Is Lifetime Health Cover Loading a Legalised Theft?

vchar on 23/02/2025 - 20:15

Folks,

You can call me ignorant but I haven't been aware of LHC loading nor I could have missed out something. I had health insurance like OSHC and OVHC prior to medicare. I have had the blue medicare card since Dec 2020 then Green one in less than a year after I got my PR. When I had the blue one, I went to Bupa and Medibank for a private health insurance, they advised me that they don't have covers for me as I was on SC491 visa which was a new visa subclass at that time. So, I thought it should be ok to be with medicare even that meant I had to pay Medicare Levy Surcharge.

Now, I contacted both Bupa and Medibank with my Green Medicare and SC191 visa, I was then advised that I need to pay LHC loading 20% which pushes the lowest-tier cover without extra to roughly $2,500 a year. They said I was given 12 months period to get a private health cover to avoid LHC Loading but I wasn't sold a policy when I wanted one.

I feel like I have been legally robbed in the daylight and it is unfair. I hope I was wrong and not sure if everyone finds this is acceptable.

I have been working and paying Medicare Levy surcharge all these years. Whether people have paid MLS in the past or not, why are they forced to pay LHC loading to health insurers?

Is LHC Loading a legalised theft? Or am I missing something? Please share your thought.

Regards,

Financial

Comments

  • brendanm on 23/02/2025 - 20:23
    +5

    Ignorance is not a defence. My choice to not have private health grows more ingrained by the year due to LHC loading. I'll get it when I'm old and decrepit.

    • CyberMurning on 23/02/2025 - 20:52
      +2

      Same here. Im happy to pay the maximum loading later.
      For now, i save my money in my pocket not on their greedy account

  • shadyscab on 23/02/2025 - 20:35
    +13

    It’s not legalised theft, it is a state sponsored scam.

    I wouldn’t necessarily have a problem with private health, if it wasn’t for the unrelenting effort to lobotomise the public system and extort aussies out of more money for worse care.

    • freefall101 on 23/02/2025 - 21:49

      We missed a massive opportunity during covid to just buy back the private healthcare system and return to a single system. Would have cost a fortune but just leave the PHI loadings in and increase the tax rate until it was paid back again. We paid them a fortune during the time to take public patients anyway.

      All it did was create a zillion middlemen who all take a cut, under the guise that corporations can do it better than the government. Which continually turns out to be a load of bollocks.

  • tenpercent on 23/02/2025 - 20:37
    +2

    If you just want the cheapest cover to be exempt from the Medicare Levy Surcharge (hospital cover for accidents only) it shouldn't be costing you more than $1200 per annum including a 20% loading. Look at Frank or Bupa or even HCF. They're all around $78/month without loading.
    It's only worth it if your / your family earn over a certain threshold though (and it's not the thresholds at which the MLS kicks in, it's a bit higher when it becomes cheaper to just pay for the basic hospital cover direct to the insurer).

  • jma97 on 23/02/2025 - 20:39
    +7

    Ok so here goes….

    Typically, most Australians get a letter when they turn 30 warning them to take up PHI or else they will be hit with LHC. For people who come to Australia and get access to 'green' Medicare, the moment you do (and if you're past the LHC age) you have 1 year to take up PHI or else you're subject to LHC depending on your age.

    As to why there's LHC, basically it comes down to community rating for PHI. Community rating is where regardless of the person's characteristics (age, gender, health status, etc) the premium is charged the same. This was instituted a long time ago (back before Medicare - so that people could actually afford PHI to go to the hospital). This makes it great for older/sicker people but not so much for younger/healthier people - as the former find great value in holding PHI but the younger see no need. But if younger/healthier people drop PHI, it means less people to spread the risk, and you have to raise premiums - a vicious cycle. Hence LHC to basically 'incentivise' people to take up PHI.

