PHI 37/13

This circular issued by the Private Health Insurance Branch contains information about Lifetime Health Cover

Page last updated: 01 July 2013

Printable version of 37/13 (PDF 131 KB)

1 July 2013

Private Health Insurance Amendment (Lifetime Health Cover Loading and other Measures) Bill 2012 and Private Health Insurance Legislation Amendment (Base Premium) Bill 2013

The purpose of this circular is to advise that the Private Health Insurance Amendment (Lifetime Health Cover Loading and Other Measures) Bill 2012 and the Private Health Insurance Legislation Amendment (Base Premium) Bill 2013 have been passed by Parliament.

The Lifetime Health Cover (LHC) changes will take effect from 1 July 2013.

Implementation Arrangements for the LHC Bill

Three month grace period

The Government recognises that some insurers are not ready to implement the system changes required to give effect to the new legislation by 1 July 2013.

Accordingly, a three month grace period up until 1 October 2013 is being provided to allow those insurers time to implement necessary system changes and to notify affected policy holders of the associated tax liability.

Under the grace period the Department of Human Services will continue to pay rebates to insurers, and for those payments that do not take account of the LHC loading, these will be reconciled by the Australian Taxation Office as part of the annual tax assessment process.

Under the grace period, rebates paid to insurers as a result of reduced premiums under the Premium Reduction Scheme that do not take account of the LHC loading will be considered to be properly paid and not subject to recovery by the Commonwealth.

Insurers who use the grace period should inform affected policy holders of the impact of the delay in implementing the changes and the potential for a tax liability.

While the grace period provides insurers with up to three months to implement the removal of the rebate from the LHC loading component, any changes implemented earlier will minimise the impact for policy holders.

Payment of premiums spanning the 1 July 2013 implementation date

The Bill provides that all premium amounts paid before 1 July 2013 and certain premium amounts paid after 1 July 2013 in relation to hospital cover prior to 1 July 2013 are not caught by the new LHC rebate arrangements. The following also applies:

(a) Premiums paid prior to 1 July 2013 – the pre 1 July 2013 arrangements apply to the full premium.
(b) Premiums paid post 1 July 2013 for hospital cover that relates to a period that is post 1 July 2013 – the post 1 July 2013 arrangements apply to the full premium.
(c) Premiums paid post 1 July 2013 in relation to hospital cover that spans the 1 July 2013 implementation date including a period pre- 1 July 2013 and a period post 1 July 2013 – the pre 1 July 2013 arrangements apply to any amount that relates to cover pre-1 July 2013. The post 1 July 2013 arrangements apply to the part of the premium that relates to cover post - 1 July 2013.

Incentives Payment Scheme

The Bill also ceases the Incentive Payment Scheme from 1 July 2013. The rebate can still be claimed via the Premium Reduction Scheme and as a tax offset through the tax assessment process. The Department of Human Services will be issuing advice to customers regarding the changes.

If you require further information please telephone: (02) 6289 9853/24 hr answering machine or email the enquiry to Private Health Insurance Branch.

For more information visit 2013 Private Health Insurance (PHI) Circulars.

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