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Why your health history doesn’t affect your premiums

Health insurance in Australia is community rated, but what does that mean?

Your car insurance premiums may be calculated on your claims history. But thankfully, your health insurance isn’t.

In Australia, a health fund can’t charge a person more based on their health or how often they’ve claimed in the past. In reverse, a person can’t be charged less for not claiming at all. Why? Well, health insurance in Australia is community rated.

The Australian government introduced a community rating system for the sake of fairness. Community rating means that each person is entitled to buy the same health insurance product for the same price as any other person.

Community rating prevents people with chronic conditions from progressively being charged more and more in insurance premiums, to the point where it becomes unaffordable. It also means an insurer cannot refuse to sell you a policy on the basis of your health or how likely you are to claim.

For example, your Grandpa who is 75 has hip issues and will likely need to go to hospital in the next year or two would pay the same for a top level of hospital cover as someone who is healthy and in their forties. It means your Grandpa’s health insurance premiums don’t sky-rocket because he has a dodgy hip.

It also means that people who have a history of serious illness, for example cancer or heart disease, don’t face prohibitively high health insurance premiums.

Put simply, the community rating system gives everyone a fair go at buying health insurance.

Are there any exceptions?

There are no exceptions when it comes to your health history, but there is one exception when it comes to your age and when you take up private health insurance.

Lifetime Health Cover loading (LHC) is a government initiative designed to get people to take out and retain private hospital cover. As part of the initiative, those who take up health insurance after 1 July following their 31st birthday are charged an LHC loading – the amount depends on how old they are when they first take out cover. The loading makes their insurance premiums cost more than someone who took out the same cover before they turned 31.

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