Private health insurance body fights rebate means-testing, but Opposition cool on repealing law

The private health insurance body has slammed the Federal Government’s most recent push to means-test the health insurance rebate, saying a report by Booz & Co finds that the rebate accounts for just 8.1% of healthcare spend.

Shares in NIB Holdings, the only listed health insurer, were higher this morning, defying a weaker market in early trade by rising 0.34% to $1.48, despite expectations that Labor would pass the bill with the support of cross-bench MPs.

The Greens are calling for increased Government spending on dental services in return for support of the bill.

The bill is expected to save the Government more than $3 billion over the next four years, and will provide a welcome fillip to its promise to return the budget to surplus.

It also comes amid expectations that insurance comparison site iSelect will be one of the biggest floats of 2012. The Coalition has previously stated its intention to float Medibank Private, one of the country’s largest health insurers.

The bill will mean that individuals earning more than $80,000 and families earnings more than $160,000 will be means-tested. Individuals earnings more than $129,001 and families earning more than $2578,001 will lose their rebate and the Medicare surcharge will be lifted by 0.5% percentage points to 1.5% for those without insurance.

Under the current rules, a 30% rebate is given irrespective of income, and people aged between 65 and 69 get a 35% rebate and those aged over 70 are given 40%. About half of the Australian population are covered by health insurance, figures released late last year showed.

But Private Healthcare Australia, which represents private healthcare insurers, has cast doubt on Treasury modelling that says the changes will result in just 0.3% of people, or 27,000, dropping their coverage.

“The Booz & Co report demonstrates that nobody should rely on the Government’s modelling and that there are not the savings to be found from this measure as claimed,” its chief executive Michael Armitage said in a statement.

“The report supports claims that means-testing the 30% rebate is poor public policy. All private health fund members will pay extra for their health insurance in subsequent years if this legislation is passed.”

But the body might not be able to count on the Coalition repealing the legislation if it wins the next election. This morning, Opposition Leader Tony Abbott said the party would fight the legislation but declined to promise the party would reinstate the rebate if elected.

Shadow Health Minister Peter Dutton also declined to make that promise, telling ABC Television that the party was “looking at a number of measures at the moment which may further enhance the attractiveness of private health insurance”.