Private health insurance: What is community rating

Developed by the Australian Government, community rating was designed to prevent health funds from charging different premiums within a geographic area on the basis of:  

• Gender 

• Race 

• Religious beliefs 

• Sexual orientation 

• State of health¹ 

• Size of family 

• Age (except where Lifetime Health Cover loading or age-based discount applies) 

• Perceived risk of requiring future treatment 

• Any other reason 

This means, a healthy, non-smoking, 35-year-old woman will be charged the same premium for the same product as a smoking, 70-year-old man with a health concern².

It's important to remember that premiums may vary due to several factors. However, none of these factors include health status or claiming behaviour.

What is the difference between risk-rated and community-rated insurance?

Car, income protection, life, trauma and total and permanent disability insurance are all risk-rated. This means a premium is calculated on the level of risk associated with that person making a claim on their policy. Companies offering risk-rated insurance can also refuse to cover a person and increase the cost of their premium or lower their benefit limit if they make a claim. This is very different from a community-rated system, where everyone has the right to buy health insurance. Health funds can’t refuse to provide you with the level of cover you desire; you’re guaranteed the right to renew your policy and the cost of your premium will not increase based on your health, personal circumstances or how many times you make a claim.

When it comes to community rating, are there any exceptions?

There are no exceptions when it comes to your health history, but there are some exceptions when it comes to your age and income.  

1. The Lifetime Health Cover (LHC) loading 

The LHC is an initiative that was put in place by the Federal Government to encourage people to take out private hospital cover earlier in life. 

For every year you put off getting private hospital insurance following 1 July after your 31st birthday, you’ll be charged a 2% loading on top of your premium when you take out a policy. 

This loading is applied to your health cover when you join, and you’ll need to pay this loading for 10 consecutive years before it ceases to apply. 

For more information about the Lifetime Health Cover loading, visit our Private Health Insurance Explained, opens in a new tab page or call us on 1800 249 966, opens in a new tab. 

2. The Australian Government Rebate 

To make private health insurance more affordable, the Federal Government provides many Australians with a rebate, known as the Australian Government Rebate (AGR). If you earn an income of $140,000 or less as a single, or $280,000 or less as a family, you are eligible for the rebate. However, the rebate amount can depend on which of the three age brackets you fall under – under 65, 65-69 and over 70. Find out which rebate tier you fall into and what percentage of your premium the Australian Government will cover.