Key Elements Of Lifetime Health Cover

 All members are given a 'certified age at entry' to enable their health fund to determine what premium should be paid. The certified age at entry is based on the age at which they first take out hospital cover.

Under Lifetime Health Cover, a person's certified age at entry is the age that the member is assigned - for the purpose of setting their premiums - when they first purchase hospital cover from a registered health fund. A persons age at entry is also called their "lifetime health cover age".

• If the member purchases cover for the first time* before 23 April 2004, their lifetime health cover age is their actual age on the day they purchase hospital cover for the first time; or

• If the member purchases cover for the first time* on or after 23 April 2004, and their birthday is not 1 July , their lifetime health cover age is their age on the 1 July before they purchase hospital cover for the first time (unless they purchase cover for the first time on 1 July, in which case their lifetime health cover age is their age on the day they purchase cover); or

• If the member purchases cover for the first time* on or after 23 April 2004, and their birthday is 1 July, their lifetime health cover age is 1 year less than their actual age on the day they purchase hospital cover for the first time

Your lifetime health cover age is used to calculate whether you need to pay a loading on your premium.

Examples:

1. Paul turns 31 on 7 June 2004. Paul purchases hospital cover for the first time on 20 June 2004. On the 1 July before Paul first purchased hospital cover he was aged 30. Paul's lifetime health cover age is 30, so he does not pay a loading on his premium.

2. Kate turns 39 on 6 March 2004, and purchases hospital insurance for the first time on 10 June 2004. On the 1 July before Kate first purchased hospital insurance she was aged 38, so her lifetime health cover age is 38. Her loading will be 16%, which is a 2% loading for each year she is aged over 30 before she purchases hospital insurance.

The base rate premium is the premium that the health fund charges a member with a certified age at entry of 30 years.

The system operates with a 'threshold age' of 30. This means that all members who join by 1 July following their 31st birthday do not incur a loading on their premium. All members who join after 1 July following their 31st birthday pay a loading on top of their premium.

A loading of 2 per cent on top of a member's premium will apply for each year a member's lifetime health cover age is above 30 when they first take out hospital cover. This is called the loading for late entry. For example, someone taking out hospital cover at the age of 30 is entitled to pay the base rate premium, provided they maintain their cover. Someone who first takes out cover at age 40 will pay an additional 20 per cent on top of the base rate premium for the rest of their life, and someone who waits until age 50 to join will pay an additional 40 per cent on top of the base rate premium.

The maximum loading allowed is 70 per cent. This translates to the maximum loading applying for a certified age at entry of 65 and applies to people who first take out hospital cover at age 65 or over.

People born on or before 1 July 1934 are not affected by Lifetime Health Cover. If people in this age group take out hospital cover at any time in the future they will pay the base rate premium, with no loading for late entry.

All Australians without private health insurance were given an introductory grace period commencing 1 July 1999 and ending on 15 July 2000 to join a health fund and lock in a certified age at entry of 30 prior to the commencement of Lifetime Health Cover.

People who took out hospital cover during the introductory grace period (1 July 1999 to 15 July 2000), are required to maintain their cover for a minimum period of 366 days after 1 July 2000 in order to lock in a certified age at entry of 30. People who are subject to the minimum period of membership requirement are not entitled to take a period of absence before 1 July 2001. However, they may suspend their membership for a time, with the agreement of their fund.

If you had hospital cover on 30 June 1999 and also on 1 July 2000, you are not affected by the minimum period of membership requirement. This means that if you need to drop your private health insurance you can do so for up to 24 months without incurring a loading on your premium. This is called the Lifetime Health Cover period of absence.

For lifetime health cover purposes, there is no minimum period of membership for a person who takes out hospital cover after 15 July 2000.

Under lifetime health cover members are able to drop their cover for a cumulative period of 24-months in their lifetime without affecting their certified age at entry. However, after 24 months aggregate absence, their certified age at entry will be increased by one year for each additional 365 days of absence (ie. a 2% loading will be applied to their premium for each additional 365 days of absence).

For example, if a person dropped their hospital cover on 15 March 2002, they could rejoin any time until 14 March 2005 (24 months + 364 days absence), without paying any additional loading on their premium. If they delayed one more day, ie. 15 March 2005 (24 months + 365 days after they dropped their cover), they would pay an additional 2% loading on their premium. If they delayed another 365 days (ie. until 15 March 2006), they would pay an additional 4% loading and so on for every 365 days they delay joining.

