Health minister announces lower PHI rebates as premiums increase
As of April 1 this year, health insurance premiums will increase across the industry, and government rebates on private health insurance will decrease. A Department of Health (DoH) media release from February 10 states that the average premium increase for 2017 will be 4.84 per cent - the previous lowest since 2010 was 5.06 per cent.
To go along with the premium increase for private health insurance (PHI), the government rebate on PHI premiums will also decrease. This obviously has a double impact on your premiums. When it comes to reviewing your private health insurance policy, make sure you get in touch with HICA to discuss all of your options.
Why is the government rebate decreasing?
As the PHI premiums increase, you'll be paying more for your continued coverage from the insurer. The government rebate is applied as a percentage of the total cost of your premiums, and as your premiums rise and the rebate decreases, but you may not necessarily get less money back.
To remain financially viable, however, the health insurance industry must keep raising premiums, and attracting new customers. This will help to reduce the pressures on the public health system, which is why the rebate was initially introduced. There were concerns when the rebate was first announced that it would cost the government too much, so since 2013, the rebate has decreased as a percentage of premiums as a budget-saving measure.
In 2013/14, the government rebate for people in the lowest income bracket was 30 per cent. A year later, it was reduced to 29.04 per cent, then 27.82 per cent, 26.791 per cent and now, in 2017/18, it will be reduced to 25.934 per cent.
For the higher bracket rebate amounts, see the table below:
| INCOME BRACKETS | Base Tier | Tier 1 | Tier 2 | Tier 3 |
| SINGLES | Up to $90,000 | $90,001 - $105,000 | $105,001 - $140,000 | $140,001 and over |
| FAMILIES/COUPLES | Up to $180,000 | $180,001 - $210,000 | $210,001 - $280,000 | $280,001 and over |
| Rebate in 2013/14 | 30% | 20% | 10% | 0% |
| 2014/15 | 29.04% | 19.36% | 9.68% | 0% |
| 2015/16 | 27.82% | 18.547% | 9.273% | 0% |
| 2016/17 | 26.791% | 17.861% | 8.93% | 0% |
| 2017/18 | 25.934% | 17.289% | 8.644% | 0% |
"As the new Health Minister, I will work with insurers over the next year to find ways insurers can deliver more value for customers without compromising on the quality of cover," commented Health Minister Greg Hunt in a separate DoH media release on February 10.
"The Turnbull Government is also supporting affordable premiums with the private health insurance rebate - worth around $6 billion per year."
What does the PHI premium increase mean?
The premium increase will average out to a rise of approximately $2 per week for a single person, and $4 per week for a family.
According to Mr Hunt, the PHI premium increase will average out to a rise of approximately $2 per week for a single person, and $4 per week for a family.
"While people may be alarmed, they should keep the changes in premiums and rebates in perspective," says Jethro Still, managing director of Health Insurance Consultants Australia.
"Of course, this will increase pressures on those people that can least afford private health insurance, but is important to keep in front of mind the purpose for having private health insurance in the first place. Review your health insurance cover to make sure it is going to meet your future needs. Seek sound professional advice. Speak to someone that can provide you with options across a range of health insurance funds, and importantly, understand the coverage your policy provides. Be cautious of a recommendation by a call centre person who is incentivised to sell a policy."
PHI premiums increase every year, with some insurers matching the industry average, some increasing more, and some less. It's important that you're always getting the best cover for yourself and your family, and that it's appropriate for your financial situation. To make sure it is, get in touch with HICA today for a free consultation.
