Update on the Fairer Private Health Insurance Incentives Bill 2009

The Fairer Private Health Insurance Incentives Bill 2009 was debated in parliament on 9 March 2010 and did not pass through.

This means that individuals earning more than $75,000 a year and couples on more than $150,000 a year won't be forced to pay more for their health cover.

Voting by the Senate on the Fairer Private Health Insurance Incentives Bill 2009 has not been finalised.

The Fairer Private Health Insurance Incentives Bill 2009 is made up of three bills —the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill 2009 and the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge—Fringe Benefits) Bill 2009, and the Fairer Private Health Insurance Incentives Bill 2009 (No 2).

The three bills are part of a package to effect three private health insurance tiers which include the removal of part of the private health insurance rebate, specifically for those people who have higher incomes.

Legislation related to the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill 2009 and the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge—Fringe Benefits) Bill 2009 was rejected by the Senate on Wednesday 24 February 2010.

It is expected that the Fairer Private Health Insurance Incentives Bill 2009 (No 2) to means test the 30 percent rebate will be debated and voted on when Senate next sits on 9 March 2010.

Click here for more background information about the Government's proposal.

On Wednesday 3 February the Fairer Private Health Insurance Incentives Bill 2009 which proposes to remove part of the private health insurance rebate was passed through the House of Representatives.

It is anticipated that the Bill will be introduced in the Senate for a second round of debate soon. According to reports in the media, the Opposition has vowed to block the legislation as it did in September 2009. As you may be aware, the legislation had been previously defeated in the Senate in 2009.

We believe that the proposed changes, if passed, could ultimately lead to higher premiums for all private health insurance customers and not just those on higher incomes. Click here for more background information about the Government's proposal.

We will continue to keep you informed about the legislation.

Kind Regards

Amanda Hagan
Group Executive
Australian Unity Healthcare

Fairer Private Health Insurance Incentives Bill 2009

Dear Member

The Fairer Private Health Insurance Incentives Bill 2009 is not fair at all. It proposes to remove part of the private health insurance rebate, specifically for those people who have higher incomes. I believe the changes will ultimately lead to higher premiums for all private health insurance customers, including you, and not just those on higher incomes. If you share our concern take action now to keep private health insurance fair.

Before I get into the details of the new bill, it is important to remember that health costs in Australia are rising dramatically. According to the Australian Institute of Health and Welfare, the federal and state governments spend $65 billion each year on health - that's over $6,000 for every taxpayer, or approximately seven times the 1.5% Medicare Levy paid on the median income of about $60,000 per annum. That cost is expected to rise dramatically as the population ages and chronic diseases become endemic.

As a private health insurance member, you already pay your taxes and support Medicare. In addition, you have chosen to take out additional cover. Your decision, and that of 11 million other Australians, removes billions of dollars of burden from the public system. We believe that your action deserves acknowledgement.

During the election campaign in 2007, the Private Health Insurance Association sought clarification from the then Opposition about its intentions regarding the rebate, one of the key policy initiatives that support people like you who take out insurance. In correspondence dated 20 November 2007, Mr Rudd stated that:

Federal Labor is committed to retaining the existing private health insurance rebates, including the 30 per cent general rebate and the 35 and 40 per cent rebates for older Australians.

The Fairer Private Health Insurance Incentives Bill 2009 is a breach of this election promise.

Private health insurance in Australia is designed so that everyone pays the same for the same cover. Private health insurers are not allowed to refuse to cover someone who has poor health; and we must charge the same premium for the same level of cover as someone who has excellent health. At Australian Unity, we believe that this design is a good thing, preventing discrimination on a range of undesirable grounds.

We believe that the measures currently before the parliament will have a range of negative effects. According to the Private Health Insurance Administration Council (the Federal Government regulator of health insurance) the average age of the health insurance pool is 40 years. This has been relatively stable over the past four years, largely due to government policies that encourage young people to enter private health insurance. It is estimated that for every year that the "age" of the private health insurance population increases, premiums will need to rise by some 5 percent simply to cover the impact that this ageing has on the amount of benefits claimed. (This figure has been derived from analysis by an independent actuary.)

The removal of the rebate could lead to members who are younger than 40 years dropping out of health insurance or downgrading their cover. This will have an impact on ageing the private health insurance population and will in turn affect all premiums - including yours. That's not fair.

I urge you to consider the material we've presented here, including our submissions to the Senate on this matter, and, if you share our concern, find out more, take action by writing to your local member of parliament and let others know about this issue.

Amanda Hagan
Group Executive
Australian Unity Healthcare