Private health insurers will be forced to pay their public hospital bills in full, under new legislation introduced by the NSW government this week. Industry groups say the “health tax” could increase premiums by $114 per year and force some to drop their cover.
NSW Treasurer Daniel Mookey will introduce the new laws to force the major insurers – Bupa, Medibank, NIB and HCF – to pay the correct rate for single-bed hospital rooms. It follows months of failed negotiations with the insurers.
The single-room rate for private patients in public hospitals was set at $892 last year. The government said many insurers were doing the right thing and paying for the full cost of services. However, some of the largest insurers weren’t, with many only contributing $474 per hospital bed.
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The NSW government said the move would claw back $140 million per year, which could be used to employ an extra 1,000 senior nurses.
“It is unfortunate that it has come to this – but the insurers can resolve the impasse by paying their bills,” Mookhey said.
The legislation would mimic laws passed by former Treasurer Mike Baird in 2013. This law has since lapsed, meaning the insurers have been underpaying since 2019.
There are 44 of 53 health insurers who are already paying the correct public hospital bed rate or have agreed to do so following negotiations.
About one in five public hospital beds are taken up by people with private health insurance.
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Warning from health insurers
Private Healthcare Australia (PHA), the peak body representing the majority of the sector, has argued the “health tax” will increase premiums for four million people with health insurance in NSW.
It claimed the move would add $114 to the cost of an average health insurance policy per person from next year.
“The smallest increase to consumer costs can have dire, far-reaching consequences that could ultimately impact all residents of NSW seeking timely, affordable and accessible healthcare,” PHA CEO Dr Rachel David said.
The group pointed to data from the Australian Prudential Regulation Authority (APRA) that found premium revenue had dropped by $52 million in the first half of 2024, suggesting Aussies are downgrading or dropping their cover in the face of cost-of-living pressures.
According to PHA, more than 216,000 policies were downgraded in the first half of 2024.
“NSW is the only state wanting to tax people contributing to their own healthcare in a cost-of-living crisis. This tax will make NSW the most expensive state in the country to hold health insurance,” David said.
About 46 per cent of NSW residents have hospital cover, slightly higher than the national average of 45 per cent. The big four health insurers control 74 per cent of the market.
Private health insurance premiums increased by 3.03 per cent on average in April.
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