If you are unsure how much of your period of absence you have used, you can contact your health fund and they can inform you. Alternatively, you can refer to the annual statement that your health fund sends you detailing your Lifetime Health Cover status.

People who joined during the introductory grace period will not be entitled to a period of absence until they serve the minimum period of membership.

Members may suspend their membership for a time, with the agreement of their fund. Periods of suspension do not count towards the 24 months period of absence that is allowed before a member's certified age at entry is affected. People who joined during the introductory grace period may be entitled to suspend their membership prior to the expiration of the minimum period of membership, but only with the agreement of their health fund.

The Lifetime Health Cover Loading 10 year anniversary rule came into effect with the Private Health Insurance Act 2007. This states that if a perosn has held Private Health Insurance (Hospital Cover) with a Lifetime Health Cover loading for 10 continuous years, their loading will be removed. This was effective from 1st July 2000, and therefore the first anniversary for this to come into affect was 1st July 2010.

This means people who have held Private Health Insurance for 10 continuous years will start to have their loadings removed.  In order for this to happen, people may need to prove they have held hospital cover for 10 continuous years.

Under the Private Health Insurance Act 2007, it is the funds responsibility to notify members who have paid a Lifetime Health Cover loading for 10 years and remove their loading from their Health Insurance premiums and revert the person's premium to the base rate.

However, for some people, health funds may not have a full history and their loading may not be removed automatically. In the case where people have transfered between multiple health funds transfer certificates will only show the date they started and ended their cover with the previous fund, not a history for the past 10 years.

People who have been members of multiple funds over the last 10 years need to request transfer certificates from their previous funds to enable their new health fund to accurately calculate the total years of hospital cover held. The 10 years of continuous cover can only be broken by permitted days; however, permitted days are not counted as part of the 10 years and therefore prolong the time before loading can be removed.

If a person is unable to obtain a transfer certificate from previous health funds the new health fund may offer the option of completing a statutory declaration.

The rules for waiting periods under hospital tables are not affected by Lifetime Health Cover. The current maximum waiting period before a person can claim benefits on their hospital cover is two months, except for obstetrics and pre-existing ailments where the maximum waiting period is twelve months.

The rules for pre-existing ailments are not affected by Lifetime Health Cover. You are required to serve a maximum waiting period of twelve months before you are able to claim benefits under your hospital cover for pre-existing ailments.

A pre-existing ailment is an ailment, illness or condition, the signs or symptoms of which, in the opinion of a medical practitioner appointed by the health fund, existed at any time during the 6 months prior to the member joining a hospital table or upgrading to a higher level of cover.

Lifetime health cover does not apply to ancillary products or ambulance cover.

Therefore, you need to take out a private health insurance policy that includes hospital cover in order to be assigned a certified age at entry and lock in lower premiums for the rest of your life.

Members will be able to vary their level of cover without adjustment to their certified age at entry.

The premium rate for couples or families with two adult partners will be a combined rate which reflects the age at entry of each of the partners, so that individuals will have a personal age at entry recorded for them rather than a joint age at entry. The couple or family premium is calculated by dividing the normal premium (ie. the premium without loadings) by the number of adults on the policy and applying each adult's loading to their proportion of the premium. For example, if a couple both aged 40 decided to take out family cover with a registered health fund and the normal premium was $1,000 pa, it would be divided by two, and each individual's loading would be applied to their half of the premium.

Lets say one adult (Bev) had a certified age at entry of 30 because she took out hospital cover prior to the commencement of the Lifetime Health Cover introductory grace period and maintained that level of cover. No loading would apply to her half of the premium and it would be $500. Whereas the other adult (Jack) never purchased private health insurance, and being 40 years old, a loading of 20% would apply to his portion of the premium and it would become $600. The two portions of the premium would then be put together and the total cost of the family cover for Jack and Bev would be $1,100.

All health funds are obliged to recognise the certified age at entry of any member wanting to transfer from another fund. This means that members can transfer funds at any time without affecting their certified age at entry.

Australia has reciprocal health care agreements with several other countries. For lifetime health cover purposes, eligibility for Medicare does not include people who have limited eligibility under Reciprocal Health Care Agreements. This means that the grace period for migrants who have limited eligibility under a Reciprocal Health Care Agreement does not start until they are granted full eligibility for Medicare. Members who have limited eligibility under Reciprocal Health Care Agreements pay a loading based on their lifetime health cover age.