The introduction of means testing for the federal government's 30 per cent rebate will have a significant impact on higher earning Australians with private health insurance from July 1.
Most policyholders do not realise that at the same time the rebates change, the Gillard government has altered the application of the Medicare Surcharge Levy (MLS) for high income earners – increasing the charge for high income earners who opt out of private health insurance because of the reduction in rebates.
At HICA, we believe that a percentage of high income earners in Australia will elect to reduce their health insurance cover due to the rebate reform, rather than completely withdrawing from private health cover due the penalties of the higher MLS if they are not insured.
Below is a table illustrating the reduction of rebates based on tiers of income, effective from July 1. The rebate is removed entirely for singles earning more than $130,000. In this example if the single person opts out then they will be liable to pay the Medicare Levy Surcharge of 1.5 per cent.
It makes sense for higher income earners to compare health insurance policies to maximise their benefits in view of the reduction in rebates. The penalties of the MLS still make it worthwhile to have private health insurance.