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“Penalties for not taking up private health cover must be suspended”: CHOICE

Consumer advocate says Lifetime Health Cover Loading should be suspended in light of COVID-19 financial pressures.

Consumer advocate CHOICE is calling on the Federal Government to suspend consumer penalties for not taking up private health insurance in light of the COVID-19 crisis.

The advocacy group says the Government should add an extra 365 days to the bank of permitted days without hospital cover, saving people who drop their private health insurance this year from being punished financially in the future. 

Lifetime Health Cover loading is a penalty that adds 2% to future premiums for every financial year you don't take out hospital cover, once you turn 31. The loading, which has an upper limit of 70%, only applies for ten years if you do ultimately take out health insurance. 

"These changes to Lifetime Health Cover loading rules would mean people wouldn't have to pay more for private health insurance in the future because they can't afford it now and have to drop out of the market," says CHOICE Health Expert Dean Price.

"Financial penalties for not taking on private health cover must be suspended while Australians focus on securing the basics for their families. The Australian Government has a chance to provide further financial relief to the community. The Government should quickly change the Lifetime Health Cover loading rules, ensuring that people's financial decisions made at the height of this crisis doesn't punish them down the track," says Mr Price.

"The Lifetime Health Cover Loading has always been used as a scare tactic by the private health industry. The community needs to know they won't be penalised for not having private health cover right now. Given 80% of people with private health insurance rated it as their number one cost of living concern before the COVID crisis (1), the Government and the private health insurance industry need to do all that they can to ensure that people are getting something that is of value and is affordable." 

"The pressures placed on the health system by the current crisis emphasise the need for whole-of-sector reform. Once the crisis is over, the industry needs a thorough, independent and public review. People are demanding better of their health system and private health insurance is well overdue for a thorough review," says Mr Price. 

The consumer advocate also welcomed moves from Government and private health insurers to cancel or defer yearly price rises. Most private health insurers have deferred premium increases that were due on April 1 and the Government has fixed its calculation of the rebate accordingly.

"Given non-urgent elective surgeries have been cancelled for the next six months, insurers have done the right thing by postponing this round of premium increases, but should go further by canning them all together," says Mr Price.

More health insurance help from CHOICE available at:

(1) CHOICE Consumer Pulse January, 2020 is based on a survey of 1,068 Australian households. Quotas were applied by age, gender, state, household income and education, to ensure the findings are reflective of the Australian population. Fieldwork was conducted from the 14th January to the 29th January 2020.

Media contact: 

Katelyn Cameron, 0430 172 669,

Editor's notes:

- Health funds not passing on premium increases include the five with largest market share: Medibank, NIB, Bupa, HCF and HBF

- Private health insurance is not required for treatment of Coronavirus, according to the Department of Health. Read more here

- CHOICE also provides advice for people with, or considering, health insurance, see below:

Advice for Australians:

Consider dropping extras - there are no tax implications and many services are unavailable. 

- Most people spend more on extras premiums than they get in benefits in a normal year. 

- This year people won't be able to use many of your extras benefits due to necessary social distancing to avoid infection with COVID-19. This may impact services like massage, physiotherapy and chiropractic as well as non-urgent dental check-ups.

- Extras insurance is not needed for lifetime health cover loading or to avoid extra tax.

- If people drop extras cover and want to take it up later again, the waiting period for most services is usually two to six months. It can be higher, including 12 months for major dental work or orthodontics and several years for services like hearing aids. 

Is private health insurance worth it right now? 

- If people are healthy, with no planned elective surgery and are under financial pressure, they should contact their health fund and ask them to suspend their cover or waive their premiums to save.

- There will be limited cases where people can use their private hospital cover in the short term - urgent surgery for life-threatening conditions that need to be done within 30 days in the public system such as limb amputations and heart surgery. 

- Private health cover may still give people benefits for pregnancy, psychiatric treatment and rehabilitation but this is a changing situation - we'll continue providing the best advice we can at

What are the impacts of dropping or not taking up private health insurance? 

- People can drop health insurance for up to 1,094 days (three years minus one day) in their lifetime without incurring a lifetime health cover loading penalty. People need to consider if this is the time that they want to utilise this break. If a person's health insurer allows them to suspend their policy, the suspension doesn't count toward the break.

- If someone earns more than $90,000 (single) or $180,000 (family, couple) dropping private health insurance will mean paying extra tax, instead they should consider downgrading to a cheaper, lower cover policy. 

- If someone drops their hospital cover you will have to serve waiting periods again if they take it up again. Waiting periods vary and are up to 12 months for pre-existing conditions and pregnancy.