Every year in June, health funds and comparison websites trot out their marketing campaigns trying to convince 31-year-olds to buy health insurance before the 30 June “deadline”.
So what’s so important about 30 June? And why age 31?
This isn’t just about 31 year olds – it’s for anyone over 30 who is thinking about one day having private health insurance (PHI). In short, for every year over age 31 you put off getting hospital cover, you’ll have to pay a penalty if and when you do buy insurance.
It’s called the Lifetime Health Cover (LHC) loading. But don’t worry, it’s not as big a deal as it seems. We found that it almost always works out better financially just to wait and buy hospital insurance when you need it, even if that means paying the LHC.
How does Lifetime Health Cover work?
LHC is a government policy that aims to get younger people into private health insurance by punishing them for not buying it sooner. It does this by charging you an extra 2% for every year that passes after turning 31 where you don’t have eligible hospital cover. The government uses lots of strategies to encourage people to buy health insurance; you can think of the private health insurance rebate as a carrot, and the LHC is one of the sticks.
LHC… charges you an extra 2% for every year that passes after turning 31 where you don’t have eligible hospital cover
The year isn’t counted from your birthday. It gets counted from 1 July for everyone – that’s why insurers go on about the June “deadline”. Every year in July, everyone aged 31 and over who doesn’t already have hospital cover will have their LHC loading increased by another 2%.
For example, if you take out insurance at 41, your premium will be 20% higher than a 31-year-old on the same policy. We call that extra charge the LHC loading.
The LHC loading for couples is the average of each partner’s rate. So if one of you has to pay a 20% loading and the other is on 10%, you’ll pay a 15% loading on a couples or family policy.
The good news is it isn’t forever: you pay the loading for 10 years, then your premiums drop back to normal, as long as you keep paying for hospital cover.
You pay the loading for 10 years, then your premiums drop back to normal, as long as you keep paying for hospital cover
If you drop your insurance for more than three years (and these don’t have to be consecutive years), if you do take it out again, it will be as if you never had it at all. You’ll have to pay the full loading again.
The loading only applies to hospital cover. Extras policies – for things like dental and optical – are a completely separate thing, even though health funds will try to sell you both of them. Having only an extras policy won’t get you out of paying the LHC loading if you decide you want hospital cover later.
There are other complicated rules which might affect you if you’re a new migrant or if you have gaps in your health cover, for example. If you still have questions about the LHC, see below.
Should you buy insurance at 31, or when you need it?
It’s not worth paying for years of expensive insurance that you don’t need, just to avoid the loading.
The LHC loading is the health insurance marketer’s best friend. The message is one of the oldest tricks in the book: you’d better buy now, because it’ll be more expensive tomorrow.
There are two sure-fire ways to avoid paying the LHC loading. The first is to buy hospital cover before the next 1 July after you turn 31, and to hold it for the rest of your life. The second is to never buy health insurance at all.
We crunched the numbers to find out whether buying hospital insurance early, and avoiding the LHC, or buying it when you need it, and paying the LHC, is the better financial decision. These are our two base scenarios:
Buying early: purchasing the cheapest Basic hospital policy you can find every year from age 31, so you never have to pay the LHC loading
Buying later: purchasing hospital cover at a later date, paying the LHC loading for ten years with a policy that suits your medical needs
Is the LHC loading that bad? We compare the numbers
Almost always, it works out better financially to wait to buy hospital insurance when you need it, even if that means paying the LHC. We’ve run the calculations on multiple occasions, the last time in 2025, and every time we come up with the same result. Buying hospital insurance just to avoid paying the LHC isn’t worth it.
We looked through 25 years of pricing data and found the cheapest hospital policies in every state in each year from 2001 to 2025. We worked out how much a single person would pay (after the base government rebate) if they bought the cheapest policy available in their state when they turned 31, and kept purchasing the cheapest policy every year until today.
We then projected what a person in the same circumstances might pay in LHC loading over the next decade, if they bought hospital cover for the first time in 2025.
We modelled hundreds of possible scenarios, but to illustrate the point let’s just look at two similar hypotheticals.
Option #1: Buying cheap cover from age 31
Meet Felix. Felix lives in Victoria and turned 31 in early 2020. That year in June he took out a cheap junk policy – not because he thought he needed it, but because he wanted to beat the 1 July LHC “deadline”.
Over the next five years until 2025 he would have paid at least $4520 in premiums (with the taxpayer chipping in an extra $1480 via the PHI rebate).
Option #2: paying the LHC loading
Now here’s Jemima: same age, same state. She doesn’t buy insurance at 31, but in June 2025 at age 36 uses CHOICE’s health insurance comparison to find a Gold policy.
She holds Gold policy for five years (switching annually if she finds a cheaper one), before dropping to the Silver tier, which she keeps for the remainder of her LHC decade.
