Private Health Insurance Rebate Changes

health-insurance.jpgOn 28 November 2012, the Private Health Insurance Amendment (Lifetime Health Cover and Other Measures) Bill 2012 (the Bill) was introduced to parliament.  The Bill aims to improve the effectiveness of Lifetime Health Cover (LHC) as an incentive for a person to take out private health insurance earlier in their life and maintain that cover.

Under current arrangements, people who take out hospital cover before 1 July after their 31st birthday, and maintain their membership, pay lower premiums than people who delay joining.
 
People who delay taking out hospital cover pay a financial loading of two per cent for every year they are over the age of 30, up to a maximum of 70 per cent, on the hospital portion of their premium.

Any LHC loading that a person is required to pay is removed from their premium after holding hospital cover and paying the LHC loading for a continuous period of ten years.

Currently, the Australian Government pays a rebate as a percentage of the premium paid, which includes any LHC loading.  The Government does not believe that it is appropriate to subsidise the LHC loading component of some policy holders.  Paying a share of the LHC loading is like giving people a parking fine and then the government paying a proportion of that fine for them.

LHC is a key component in supporting community rating in private health insurance. Community rating means that insurers are not allowed to charge different premiums according to an individual's health risk characteristics.  Community rating keeps private health insurance affordable for all Australians, regardless of age, illness or potential health risk.

These changes ensure fairness in private health insurance, so all people who purchase hospital cover receive the same rebate relative to the premium paid, their age and income level.

Private Health Insurance Rebate Tiers for 2012-13 will be:

 
Unchanged
Tier 1
Tier 2
Tier 3
Singles
Families
 $84,000 or less
$168,000 or less
$84,001 –97,000
$168,001-194,000
$97,001-130,000
$194,001-260,000
$130,001 or more
$260,001 or more
Age
              PRIVATE HEALTH INSURANCE REBATE
Under 65
30%
20%
10%
0%
65-69
35%
25%
15%
0%
70 and over
40%
30%
20%
0%
MEDICARE LEVY SURCHARGE
All ages
0.0%
1.0%
1.25%
1.5%

 

Note: These thresholds are based on projected growth in Average Weekly Ordinary Time Earnings (AWOTE). Families with children, the thresholds are increased by $1,500 for each child after the first.