Private health insurance hikes could force 60,000 people to drop their cover

Providers claim state tax hikes on private health insurance could force 60,000 people to drop their cover, heaping further pressure on the strained public health system.

Health bureaucrats are ­threatening to hike state taxes on private health insurance, in a move that providers say would increase premiums for typical policies by $114 a year and force 60,000 people to drop their cover, heaping further pressure on the strained public health system.

The secret plans to increase the health insurance levy can be revealed after NSW Health demanded insurance companies start paying the government almost $900 a day for customers who get a private room when admitted to a ­public hospital.

The government and the insurance industry are now at war over how much companies should pay when a ­customer gets a private hospital room.

NSW Treasurer Daniel Mookhey June budget included plans to crack down on private healthcare providers. Picture: John Feder.

NSW Treasurer Daniel Mookhey’s June budget included plans to crack down on providers not paying the full room fee, to raise $490m over four years.

The Minns government claims that for-profit insurers are robbing the taxpayer of $140m every year by not paying their fair share.

Health bureaucrats emailed private health funds last month threatening that if they did not start paying $892 per day for their customers to get a private room, the government would “have no choice” but to hike taxes on private health insurance.

Industry body Private Healthcare Australia hit back in a letter to Health Minister Ryan Park last week, declaring that the proposed “health tax” would hit four million people, adding on average $114 to ­premiums for a typical “silver hospital policy”.

Private Healthcare Australia chief executive Rachel David accused the government of trying to “drive up costs” for the 46 per cent of NSW residents with private cover. She said that most insurers pay a rate set down by the Commonwealth government of $421 per day, rather than the NSW government’s requested $892 per day.

The Minns government is now exploring ways to force insurers to pay the higher rate, or increase taxes to make up the difference.

Dr David warned that increasing costs for insurers would entrench a “two-tiered system” in public hospitals, by encouraging public hospitals to put private patients in single rooms to raise extra cash.

Private Healthcare Australia believes the government is looking to hike taxes on providers to about $3-$4 per customer per week, up from the current $1.77 rate.

Citing modelling provided to the peak body, Dr David told Mr Park that the increase would lead to 60,000 people dropping their cover, “forcing them to rely solely on the NSW public hospital system which already has the highest wait times of all states and territories for planned surgery”.

“Imposing a tax on people working hard to contribute to their own healthcare via health insurance is not the ­solution,” Dr David said in her letter.

The Minns government accused a number of private health insurers of not paying fees that had been agreed to decades ago. It is now considering enshrining the room fees in law or hiking the taxes insurers pay the government.

Mr Mookhey said the refusal of private insurers to pay the higher fees had robbed the public system of critical funds. “This has been a very reasonable request to private health insurers to simply resume paying their fair share,” he said.

Health Minister Ryan Park said many smaller insurers had agreed to “do the right thing”, including health funds covering “police, nurses, navy and teachers”.

“But we’re seeing some of the largest for-profit insurers, who enjoy billions of dollars in profit each year, sticking taxpayers with the tab,” he said. “This really is not sustainable.”

Originally published as Private health insurance hikes could force 60,000 people to drop their cover