Because she bought health insurance five years after turning 31, Jemima pays a 10% LHC loading. Our projections estimate that over those ten years Jemima can expect to pay about $3000 extra due to the LHC loading.
Text-only accessible version
This infographic compares two scenarios. Felix and Jemima are the same age, live in the same state, and have the same medical needs.
Felix buys hospital insurance early. From 2020, age 31: buys cheapest Basic hospital policy and avoids the LHC. At 2025, age 36, he buys a Gold policy that suits his needs, in 2030 he switches to a Silver policy.
Felix paid an extra $4520 for hospital insurance he didnt want or use between 2020 and 2025.
Jemima buys hospital insurance later. She doesn’t pay for insurance until she thinks she needs it. In 2025, age 36: she buys a Gold insurance policy that suits her needs with a 10% LHC loading. In 2030 she switches to a Silver policy, paying another 5 years with 10% LHC.
Jemima paid roughly $3000 extra in hospital insurance premiums between 2025 and 2035 due to the LHC.
Jemima saved over $1500 by not worrying about the LHC.
We modelled over 9000 scenarios like this using hospital insurance premiums from CHOICE archives between 2001 and 2025, and modelling future premiums based on historical rates of price increase, and found that buying hospital insurance later was the better choice in 84% of cases.
Who saves more money?
Let’s compare the pair. Felix does what the government and PHI industry says and buys into health insurance at a relatively young age.
He never claims on his Basic policy, which is fairly easy as it barely covers anything, and even then only in public hospitals. He spends $4500 to get basically nothing.
Jemima buys insurance that she actually wants, when she wants it. For this she gets penalised $3000 through the LHC loading. That’s still $1500 less than the unlucky Felix paid.
Is there any situation where it makes more sense to avoid the LHC loading?
So are there any situations where buying budget insurance at 31 is cheaper than copping the LHC loading? In 2025 we modelled 9744 comparisons using 25 years of premium data and found that paying the LHC (like Jemima) was cheaper than holding basic cover (like Felix) in 84% of scenarios.
We varied:
the state (prices for the same policy vary from state to state)
the age of our personas (to compare the cost of longer periods of buying Basic against higher LHC loadings for older people), although we only compared personas of the same age
the policy tier our LHC payer purchased, and the years they stayed there before dropping cover
We wanted to project how much you might pay in LHC loading at different levels of cover. The higher the cover tier, the more you can expect to pay in LHC.
In each scenario, our person began with a Basic, Bronze, Silver or Gold policy. In some scenarios they held the same level of cover for ten years, while in others they dropped to a lower tier after a number of years.
Step one: find the cheapest Basic hospital policy in your state. Step two: don’t buy it
In every scenario but one Jemima came out ahead of Felix by paying the LHC, rather than buying any policy – even the cheapest – from age 31.
The only scenario where the LHC would cost more was if Jemima bought a Gold policy for the whole decade. In the other scenarios, even with Jemima paying the LHC, she saved money, ranging from a couple of hundred dollars to $3200, depending on the level of cover Jemima chose.
Based on these calculations, we’ve devised a four-step process where you pay LHC loading and still come out ahead:
Find the cheapest Basic tier hospital policy in your state.
Don’t buy it.
Repeat from step one the next year.
Take out the right health insurance when you’re ready to use it.
How we crunched the numbers
We went through 25 years of historical pricing data and found the cheapest hospital policies in every state for every year from 2001 to 2025. We calculated how much these policies would cost, factoring in the base level government rebate for that year. We reviewed this work in September 2026, and although premiums and thresholds have changed slightly since our modelling, the gap between these two options is large enough that the conclusion is unchanged.
We worked out how much a single person would pay if they bought the cheapest policy available in their state when they turned 31, and kept purchasing the cheapest policy every year until today. We also modelled how much they would spend if they bought the cheapest Gold tier policy, since we wanted to see the cost of actual health cover instead of junk policies.
Historical prices were sourced from the CHOICE magazine archives. The cheapest low-cover policies we had recommended for avoiding the Medicare Levy Surcharge were “purchased” in that year. Data was unavailable for 2006, and for that year we have taken the median between the relevant 2005 and 2007 prices as the “cheapest price”.
We then modelled what another person (of the same age, in the same state) would pay in LHC loading over the next ten years, if they bought hospital cover for the first time in June 2025. We tried to capture a range of purchasing patterns, in particular the common practice of dropping cover as insurance gets more expensive. In some scenarios, our persona stayed on the same cover tier (Gold, Silver, Bronze or Basic) for ten years. In the other scenarios they purchased one tier and dropped to a lower tier after a number of years. For these scenarios we chose policies with a $750 excess.
