Australian retirees may cancel health cover over rebate cut

Money.com.au found 18% of older citizens would drop private cover entirely.

One in three Australian retirees could cancel or downgrade their private health insurance if proposed legislative changes reduce their government rebates.

The survey of more than 1,000 Australians indicates that 34% of citizens aged over 65 would alter their insurance status, according to research from Money.com.au.

Specifically, 18% stated they would cancel their private health cover entirely whilst 16% would switch to a lower-tier policy with fewer benefits.

Another 9% plan to increase their excess to lower their premium costs. Despite the financial pressure, a majority of 57% intend to retain their current level of cover and absorb the extra expense.

The potential shift follows proposed amendments to the Private Health Insurance Act 2007, which require parliamentary approval.

If passed, the changes would affect approximately 3 million Australians aged 65 and over from 1 April 2027.

Under the new rules, the rebate for single retirees aged 65 to 69 earning under $70,700 (A$101,000), or families earning under $141,400 (A$202,000), would drop from 28% to 24%.

For those aged 70 and over within the same income brackets, the rebate would fall from 32% to 24%.

The federal government states the adjustment aims to align the rebate rates of older citizens with those available to younger Australians on identical incomes to improve intergenerational equity.

Analysis by Money.com.au suggests the rebate cuts, combined with projected annual premium rises of 3 to 4% in 2027, would increase out-of-pocket expenses.

A single policyholder aged 65 to 69 with a standard silver hospital policy could pay roughly $125 (A$179) more per year.

For a single policyholder aged 70 or older with the same policy, the annual cost could increase by around $251 (A$358). 

These estimates are based on an average annual silver hospital policy premium of $3,128 (A$4,469).