    As you mention OSHC and OVHC - those premiums are basically for the insurer to keep (i.e. they don't contribute to risk equalisation, where high cost and older people's claims are shared across all insurers to prevent cherry picking of younger insurers) - so they do not count to avoiding LHC.

    Noting you have MLS - you can think about just taking out the very cheapest Basic hospitals policy so at least you avoid the MLS (especially if it is more expensive to pay for MLS rather than PHI). Once you serve your 10 years the LHC will be removed. That's just a numbers calculation - you may have different needs so that's just one suggestion.

    Edit - to find the cheapest just use privatehealth.gov.au instead of the comparator websites.

    • vchar on 23/02/2025 - 20:58

      Thanks @jma97, and appreciated your clear and straight to the point explanation. so does that mean older people don't pay a higher premium? if so, it seems fair to me.

      They didn't sell me the insurance when I got my blue medicare card due to my visa was too new to them; otherwise, I would have PHI since then.

      However, I don't get it why we need PHI while Medicare exists. Australian pays 2% Medicare Levy still not enough to get rid PHI?

      • ihbh on 23/02/2025 - 21:17

        Australian pays 2% Medicare Levy still not enough to get rid PHI

        Healthcare cost ~10% of GDP.

        Labour share of GDP < 50%. Say it's 50% then healthcare cost ~20% of income.

        So no. Medicare, PHI, government funding (from taxes).

      • mskeggs on 23/02/2025 - 21:23

        You don't need private cover, but you will need to wait for public health for non-critical care.
        This includes things like if you required knee surgery and were in pain. You might have to wait months for the surgery.
        You also are allocated the doctor on duty. For some people it is is essential they choose who cares for them, so they can't accept just Medicare

        It is generally possible to just pay your way if you want a private doctor but don't have private insurance, but can cost thousands for a hospital stay.

        Like most healthy people, I didn't have private cover when younger, then started paying for it when I needed to pay the surcharge. I'm old enough now that I don't need to pay the loading anymore.

      • jma97 on 23/02/2025 - 22:52

        For your first question - yes, in a way. For a given policy that an insurer offers, they must charge the same price to whoever buys it. Insurers do things though to try manage this slightly, e.g. marketing certain products geared towards younger/older insurers, strategic discounting (particularly with extras) etc.

        As for your other question - it's a very broad thing whether we have a completely public v completely private system. Honestly, having either completely public/private system probably isn't the best, so the question has always been how to draw the line. To note PHI exists for many reasons, mostly because there will always be those that want to go private and want 'the best'. Question has always been if, and how, government should support PHI (lots of history there that I won't wade into…) To note, healthcare is very expensive and the Medicare Levy really is more for decoration (it hardly covers the cost of Medicare).

  • MS Paint on 23/02/2025 - 20:41
    +1

    🎻

  • Wiadro on 23/02/2025 - 22:35

    its a scam and what you gunna do?

  • Ave Maria on 24/02/2025 - 01:02

    I came to Australia in 2001 when I was 38 and took Private Hospital & Extras straight away. I was still penalised and had to pay the 2% loading for each year over 31 for a long time until legislation changed to recognise that you cannot penalise someone for something that they could not possibly comply to retrospectively. When I married, I added my partner then 39 on my policy that had no previous cover as a low earner and did not have to take it or afford it. So I then had to pay 18% loading for the next 10 years for my partner. Was it fair? No but the only thing you can do is not to take Private Cover if you are on low income and/or pay the surcharge if you are on higher income. Is it daylight robbery, yes it is. If you realy do not need the Private Care cover (treated straight away in private or public hospital) stay on just the Medicare cover and be on a waiting list for anything not urgent or life threatening until you can be admitted to a public hospital (or die waiting). It all depends on your needs and medical situation.

    I know a lot of people that prefer to pay the medicare surcharge (not a big deal) as then all the money goes to the medicare system to benefit everyone that needs it and not the Private Health Care providers that mostly care for their investors. Your decision to make on what you think is best for you and your family.

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