To predict future premiums we calculated the average annual rate of increase, for premiums at each cover tier since 2022. For Basic and Bronze policies we assumed a 2% annual price increase. For Silver policies we modelled a 3% increase each year, and for Gold policies we projected an 11% price hike. Once we had calculated how much PHI might cost in the past and in the future, we compared the two sets of results.
Why are people punished for buying health insurance later in life?
The LHC loading – or the threat of it – works. As of June 2026 there were about 212,000 more people in their early 30s with hospital cover than people in their late 20s, according to the Australian Prudential Reporting Agency (APRA). Insurers say the goal of the LHC is to get more people into the private system and relieve the strain on our public hospitals. But that’s not the end of the story.
The private health insurance industry needs a constant supply of healthy young bodies to pay for the increasingly costly medical care of older people.
Younger people tend not to come with chronic illnesses and spend less time in hospital than older people, making them cheaper to insure. In the 12 months to June 2026, APRA data shows that health funds paid, on average, less than $1000 in hospital benefits for every insured person in their thirties – well below the $1522 population average.
The private health insurance industry needs a constant supply of healthy young bodies to pay for the increasingly costly medical care of older people
But as you would expect, this pales in comparison to healthcare costs for older age cohorts (the average benefit received by people aged 75 to 79 in the same period was over $5000).
Health funds aren’t allowed to set premiums according to a person’s age or health. Before discounts and loadings come into play, everyone pays the same base premium for the same policy.
Younger health fund members are subsidising the private hospital care of older Australians. If this wasn’t the case then the private health insurance industry might spiral into collapse.
Text-only accessible version
This infographic shows statistics about the benefits paid for private hospital treatment by health funds.
The average benefit received from health funds by people aged 30 to 39 is less than $1000.
The average benefit received by people aged 70 to 79 is more than $5000.
Younger people are much cheaper to insure, making them valuable customers for health funds.
Source: APRA, Private Health Membership and Benefits. Figures reported for 12 month to June 2026.
What if I have to pay the Medicare Levy Surcharge?
The Medicare Levy Surcharge (MLS) is a tax paid by people on high incomes who don’t have private health insurance. It’s tied to your income, and as of July 2026 costs upwards of $1050 per year.
Tax minimisers are good business for health insurers, so many of them offer junk Basic policies sold for around this threshold – just under $1050 (once the rebate is applied).
What if you’re older than 31 and your income has just passed the threshold where you have to pay the MLS? Does it make sense to buy junk insurance to avoid the MLS if you also have to pay the LHC loading?
Tax minimisers are good business for health insurers, so many of them offer junk Basic policies sold for just under $1050
Everyone’s situation will be different. The answer will depend on your LHC loading, your income (which determines your MLS and PHI rebate amounts), and the cost of the cheapest Basic policy in your state or territory.
Generally speaking, because of the effect the LHC loading has on your premium, buying Basic hospital insurance to minimise your MLS tax liability is typically only a sensible option for people on higher incomes.
For example, take a 41-year-old Queenslander with a 20% LHC loading. If they earn $120K, their MLS amount is $1200, or 1%. Taking their LHC loading and 16% PHI rebate into account, the cheapest Basic product will cost them $1284.
In this case, paying the MLS is the smarter decision, since it is $84 less than the LHC-loaded cost of junk insurance.
But if they earn $124K, this puts them in the income bracket for the higher 1.25% MLS rate, putting their surcharge at $1550. Earning more also means their PHI rebate goes to the lower 8% rate, which makes the cost of the Basic policy $1384. So in this case buying the Basic policy is the rational financial choice by about $166.
So if you’re considering whether to buy a Basic policy or pay the MLS, check whether that Basic policy is still cheaper after your LHC loading and rebate is applied to the price. If you’re only earning a little bit above the MLS income threshold you may come out ahead simply by paying the surcharge.
Still have questions about Lifetime Health Cover loading?
Does the LHC affect me when I’m under 30?
No, the LHC loading adds an extra 2% on your hospital insurance premiums for every year that you haven’t had hospital cover from 1 July after you turn 31. There are no penalties for having no cover when you’re 30 years of age or younger.
What is the maximum LHC I could have to pay?
LHC loading is capped at a maximum loading of 70%. You’ll pay an extra 2% on your hospital insurance premiums for every year that you haven’t had hospital cover since you turned 31, up to a maximum loading of 70%.
How long will I have to pay the LHC for?
You’ll pay the loading for the first 10 years that you have hospital insurance, then your premiums will go back to normal. However, if you have a break in your cover longer than 1094 days, and then buy it again, the 10-year period restarts (see Days of Absence, below).
Do I have to pay LHC?
If you were born on or before 1 July 1934, you are exempt from LHC. The policy applies to pretty much everyone else, even to those who are dependent with a disability, but you only need to start paying it if you purchase hospital insurance after you’re 31. If you start hospital cover before you turn 31 (and keep it) or never buy hospital insurance, you’ll never have to pay it.
