Private health insurance changes explained: Age of dependents on family polices to rise to 31

As part of the government's 2020-21 budget, the age of children to be considered as "dependents" under family health insurance policies has risen.

From April 1 this year, the maximum age of a dependant for a private health policy will be increased to 31.

The reasoning behind this is to give young people more time before facing financial decisions, especially in the wake of one of the hardest youth employment years in recent memory.

Here's what we know about the changes:

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What age can children be listed as dependents on family private health cover?

From April 1, 2021, the maximum age of dependants for family private health insurance polices will rise from 24 to 31-years-old.

This means young people can wait until 31 to get their own policy, or drop cover altogether.

Does this change apply to everyone?

Almost.

Thankfully, the age limit for dependents with a disability will be scrapped altogether.

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Why is the government making this change?

There are several reasons why the age limit is being increased. Data has shown that young people are dropping private health cover at a steady rate over the past five years or so.

Conceivably, by extending the age limit to a time where young people are more likely to have higher paying jobs and be more financially secure, the more likely they are to take out their own policies.

As young people decide to drop private health cover, the remaining age of those who still have the insurance rises.

This, as a result, tends to make premiums go up. So as the government theorises in its budget papers, keeping young people covered keeps insurance cheaper overall.

"Allowing dependents to remain on the family policy until the start of Lifetime Health Cover provides them with a clear moment for decision about maintaining their PHI, and increases PHI's attractiveness to young people," the government said in its Budget.

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Can you remind me once again, what is Lifetime Health Cover?

Lifetime Health Cover – or LHC – and it was introduced by the Federal Government on July 1 2000.

In extremely short terms, it applies a two per cent loading penalty per year to the cost of health insurance for people over the age of 31 for every year after their 30th birthday that you do not hold it.

The loadings only apply to hospital cover insurance policies.

We have a full explainer of LHC here.

The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.