Consumers to abandon private health insurance?

Private health insurance about to get more expensive

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

10.5 million Australians who currently hold private health insurance could abandon the sector, and move back onto the public health system, thanks to proposed changes to private health insurance laws.

Ramsay Health Care (ASX: RHC) boss Chris Rex has slammed the federal government over the changes, warning that increasing prices could force many to cancel their health insurance. Mr Rex has told the Australian Financial Review that “If private care becomes unaffordable, their healthcare cost does not disappear, it just transfers back to the public system and is paid by taxpayers.

Last week, the government announced that the tax rebate for health insurance premiums will be indexed to the Consumer Price Index (CPI) – otherwise known as the inflation rate. This follows changes that began from July 1, where the 30% tax rebate will be progressively scaled back for those on higher incomes.

The move was expected to save the government nearly $700 million, but may backfire, as consumers move into the public health system, costing taxpayers more. If you’re single and earning more than $84,000, or a couple with a combined income of more than $168,000, your premiums will increase. That could mean a price hike of up to $1,300 on a typical $4,000 annual family policy. The Australian Taxation Office (ATO) has a handy table, if you want to know how you will be affected.

Of course, if you do decide to leave the private sector, the ATO will slug you with the Medicare levy surcharge, which can be up to 1.5% of your taxable income.

The risk of people leaving the system may be why private health insurer, NIB Holdings (ASX: NHF) has today agreed to buy Tower Ltd’s (ASX: TWR) New Zealand health insurance business for around $80 million. NIB have said that the New Zealand market was attractive as there “was almost no regulation in the market.” The company also said that budget constraints in New Zealand mean the government knows there must be more future private funding of healthcare.

Foolish takeaway

Past experience has shown that the attractiveness of private health cover can impact the numbers that take up this insurance. Will it be different this time? Unlikely.

If you only invest in one company this year, make it our “Top Stock for 2012-13”. Operating in two hot markets — one set to double by 2012, the other predicted to grow 5x over the next five years — this stock is a solid growth play that also boasts strong recurring revenue, zero debt, and lots of cash. Get its name and full research case in this brand-new FREE report.

More reading

Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »