"The changes proposed to the private health insurance rules are disappointingly complex and potentially will cost the industry hundreds of millions of dollars", said Suzanne Still CEO of Health Insurance Consultants Australia.
On the back of the introduction of the means testing of the Federal Government rebate, introduced from 1st July 2012, these new changes set to take effect from mid 2013 and April 2014, will create enormous uncertainty and confusion for consumers. The levels of complexity involving rebates, Medicare Levy Surcharge, Lifetime Health Cover and means testing will soon have private health insurance in a crisis of confidence similar to the superannuation system.
Health funds already struggling with the introduction of means testing will now have to implement enormous systems changes to split premiums between Lifetime Health Cover Loadings as non-rebateable, premiums that have only been increased by CPI and excess premiums where no rebate is applied. The cost to the industry from this alone will make these changes extraordinarily inefficient.
As from the 1st July 2013, the premium attributable to Lifetime Health Cover loadings, the penalty for not taking out health cover prior to age 30, will no longer qualify for a rebate. On the 1st April 2014, increases in premiums over and above the CPI increase will also not qualify for the Government rebate.
"Health funds will be encouraged to create new products to maximise rebates", Suzanne said.
"These changes could create a high rate of churn within the industry due to consumers shopping for products with the highest rebates and this will come at a significant cost to the industry. Some Health funds will enjoy an enormous competitive advantage over other health funds."
The role of specialist consultants like Health Insurance Consultants Australia (HICA) will become increasingly important. This is something that the online mass marketing organisations will struggle to convey to consumers. HICA will be monitoring the progress of these changes to keep its clients fully advised of their options.
These changes will still have to be passed by the parliament and hopefully common sense will prevail.