Private health insurance premiums to rise by an average 5.6 per cent

Source: PHIAC

Early each year the Health Minister announces the average increase to private health insurance (PHI) premiums that will apply from 1 April, following her annual assessment of applications for increases from the 36 health insurers. The announcement invariably attracts considerable attention, particularly if the increase is higher than community expectations. This year, the average increase to premiums will be around 5.6 per cent, according to the Minister’s statement. This is broadly in line with the magnitude of increases over recent years, and just marginally above last year’s increase of 5.06 per cent. For families with top cover this will mean an average increase of $3.70 per week.

Competitive constraints in private health insurance raised—but a broader debate needed

Image source: Victorian Health Department

Competition in the private health insurance market is the focus of a recent discussion paper released by the independent regulator, the Private Health Insurance Administrative Council (PHIAC). The paper is the first prepared by the new Premiums and Competition Unit (PACU) which was established in the last budget to help foster competition in the Australian private health insurance market. The paper aims to ‘promote discussion and stimulate comment on the nature of markets and competition’ in private health insurance, with a view to feedback informing a final report due for release in early 2013.

Private health insurance rebate to deliver yet more savings for Government

Image: Department of Health and Ageing

The Mid Year Economic and Fiscal Outlook (MYEFO) included yet more changes to private health insurance rebate (PHIR) arrangements, on top of those recently implemented. These are expected to deliver savings of $1.09 billion over three years which will be used to offset the cost of the Dental Health Reform package announced in August this year.

New unit to lower health insurance premiums and improve competition

Image: Private Health Insurance Administration Council

The 2012–13 Budget included an announcement of funding for a new unit to advise the Government on private health insurance industry costs, insurance premiums and competition in the sector. Costing $2.3 million over four years—to be met by an increase in a levy imposed on private insurers—the unit will be established within the Private Health Insurance Administration Council (PHIAC), the independent regulator of the sector. One of the primary functions of the new unit will be to identify options to increase competition in the sector and put downward pressure on health insurance premiums (see Portfolio Budget Statement, p. 556).

Health Insurance in Australia: time for a new debate?



Image: Department of Health, Victoria

 In July 2011 the Government re-introduced its Fairer Private Health Insurance Incentives legislation into the House of Representatives; for an overview of the history of this legislation, see here. The Bills have not yet been debated. The key changes proposed by this legislation are: a means-test on tax-funded rebates for private health insurance (PHI) for those on incomes above a specified threshold, and; a higher Medicare Levy Surcharge for people on high incomes who choose not to purchase PHI.

If passed, the legislation will mean that higher income earners will receive a lower or no tax-funded subsidy when they purchase PHI, and, if they choose not to purchase PHI, they will face higher tax penalties.

Legislation to means test the private health insurance rebate re-introduced—debate continues

Image Source: Wikimedia Commons

As the Government signalled in the last budget, legislation to means test the private health insurance rebate has been re-introduced into Federal Parliament. This is the third time the Government has attempted to implement this 2009–10 budget initiative; previous attempts were blocked by the Senate as this earlier Flagpost outlines. As before, three Bills have been introduced: the Fairer Private Health Insurance Incentives Bill 2011, the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill 2011, the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge—Fringe Benefits) Bill 2011. Details and analysis of the earlier bills can be found in these three bills digests, available here, here and here.

If switching health insurance funds can save money, why don't more Australians do so?

A recent report by Choice, the publication of the Australian Consumers' Association, found that if some people switched health insurers they could make substantial savings to their health insurance costs. Reviewing some 17 000 health insurance products as part of its annual survey of health insurance, Choice found that families could save more than $1500 a year by switching to a better value fund. In some cases, the savings could be even higher.

Debate: does the private health insurance rebate relieve pressure on public hospitals?

As the Government once again prepares legislation to means test the 30 per cent private health insurance rebate—see this recent Flagpost for background—arguments over whether the rebate eases pressure on public hospitals, or exacerbates it, are likely to re-emerge. Because the rebate subsidises the purchase of private health insurance, which can be used to meet the cost of private hospital services, the private health insurance industry and others argue that it keeps pressure off public hospital services. They warn that means testing the rebate will encourage people to drop their private cover and then turn to the over-stretched public hospital system when they require medical treatment. The Australian Council of Social Services counters that the rebate redirects much-needed funding away from the public system—which those on low incomes rely upon—to the less efficient private sector.

Means testing the private health insurance rebate—one more attempt in a changed parliamentary environment?

In the 2009–10 Budget the Rudd government announced it intended to means-test the private health insurance rebate which it said would deliver savings of $1.9 billion over 4 years. The rebate reimburses 30 per cent of the cost of the premium for people who purchase private hospital cover (higher rebates apply for people aged over 65).

The budget proposed the introduction of three income threshold tiers, so that the amount of the rebate would be reduced as income rose. Those on incomes below $75,000 a year (or $150,000 for families) would remain unaffected and continue to be eligible for the full rebate. Those in the first income tier, $75,000 to $90,000 a year for singles ($150,000 to $180,000 for families), would be eligible for a 20 per cent rebate; those in the second income tier, $90,000 to $120,000 ($180,000 to $240,000 for families) would be eligible for a 10 per cent rebate, while those on incomes above $120,000 (or $240,000 for families) would not be eligible for the rebate.

Private health insurance premium increases

The private health insurance sector has begun its annual process of negotiating premium increases with the federal government. To most, the process of—and indeed the need for—negotiating premium prices with government is a little mysterious. A Background Note prepared by the Parliamentary Library provides an overview of the current process for seeking premium increases. Under the Private Health Insurance Act 2007, private health insurance funds must seek the Minister for Health and Ageing’s approval for all premium increases; and the Minister must publicly disclose reasons for not approving an increase.

Medibank Private dividend payment

Medibank Private is to pay the Government a special one-off dividend of $300 million according to this statement from the Treasurer.  This is ‘in recognition of Medibank Private Limited’s strong capital position’ due to the build up of its reserves during the period it was a not-for profit health insurer. The dividend will help fund Labor’s election promises.