Private Healthcare Australia (PHA) has warned that the federal government’s plan to remove higher private insurance rebates could cost 3 million seniors an extra $600 per year.
This comes months after federal Health Minister Mark Butler announced cuts to the private health insurance rebate for Australians aged 65 and over to instead, raise funds for Labor’s $3 billion aged care initiative.
Yet the peak body said it would force tens of thousands to abandon or downgrade cover, and has the potential to “destabilise” the health system by shifting the burden to the state public systems.
PHA said the bill would raise premiums for older Australians by up to $600 a year. This means that older Australians as a whole would pay more than $900 million extra.
“The proposed rebate cuts are essentially a large cost-shift from the Australian government to more than three million Australians holding private health insurance,” PHA stated (pdf).
“These cuts could destabilise the health system as a whole, not just disadvantage those directly affected.”
The comments were made in its submission to the Senate Community Affairs Legislation Committee inquiry into the Private Health Insurance Amendment (Modernising the Private Health Insurance Rebate) Bill 2026. The committee is due to report by Oct. 7.
What the Government is Proposing
The bill removes the higher private health insurance rebate, which allows an Australian to claim a deduction on the cost of their insurance either through the Australian Tax Office or directly with their insurer.
The new rules start on April 1, 2027.
Currently, those aged 65 to 69 receive a 28 percent rebate, while those 70 and older receive a 32 percent rebate.
Minister Mark Butler defended the changes as necessary to restore “intergenerational equity.”
“And the current model is simply not the best way to spend taxpayers’ dollars on behalf of older Australians when there is a significant need to expand access to aged-care services,” Butler told parliament (pdf) in June.
Meanwhile, PHA estimated 62,000 people would drop cover, and around 200,000 would downgrade, mostly from Gold to products with exclusions.
“PHA is particularly concerned that low-income Australians across the country will drop or downgrade their private health insurance if this legislation passes,” the submission said.
The peak body called the bill a “massive cost shift” that must be reconsidered. The submission warned that Tasmania, the Sunshine Coast, and the north coast of New South Wales would be disproportionately affected.
HCF Says Change Equivalent to 3 Premium Increases
Meanwhile, Hospitals Contribution Fund (HCF), Australia’s largest not-for-profit fund, said the changes would hit more than 400,000 of its members.
The fund said (pdf) the cuts would accelerate lapses and downgrades. Participation would weaken and extra pressure would fall on public hospitals.
Older members could experience the equivalent of approximately three years of average premium increases in one go once the change kicks in on April 1, 2027.
HCF modelling shows about 20.4 percent of its members would be affected. Member research conducted by HCF found 63 percent said changes like this make private health insurance feel unpredictable or unstable.
Only 29 percent thought private health insurance would remain affordable for people aged 65 and over.
Medibank Warns 700,000 Members Face Price Hike
Meanwhile, Medibank warned in its submission of unintended consequences for affordability and system capacity.
More than 700,000 of its customers aged 65 and over face higher costs, with around 70 percent aged 70 and over.
“We are concerned that removing the age-based Private Health Insurance (PHI) rebate for Australians aged 65 years and over may have unintended consequences for affordability, PHI participation and broader health system sustainability,” Medibank stated (pdf).
People walk past a shop front for Medibank in Sydney, Australia, on Nov. 11, 2022. Muhammad Farooq/AFP via Getty Images
Many long-standing members would be hit hardest, the insurer said.
Analysis by Medibank indicates that about 78 percent of affected customers have held cover with Medibank or AHM for over 10 years.
Members aged 65 to 69 could experience premium increases of around four to six percent, while members aged 70 and over could face rises of nine to 12 percent.
Similarly to PHA, Medibank said affordability pressures may lead some customers to downgrade from Gold products to lower-cost options.
The insurer warned this long-term movement away from comprehensive cover could place upward pressure on premiums for remaining policyholders.
Private Hospitals Oppose Bill
The Australian Private Hospitals Association (APHA) warned its members would also feel the after-effects.
“Older Australians keep private health insurance not simply because they prefer it, but because they cannot afford to be without it,” the association said (pdf).
Private hospitals deliver care to about 44 percent of people over 65 in Australia.
APHA also said older people often have “serious and ongoing health needs,” noting that public hospital wait times may be “too long” to safely manage these conditions.
The Epoch Times has contacted the federal Health Minister’s office for comment.
