While there has been a lot of focus on how the means testing of the federal government's 30 per cent private health insurance rebate is going to affect individuals, little has been said on how the reform will impact on companies that choose to pay for their employees' private health insurance under their corporate health plans.
Typically, company-sponsored health plans exist in the higher income industries such as finance, technology and mining. Employers have, by default, had their corporate health plans subsidised by government through the 30 per cent rebate. Now that the government has decided to means test the application of the rebate, a significant portion of the employees could no longer be eligible for the payment.
The means testing could result in some employees not having the rebate applied to their premiums. If an employee lost the rebate, the employer would have to make up the difference – which could be a much as a 43 per cent increase.
The problem for employers is quantifying their prospective increases in costs. As the means testing is based on an individual’s income from all sources – including spouses – employers can not estimate their costs accurately without confirming each employee's individual situation.
Health Insurance Consultants Australia is working with all our employer clients to develop strategies that minimise the increase in costs, as well as the associated increase in the Fringe Benefits Tax liability.