading), then hold it for 10 years without major gaps, the loading is wiped from year 11 onwards.

You may be exempt from LHC loading if:

• You’re a new migrant who joins hospital cover within 12 months of registering for Medicare

• You’re a member of the Australian Defence Force

• You’ve lived overseas on or after 1 July following your 31st birthday (special rules apply if you’ve spent more than a year abroad and take out cover within a set period of returning)

Tip from Alfie: If you’ve recently moved back to Australia or had cover in the past, check with your insurer, you might qualify for an exemption or partial loading reduction.

If you’ve already turned 31 and never had hospital cover, it’s not too late — but the longer you wait, the more the loading grows.

Here’s how the loading adds up:

The loading is calculated as a percentage of your base hospital premium, not extras. That means you could be paying hundreds of dollars more per year, for the exact same cover as someone who took it out earlier.

💸 Example: If your hospital policy costs $1,500/year, a 20% loading means you’ll pay $1,800. That’s $3,000 extra over 10 years.

No, the LHC loading only applies to hospital insurance. You won’t be charged extra if you only hold extras cover (for things like dental, physio, or optical), but extras on its own won’t protect you from the LHC loading.

To avoid or reduce the loading, you must have eligible hospital cover.

The Lifetime Health Cover loading can cost you money quietly, unless you know how it works.

Here’s the short version:

• Turn 31? Take out hospital cover by the following 1 July to avoid the loading.

• Already over 31? The sooner you get cover, the lower your loading will be.

• Have cover? Keep it going for 10 continuous years, and the loading disappears.

Need help finding an affordable hospital policy to lock in your LHC status? Alfie can help compare options and explain what’s covered, no jargon, no pressure.