AMA calling for private health insurance subsidy increase

GPs are calling for change to help more people afford health cover in the Federal Budget. Calculate and see which is the best fund for you.

Exclusive: Health fund members would save around $400 a year if the government lifted the subsidy for private health insurance from 24 to 30 per cent in the May budget.

The Australian Medical Association (AMA) is calling for the change, claiming it would increase the number of younger people with insurance at a cost to taxpayers of $5.3 billion.

When it was introduced over 20 years ago the subsidy called the Private Health Insurance Rebate was set at 30 per cent but budget cuts have eroded its value and the AMA wants it restored as a cost of living measure.

If the government acted on the policy it would save a single person earning less than $93,000 a year around $200 a year on a Gold policy and a family earning less than $186,000 around $400.

However, some consumers would face higher taxes if they didn’t have health cover under another key part of the AMA plan put to the federal government.

Calls for health insurance reforms in the budget. Picture: NCA NewsWire/Paul Jeffers

Currently more than 411,000 Australians who don’t have health cover are hit with a tax penalty called the Medicare Levy Surcharge.

Singles earning over $90,000 (93,000 from July 1) and families earning over $180,000 ($186,000 from July 1) pay a one per cent tax penalty if they are uninsured.

The penalty rises to 1.5 per cent by the time singles earn more than $140,000 ($144,000 from July 1) and families pay the penalty once they earn over $280,000 ($288,000) from July 1.

The penalty has ceased to be effective in recent years because health fund premiums have risen so much it is cheaper for people to pay the tax penalty than take out cover.

The AMA wants the tax penalty lifted to 2 per cent for those earning over $105,000 and it claims the move would drive 190,000 more people to buy health cover.

The establishment of an independent Private Health System Authority to oversee private insurers and a legal requirement that funds pay back 90 per cent of their premium revenue to their members are also key parts of the reforms the peak doctor’s body is calling for.

Even though more than 500,000 Australians have taken out private health cover in the last 18 months, the AMA said the industry was at risk of failing over the long term.

This is because most of the people joining funds (40 per cent of new members) are aged over 60 and more likely to claim on their insurance, which drives up premiums.

Australian Medical Association president Professor Steve Robson.

“Private health insurance is more than a straight numbers game. What we are seeing is the members joining are typically older with more complex health needs, while very few are younger people are signing up,” AMA president Professor Steve Robson said.

“This is not a long-term recipe for a sustainable private health system, which is why we are calling on the government to restore the private health insurance rebate for targeted groups to make private health insurance affordable,” he said.

Health fund lobby group Private Healthcare Australia is also backing a hike in the tax penalty applying to people who don’t have health cover in its budget submission.

It wants the surcharge lifted by a full percentage point which would mean singles earning over $93,000 and families earning over $186,000 would pay a 2 per cent penalty, those on the highest incomes would be slugged 2.5 per cent in tax if they did not have cover.

Health insurers want a more modest hike in health fund subsidies.

They want the 24 per cent subsidy increased by one percentage point for singles earning under $50,000 and families under $100,000. This would save families with a Silver policy an average $27 on their premiums each year and cost the Budget around $70 million.