It’s a sobering day when we realise we are no longer ‘spring chickens.’ The realisation can come at the arrival of grandchildren or a Seniors Card, but for many of us it may simply come with some creaky joints, additional doctors’ visits or the need for medical procedures your parents used to talk about. Laura Crowden, iSelect spokesperson, takes a look at what costs you may be up for if taking out private health insurance later in life.
Many over 50’s appreciate their private health insurance policy more than ever for the valuable peace of mind, ability to avoid waiting periods and flexibility in medical care it provides. However, for many older Australians, including Ross Fairhurt from Waterloo NSW, it remains a costly commodity, not surprising given average premiums have risen over 50% since 2010.
Even though he doesn’t struggle to pay his private health insurance premiums, he finds the cost of private cover “too high” and the options “incredibly confusing and difficult to navigate through alone.”
However, Ross is fortunate to not be paying even more for his cover due to Lifetime Health Cover (LHC) loading. Currently the ‘mystery cost’ of LHC is making private health insurance even more costly for over a million Australians who waited until later in life to take out private hospital cover for the first time.
The way it works is: If you take out private hospital cover for the first time after the age of 31, you’ll pay two per cent LHC loading on top of your hospital premium for every year over 30 you were without private cover. Because LHC compounds, the longer you wait to take out cover, the greater the impact of LHC on your hip pocket. For example, if you wait until 50 to take out hospital cover you’ll pay an extra 40%, by 55 you are looking at 50% more and if you are 65, you’ll be facing the maximum LHC loading of 70%.
In dollar terms, a 55 year old couple are looking at around $1500 a year extra on an average policy, which adds up to $15,000 over the ten years you have to pay LHC for. Those who waited until 65, are looking at over $2000 a year more or $20,000 over a decade!
LHC was introduced by the Government back in 2000 and was designed to encourage Australians to take out private cover earlier in life and reduce the burden on the public system.
Unfortunately, if you decide to take out private cover later in life, there is nothing you can do to avoid LHC completely but you can minimise its impact. LHC loading is calculated as a percentage of your premium, meaning that the higher your hospital premium, the greater the LHC impact on your budget.
So if you are already paying an LHC loading or thinking about taking out private cover for the first time, make sure you are on the best value policy to minimise your LHC burden.
This is easier said than done, given the sheer volume and complexity of private health insurance options out there. Private health first-timers should consider speaking to a private health insurance expert such as iSelect to discuss their current life stage and what might be on the horizon.
Taking stock of your current and near-future requirements as well as your budget will ensure you take out the best value policy that covers you for everything you need. It will also prevent you from paying for things you don’t need such IVF when the only parenting you plan on doing is babysitting the grandkids!
This approach helped Ross secure a high-value policy which included suitable “Young at Heart Extras” such as preventative tests, hearing aids, dietary advice and pharmaceutical prescriptions. It also provides him with extensive hospital cover that does not include pregnancy.
Ross saved almost $400 a year by being proactive and getting a better deal, which proves that while private health insurance can carry unexpected costs, there can also be some unexpected savings to offset them.
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