Why health funds want you to pay more
The government's 25 per cent subsidy for health insurance premiums must be lifted to 30 per cent to stop a catastrophic death spiral in membership, health funds have warned.
And older people may have to pay for more for health insurance.
As the government's financial regulator predicts only three of the nation's 38 health funds will remain by 2022 the industry is calling for high cost changes in the May federal budget.
"I don't think they (the regulator) are being alarmist when you look at the data," Managing Director of health fund BUPA Dwayne Crombie told News Corp.
Unless things changed it was possible only three health funds would have an operating surplus within two years and most would be drawing down on their financial reserves to stay open, Mr Crombie said.
However, the Members Health Alliance - representing 27 small not for profit funds - attacked the regulator for undermining confidence in smaller health insurers.
"The regulator's modelling is predicated on the notion that a net margin of less than 1 per cent is unviable," Members Alliance chief Matthew Koce said.
"However, many Members Health funds deliberately target their margins at that level, because they want to deliver more to members … they do not have to deliver profits to shareholders."
Consumers and hospital groups are demanding a major inquiry into insurers as premiums continue to rise by more than the inflation rate and out of pocket expenses soar.
"Private insurance in Australia has become a 'lose-lose' proposition: having paid ever-increasing premiums, members are exposed to yet further out of pocket costs when they do get private care," Consumers Health Forum chief Leanne Wells said.
The financial regulator the Australian Prudential Regulation Authority APRA this week attacked health funds for failing to fix their own problems by merging underperforming funds and providing better value for members.
Instead APRA said the funds were banking on a miracle cure from federal government.
In their budget submission the funds are still demanding government do the heavy lifting.
Public hospital waiting times will blow out by 91 per cent if health fund membership continues to decline and the government must increase the tax rebate for health insurance to avoid it, industry lobby group Private Healthcare Australia said in its budget submission.
It's calling for changes in government policy that would deliver health funds another $853 million from taxpayers and members of the public.
It wants the government subsidy for health insurance to be raised from 25 to 30 per cent for the under 40s to stem declining membership - a change that would cost the government $418m a year.
The funds also want force middle income earners to buy insurance by slugging them with a higher tax penalty if they don't take out cover by lifting the Medicare Levy Surcharge from 1.5 to 2.5 per cent of their income.
This would add another $435 million to health fund coffers.
Currently a single person earning $90,000 has to pay extra tax worth $1350 a year if they don't have health insurance, this would rise to over $2250 under the proposed change.
As a further incentive funds want an exemption from the fringe benefits tax for employers who pay for their employees health insurance.
Controversially, PHA chief Dr Rachel David and BUPA's Mr Crombie said the rules may have to be changed so older people who are currently not members of health funds pay more for health insurance.
Health fund membership has already plunged from 47 to 44 per cent of the population and the government's financial regulator the Australian Prudential Regulation Authority warned this week it most funds were unsustainable and membership would continue to plunge.
"Right now, strong and persistent headwinds are blowing private health insurance ever closer to the point where the majority of PHIs are unsustainable," APRA member Geoff Summerhayes said.
Not for profit fund HCF's chief Sheena Jack said "We would question the proposition by Mr Summerhayes that, without change, only 3 PHI providers will survive in 2022."
Opposition health spokesman Chris Bowen said it was deeply concerning that under this Government, premiums have risen by 33 per cent on average and the average Australian family is over $1000 worse off.
"It's past time for Minister Hunt to claim responsibility and get on with the job of making private health insurance affordable and sustainable," he said.