The Fairer Private Health Insurance Incentives Bill 2011 was approved by the lower house this morning (February 15), with the government succeeding 71 votes to 70.
The new legislation will apply from July 1 2012 and is expected to save the government $2.4 billion over the next three years and $100 billion by 2050.
A late amendment from the opposition requesting that the reforms be delayed until the next federal election was defeated.
According to the ABC, opposition frontbencher Malcolm Turnbull believes the new legislation will force people to reduce or remove their private health cover.
"It will increase the cost of private health insurance for all Australians, regardless of their income, and it will increase pressure on the public hospital system," he said.
With the support of the Australian Greens, the legislation is expected to easily pass through the upper house.
According to health minister Tanya Plibersek, more than 20 million Australians will be unaffected by the change.