In the midst of intense debate over whether the new means test will create a mass exodus of members from health funds, the number of Australians with private health cover is increasing. At the end of March 2012, a total of 12,162,753 people had some form of private health insurance, according to the Private Health Insurance Administration Council’s quarterly report. That represents 53.2% of the population.
The increase in single policies from the last quarter to the most recent was 19,494, while family policies increased by 21,251 in that same time. For the last year to 31 March 2012, the number of insured persons with general treatment cover increased by 369,178.
Although this most recent increase in the number of people with private health cover is small, it is still an increase. Over the past three years, from March 2009 to March 2012, statistics show a slow but steady climb in the number of those with private health cover. In March 2009, right at 51.4% of the population had private health insurance and by March 2010, that percentage had crept up to 52%. By March 2011, the percentage was at 52.6% and we are now looking at 53.2% of the population with private cover.
For many years, the Australian government has focused on offering incentives to encourage people to take out private health cover. One of the biggest incentives is the Private Health Insurance Rebate, also known as the Federal Government 30% Rebate, which began in 1999. For every dollar a person contributes to a private health insurance premium, the government gives back at least 30 cents with this rebate. Those age 65-69 get a 35% rebate and those 70 and over receive a 40% rebate.
However, as of 1 July 2012, this rebate will be progressively scaled back for those with higher incomes. Another change that will take place at that time has to do with the Medicare Levy Surcharge (MLS). Currently, if you have a higher income, you pay this extra tax if you don’t take out private health insurance. The current rate is 1% of your income, but that will be increased to 1.25% or 1.5% depending on your income.
Who Will Be Affected?
While the talk of a smaller rebate and an increased tax may strike fear in the hearts of many, these changes will actually only affect slightly over 20% of people with private health insurance. Your premiums will increase only if you are a single person earning over $84,000 annually or a couple or family earning more than $168,000 a year (the threshold for families is based on the number of dependent children).
So, if you are single and earn less than $84,000 a year or a family and earn less than $168,000 a year or thereabouts, you’ll still get your 30% rebate and the changes won’t affect you.
For those who earn over those amounts, the changes vary based on income and are set up in a three tier system, cutting the rebate to anywhere from 25% to 0% depending on income and age.
Back to the Numbers
Whether or not the implementation of the means test for the Private Health Insurance Rebate and MLS will have a negative effect on private health funds remains to be seen. Only time will really tell. But if the numbers from the most recent quarter are any indication, Australians are taking a wait and see attitude before rushing to drop their cover. Perhaps many looked at the numbers and realized they simply wouldn’t be affected by the change. Others may have realized that the benefits of their private health cover outweigh the higher costs they may incur.
Whatever the case, Australians have many choices today when it comes to health insurance. With the use of the internet, it is simple for people to compare health funds and find an option that works best them. Those who need to can look for lesser cover and make do with fairly cheap health insurance. And as the population of Australia continues to increase and as the number of older Australians also increases, it is likely that the number taking private health cover will also increase.
This article is opinion only and should not be taken as financial advice.
Filed Under: Industry News