Budget 2009 - Changes To Private Health Insurance Incentives

By Sandy Naidu | May 14, 2009

To reduce burden on public health system and to encourage more people to take up private health insurance the Government currently provides us with a 30% rebate on the premium paid and fines the high income earners who don’t take up private health insurance with a medicare surcharge.

In 2009 Federal Budget, the Government has announced changes to the rebate and the surcharge. The Government has now introduced a tiered system. This new system will come into effect from July 1st 2010.

Tier One

Singles earning more than $75,001 and couples earning more than $150,001, the rebate has been reduced to 20% from 30%. The rebate is 20% for people under 65, 25% for people over 65 years and 30% for people over 70 years. The medicare surcharge, if you don’t have private health insurance, is one percent.

Tier Two

Singles earning more than $90,001 and couples earning more than $180,001, the rebate has been reduced to 10% from 30%. The rebate is 10% for people under 65, 15% for people over 65 years and 20% for people over 70 years. The medicare surcharge (if you don’t have private health insurance) has been increased to 1.5 percent. This increase is to prevent high income and middle income earners from fleeing private health insurance (since the rebate has been reduced).

Tier Three

Singles earning more than $120,001 and couples earning more than $240,001, the rebate has been completely removed - Zero rebate. The medicare surcharge (if you don’t have private health insurance) has been increased to 1.5 percent. This increase is to prevent high income and middle income earners from fleeing private health insurance (since the rebate has been reduced).

This change is going to hit both high income and middle income earners quite hard. The Government’s expects people will continue with their private health insurance, despite the reduced rebates, because if they don’t they will charged a heft surcharge.

If you have any thoughts or if you would like to share how this change is going to affect you, then please share your comments below.

Other Budget 2009 Posts:

Changes For Carers’ Income

Pension Income and Pension Age Changes

Superannuation Changes

Paid Parental Leave

First Home Buyers Grant Boost

Budget 2009 Winners and Losers

Tax Cuts