Will I need to take out hospital insurance when I’m old?
No, you never need to take out private hospital insurance, but some people choose to purchase it when they’re older and are more likely to face more medical costs. Since the government requires health insurers to offer the same base rates to customers, regardless of age, and older people claim more, older people tend to get better value for money from private health insurance than younger people.
What effect does LHC have on extras insurance?
None. LHC only affects hospital insurance. Having or not having extras will never affect future health insurance premiums. Additionally, extras premiums are not affected by whether you do or don’t have hospital insurance.
What’s the difference between hospital and extras?
We break down the difference in our health insurance buying guide. Basically hospital insurance covers care in a hospital, and extras covers out of hospital care like physio, glasses and dental.
Most insurers will try to sell you a package deal, or combined policy, but it’s usually better value to buy them separately. Or some people buy one, and not the other
What if I came to Australia after I turned 31? Will I have to pay LHC?
Once I buy hospital cover, do I need to keep it forever so I don’t get charged additional LHC?
You’re allowed to have gaps in active hospital cover that add up to 1094 days (see “Days of absence”, below) before your LHC is affected. You’re also allowed a period of 12 months of living overseas, without adding to your 1094 days of absence, or affecting your LHC.
But once these are used up, any further gap will cause LHC to be added to your premium when you purchase hospital cover again. And if you were already paying LHC, any new LHC percentage will be added to the original amount, and the 10 years for which you need to pay LHC will restart.
What are “Days of Absence”?
You’re allowed to have gaps in active hospital cover that add up to 1094 “days of absence”, before your LHC is affected. This is to allow gaps between switching funds etc. Once these are used up, any further gap will cause LHC to be added to your premium when you purchase hospital cover again. If you were already paying LHC, any new LHC will be added to that and the 10 years for which you need to pay LHC will restart.
You’re also allowed a period of 12 months of living overseas, without adding to your 1094 days of absence, or affecting your LHC.
Are there any other ways to have gaps in cover without being penalised? What happens when you go overseas?
You’re allowed to have gaps in active hospital cover that add up to 1094 “days of absence”, before your LHC is affected. This is to allow gaps between switching funds etc. Once these are used up, any further gap will cause LHC to be added to your premium when you purchase hospital cover again. If you were already paying LHC, any new LHC will be added to that and the 10 years for which you need to pay LHC will restart.
You’re also allowed a period of 12 months of living overseas, without adding to your 1094 days of absence, or affecting your LHC.
Where can I find out more about the LHC?
For more details see the LHC section of the government’s private health insurance website.
You’re allowed to have gaps in active hospital cover that add up to 1094 “days of absence”, before your LHC is affected. This is to allow gaps between switching funds etc. Once these are used up, any further gap will cause LHC to be added to your premium when you purchase hospital cover again. If you were already paying LHC, any new LHC will be added to that and the 10 years for which you need to pay LHC will restart.
You’re also allowed a period of 12 months of living overseas, without adding to your 1094 days of absence, or affecting your LHC.
Daniel Graham is a Senior data analyst in the Insurance and utilities team. He maintains the CHOICE database of general insurance products and is the resident expert in insurance pricing. He covers home, car, pet and health insurance.
Previously, Daniel has worked as a finance journalist and data journalist in the investigations team, focusing on insurance stories and comparisons.
Daniel has a Graduate Diploma of Journalism from UTS and a Bachelor of Arts from the University of Sydney. He is RG146 compliance certified to provide general advice in Tier 2 General Insurance and is a member of the Media, Arts and Entertainment Alliance.
Daniel Graham is a Senior data analyst in the Insurance and utilities team. He maintains the CHOICE database of general insurance products and is the resident expert in insurance pricing. He covers home, car, pet and health insurance.
Previously, Daniel has worked as a finance journalist and data journalist in the investigations team, focusing on insurance stories and comparisons.
Daniel has a Graduate Diploma of Journalism from UTS and a Bachelor of Arts from the University of Sydney. He is RG146 compliance certified to provide general advice in Tier 2 General Insurance and is a member of the Media, Arts and Entertainment Alliance.
Jane Bardell is a Content producer in the Insurance and utilities team. She writes about home, car, pet and health insurance.
Previously at CHOICE, she checked facts, figures and statistics as a Verifier with the Editorial and investigations team.
Jane has a Bachelor of Science from the University of New South Wales. LinkedIn
Jane Bardell is a Content producer in the Insurance and utilities team. She writes about home, car, pet and health insurance.
Previously at CHOICE, she checked facts, figures and statistics as a Verifier with the Editorial and investigations team.
Jane has a Bachelor of Science from the University of New South Wales. LinkedIn
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