Tanya Plibersek (Sydney, Australian Labor Party, Minister for Health) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

The Australian government rebate on private health insurance is a significant component of government health expenditure. The objective of the rebate is to encourage people to take out private health insurance by contributing an income tested rebate to private health insurance premiums. Over recent years there has been substantial growth in private health insurance membership and therefore rebate expenditure. This is despite the claims by those opposite that previous changes to the private health insurance rebate would cause over a million people to drop out of private health insurance. One hundred and twenty thousand people have joined in the six months following means testing.

Private health insurance participation rates remain strong. The rate of new membership continues to outstrip population growth with 46.9 per cent of the population now holding hospital cover. As at December 2012, 54.6 per cent of the Australian population held some form of private health insurance.

The Private Health Insurance Legislation Amendment (Base Premium) Bill 2013 will amend the Private Health Insurance Act 2007 to index the government's contribution to individual private health insurance policies—making the rebate expenditure sustainable into the future and helping to reduce long-term costs in health expenditure.

Background

This measure was announced by the Treasurer on 22 October 2012, as part of the 2012-13 Mid-Year Economic and Fiscal Outlook and was one of two reforms announced to the private health insurance rebate. In this MYEFO announcement, the Treasurer stated that the 'rebate currently costs around $5 billion a year and its growth rate of 6.3 per cent over the forwards is unsustainable'. As the rebate is funded by the Commonwealth, it is appropriate for the Commonwealth to monitor and reassess its support in this area, ensuring that every tax dollar is spent in the best possible way.

Rebate

This bill will create, for the purposes of the rebate, a base premium for each individual health insurance policy which will be indexed annually by the lesser of the consumer price index or the actual increase in premiums imposed by insurers. This will then be used to determine an individual's private health insurance rebate.

These changes will mean that while the rebate percentage remains the same, the rebate rate will be calculated on the 'base premium'. A policy holder's percentage rebate entitlement will continue to be dependent on their age and income.

The calculation of a weighted average ratio will be used to determine the base premium for product subgroups, and new insurers, that are made available after 1 April 2013. The weighted average ratio will be determined in consultation with industry and then detailed within the Private Health Insurance (Incentives) Rules prior to the bill's commencement on 1 April 2014.

For premium changes, private health insurers will continue to be required to apply to the minister for health for approval under the Private Health Insurance Act 2007. This will permit the government to consider an insurer's solvency requirements, forecast benefit payments and prudential requirements, while also ensuring the affordability and value of private health insurance as a product.

Summary

In summary, this bill seeks to make the government's rebate expenditure sustainable by indexing the government's contribution to individual private health insurance policies. The government always needs to assess how we prioritise our spending and make sure we get maximum value for every dollar spent in the health budget. As a government, we will continue to make decisions that ensure our spending is directed to areas where it can do the most good. We feel this change is important as the rate of new private health insurance memberships continues to outstrip population growth and as such the rebate will continue to grow at an unsustainable rate.

Debate adjourned.