Lifetime Health Cover for Australian Expats

As an Australian expat, you’re navigating a world of new experiences and opportunities. However, amidst this exciting journey, it’s crucial not to overlook a key aspect back home – your health insurance, specifically the Lifetime Health Cover (LHC). Understanding LHC is essential to avoid financial penalties and ensure you have adequate health cover when you return to Australia.

This guide will walk you through everything you need to know about LHC, helping you make informed decisions for your health and finances.

Understanding Lifetime Health Cover

Lifetime Health Cover is an Australian Government initiative designed to encourage people to take out private hospital cover earlier in life and maintain it.

Here’s how it works: if you don’t have private hospital cover by July 1 following your 31st birthday, you’ll pay a 2% loading on top of your premium for every year you’re aged over 30. For example, if you take out private health insurance at 40, you’ll pay 20% more than someone who joined at 30.

The concept of ‘certified age of entry’ (CAE) is also crucial. Your CAE is the age you are when you first take out private hospital cover, and it doesn’t change as long as you maintain your hospital cover. If you drop your cover, you have 1,094 permitted days without hospital cover (known as ‘Days of Absence’) before your CAE is affected.

The Implications for Australian Expats

As an Australian living abroad, you might think LHC doesn’t apply to you – but it’s not that straightforward. If you’re a current or future expat over the age of 31, and you haven’t maintained your private hospital cover, you could face the LHC loading upon your return to Australia. This loading can significantly increase the cost of your health insurance.

For instance, if you return to Australia and take out private health insurance at 40, having never had it before, your premium could be 20% higher due to LHC loading. It’s a common scenario for many returning expats, leading to unexpected expenses and frustration.

Navigating the LHC Loading

So, how can you minimise or avoid this loading?

Here are some strategies:

• Maintain Your Private Health Insurance: If you already have private health insurance before moving overseas, consider maintaining it. However, this might not be financially feasible or necessary, depending on your circumstances.
• Understand the 10-Year Rule: If you’re returning to Australia and haven’t had private hospital cover, you can avoid the LHC loading by purchasing hospital cover before the 1st of July following your 31st birthday plus 10 years. For example, if you turn 31 while living abroad, you have until you’re 41 to start your cover without incurring a loading.

• Plan Your Return: If you’re planning to move back to Australia, consider taking out private health insurance as soon as possible to avoid increased loadings.

LHC and Private Health Insurance

Choosing the right health insurance plan is crucial, especially considering the LHC implications. Look for a policy that suits your needs and budget. Remember, not all health insurance is equal. Some policies offer comprehensive cover, while others might only provide basic coverage. It’s also worth noting that if you switch to a different hospital cover or insurer, your LHC loading will transfer to the new policy.

Compliance and Record Keeping

Keeping track of your LHC status is vital. Maintain records of any health insurance coverage you have, including the dates of coverage and any periods without coverage. If you believe there’s been an error with your LHC loading calculation, contact your health fund or the Australian Taxation Office (ATO) for assistance.

Planning for the Future

As an expat, your life is full of changes and uncertainties. Regularly reviewing your health insurance in line with LHC changes can save you money and stress in the long run. Stay informed about potential policy changes that might affect you.

Conclusion

Lifetime Health Cover might seem complex, but understanding it is crucial for managing your health insurance effectively as an Australian expat. By staying informed and proactive, you can avoid unnecessary loadings and ensure you’re covered when you need it most.

Ally Wealth Management is the trusted ally in finance for Australians at home and across the globe. As both Australian expats and residents, the founders of Ally have a unique understanding of the common personal financial challenges faced.

Book your complimentary appointment with our team at Ally Wealth Management to discuss how we can help you to achieve your financial goals.

Ally Wealth Management Pty Ltd is a Corporate Authorised Representative of Sentry Advice Pty Ltd ABN 77 103 642 888. Sentry Advice holds an Australian Financial Services Licence (AFSL) No. 227 748.

General Advice Warning: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances, and objectives. We recommend you obtain professional financial advice specific to your circumstances.