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Government ‘abolishing health insurance rebate by stealth’

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The Federal Government has been accused of cutting the private health cover rebate by linking rises to the consumer price index (CPI).

The Private Health Insurance Legislation Base Premium Bill was introduced to Parliament last week. It has now gone to a Senate standing committee, which will report on June 17.

The bill will significantly change the way the rebate works, Finity consultant Jamie Reid says.

“If premiums go up by about 6% a year, the rebate now will only increase by about 2%, meaning people will be considerably out of pocket.

“The legislation says it will apply only to the base premium, and not any incentive that was applied to encourage people to take out cover.

“The Government is not being transparent about what it’s doing.”

CPI-linked rebate rises will take effect from April 1 next year, according to an explanatory memo on the bill.

“If insurers decrease the premium they charge, the rebate will decrease commensurately,” the memo says. “The bill will reduce the level and rate of the Government’s rebate expenditure.”

The move will save $699.7 million over four years, according to the legislation.

But the total figure will be much higher, with budget papers referring to savings of $6.4 billion over 10 years, Mr Reid says.

“The Government is replacing the rebate by stealth. There has been no thought about how it will be implemented, because insurers will have to allocate the changes to each product.

“It all sounds easy in the legislation, but it isn’t.”

Insurers have different increases for different products, so the rebate will change in each case, Mr Reid says.

“This will be a headache for insurers,” he told Life+Health insuranceNEWS.com.au.

“They will have to prepare their systems to handle the different rebate increases, and then [need] a period of time to test the programs.

“Private health insurers will need time to prepare for this big change to the rebate process.”

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