The NSW Government’s new tax on 4 million people with health insurance will exacerbate problems for private hospitals at a critical time for the sector.
CEO of Private Healthcare Australia, Dr Rachel David, said the tax will cost NSW families $156 more per year for their health cover from as early as January. Modelling shows this will cause 75,000 people to drop their health insurance in 2025, reducing demand for private hospitals. It will also decimate health fund reserves to assist private hospitals in areas of need in acute financial distress.
“To date, health funds have provided multiple voluntary payments to private hospitals to help them survive tough financial conditions. However, the Minns Government’s tax hike will cannibalise any reserves to do this in future. The capacity for health funds to respond financially to the Federal Government’s ‘Private Hospital Health Check’ has been eliminated.”
The Federal Government launched its financial health check of private hospitals in response to concerns about the financial viability of some services. The Government is yet to realise its findings publicly.
Economic modelling commissioned by PHA shows the NSW health tax, which aims to raise $1 billion over four years, is the equivalent of a 4.1% premium rise. This is on top of increases required to cover growing costs for health insurance claims which surged 10% last financial year. This year, health insurance premiums rose on average 3.03% across Australia.
PHA has briefed the Australian Prudential Regulation Authority on the detrimental tax to explain why it will be extremely difficult for health funds to deliver premium rises below inflation in 2025. These premium rises will be determined in coming months to take effect nationally on 1 April 2025.
Dr David said the tax, known as health insurance levy, will hit lower income earners the hardest from early next year after it was rushed through NSW Parliament this week with minimal public scrutiny.
“This policy is a kick in the teeth for the millions of people in NSW who are contributing to their own healthcare in a cost-of-living crisis. It is punishing people for choosing to invest in private health insurance,” she said.
“This tax will be unfairly applied at the same rate for everybody, regardless of income and level of health insurance. So, if you’re paying for bronze health cover, you will pay the same tax as someone paying for gold cover.”
“It will make NSW the most expensive state in Australia to hold health insurance and cause more than 75,000 people to drop their insurance next year. This will increase pressure on public hospitals, which are already at breaking point. NSW already has the longest waiting times for surgery in Australia.”
NSW is the only state in Australia that taxes people contributing to their own healthcare via health insurance in this way. This is despite 65 per cent of people with health insurance having a taxable income of $90,000 or less and 38 per cent having an income of $50,000 or less.
Dr David said the tax will hit people in rural and regional areas of NSW particularly hard, and those living west of Sydney where many people have signed up for health cover in recent years. This includes areas like Blacktown-Parramatta, Campbelltown and Penrith.
“This is an extremely unfair policy for NSW residents who are already paying their taxes for public hospitals and health insurance premiums for private healthcare in case they need it. These people will now be forced to pay a third time and get nothing in return,” she said.
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