Compare
Health Insurance
Use the moneytime comparison engine to find the right health insurance for you
Related Links
Participating Health Funds
 |
 |
 |
 |
 |
|
 |
 |
| Publication: | Courier Mail |
|---|---|
| Date: | 28 July 2008 |
| Section: | Money & You |
| Page: | 29 |
Big choice over that bill of health
Will you dump your health insurance if there's no tax incentive to keep it?
Can you think of better ways to spend the $1200 on average each member pays each year for private hospital cover?
Forking out for the annual premium can seem like such a waste of money if you are fit and healthy.
Since universal health care was introduced in 1972, many Australians see it as a right.
These same people can pay upwards of $100 for a haircut but expect to get their eyes tested for free.
Many people who make more than $50,000 a year only keep their hospital cover to save being slugged with a bigger tax bill.
But soon the decision of whether or not to stay with your health fund is going to get a lot harder for the 44.6 per cent of Australians with cover, across the 44 various open and restricted funds.
The Rudd Government wants to lilt the threshold for those paying the extra 1 per cent in tax to $100,000 from $50,000 for singles and $150,000 from $100,000 for families.
Average earnings stand at $58,490, so these people induced to hold cover will be high-income earners.
The insurance industry predicts 913,000 Australians will drop their insurance because of changes to the tax system.
That stampede will result in a $1.8 billion patient surge into public hospitals, the Australian Health Industry Association has told a Senate inquiry.
Treasury estimates 484,000 adult-equivalent memberships will be abandoned but the Australian Medical Association says the figure will be higher based on the number of children covered by family memberships.
David Miller, founder of moneytime.com.au – which compares health funds for consumers free – says many consumers will be hit by inertia and not cut up their policies if the levy threshold changes.
"I don't think that people are going to be physically worse off," he says. "From a cash now point of view you won't pay more but we are going through some tough times and my feeling is that inertia may be tempered by people's daily expenses and some may opt out.
"But this is a great opportunity to have a look at your cover and see that you are in the right fund, and work out which funds offer the best value for the things you want cover for.
"I don't think anywhere in the world is there a universal health system that is functioning like people want it to."
Mr Miller says health insurance is "an avoidance of gambling" and if people self-insure they are taking a big risk.
"Insurance protects you against surprises and the odds are that you have no idea what is going to happen when you step outside the front door," he says. "Health insurers don't try and profit from people's misfortunes but are there when people need it."
Most funds payout around 85 per cent of premiums in claims and the rest is spent on administration.
Health insurance broker iSelect believes the proposed threshold movements could affect 1,010,615 single taxpayers earning between $50,000 and $100,000 in 2005-06.
"The proposed new threshold. in isolation. Will therefore no longer encourage these individuals into private health insurance or to retain their existing cover," iSelect wrote in its Senate submission.
Central to the debate is the assumption that any loss of members will be mainly among the young and healthy who rarely use hospitals anyway and who would be the least likely to hold private insurance without the levy surcharge.
Since these people subsidise the benefits to older and higher usage members, average premiums are expected to rise.
The health insurance association expects annual premiums to rise by up to 10 per cent after they went up by almost 5 per cent this year.
In its submission, Catholic Health Australia also predicts a 10 per cent jump because those who drop their insurance will not be high users of the health system and the insurers will want to make up for their loss of revenue.
But emeritus fellow John Deeble of the Australian National University expects there won't be much of an immediate effect if the levy changes thanks to "ignorance, apathy and uncertainty".
He says: "Despite the publicity, some people will not even be aware of the change, some will defer, or forget to take the necessary action (at least until tax return time) and others will be held in private insurance by the 'Lifetime Health Cover' rules."
Dr Deeble, one of the brains behind the Medicare system introduced in [984, also says flaws in the public hospital system will be publicised.
"The number of people covered by private insurance is expected to fall by about 8 per cent but benefits paid would fall by only 3 per cent," he says. "Premiums for the remaining members would rise by just over 5 per cent. That would not threaten the viability of private insurance."
The AMA wants low-income families compensated for premium rises.
It says: "This could take the form of increasing the private health insurance rebate or providing some other financial assistance or tax relief."
Shadow health minister Joe Hockey says Treasury failed to determine the impact on public hospitals as this was considered a second-round effect, meaning it was the responsibility of state and territory governments.
Those governments were also not consulted by the Treasury, which admits it only took into consideration the immediate impact of a rise in the threshold.
But consumer group Choice argues the AMA and the insurers have overstated the risk to consumers, concluding that changes to the Medicare levy surcharge are fair.