Unhealthy cover hit

Penalties drive up costs

MORE than a million Australians are paying up to $3000 more for private health insurance as a result of government means tests, age penalties and subsidy cuts.

Government health insurance penalties are more than doubling the cost of health cover for some at a time when rising premiums are forcing people to drop insurance.

For some these penalties are pushing health insurance costs up from about $3000 to more than $6100.

Coupled with premium rises more than three times the inflation rate, they are helping drive an exodus from cover.

The proportion of the population with health insurance has started to fall for the first time in 17 years, threatening to send health fund membership into a death spiral.

But two years after the Federal Government set up a private health insurance reform process little has eventuated.

An investigation into the effect of penalties has found tens of thousands lost access to some or all of the 25 per cent private health insurance tax rebate under a means test introduced in 2012. As a result they are paying up to $1077 a year more for cover.

If they also delayed taking out health insurance they could be paying a government lifetime health cover penalty worth up to $2100.

More than a million Australians are paying this LHC penalty that increases the price of insurance by 2 per cent for every year they delayed taking out cover after they turned 30.

The government has also cut the subsidy it provides for health insurance from 30 per cent to 25 per cent adding a further $166 to the cost by indexing it at a rate lower than premium rises.

When these charges are added to the average $4000 premium for family cover it means some Australians could be paying more than $6000 for health cover, twice the $3000 bill faced by those not impacted by the penalties.