The New South Wales government’s newly introduced health tax is drawing criticisms from the private healthcare sector, particularly from Private Healthcare Australia (PHA), which represents health funds across the state. According to the PHA, this tax could impact around 4 million residents with private health insurance, as it will increase annual health cover costs by $156 starting in January 2025.
Economic modelling commissioned by PHA predicts that the tax could result in 75,000 people dropping their health insurance next year. PHA noted such a decline would lead to reduced demand for private hospital services and deplete the financial reserves of health funds.
Dr. Rachel David, CEO of PHA, expressed grave concerns regarding the tax’s impact on private hospitals. “To date, health funds have provided multiple voluntary payments to private hospitals to help them survive tough financial conditions,” she said. “However, the Minns government’s tax hike will cannibalise any reserves to do this in future.”
David also said that the tax undermines the funds’ capacity to respond to the federal government’s recent “Private Hospital Health Check,” aimed at assessing the financial viability of private healthcare services.
The NSW government anticipates that the health tax will raise approximately $1 billion over four years. PHA argued this translates to a 4.1% increase in health insurance premiums.
“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 said in a news release.
David said that the tax disproportionately burdens lower-income earners.
“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,” she said. “It is punishing people for choosing to invest in private health insurance.”
NSW is the only state in Australia imposing such a tax on health insurance contributions. Notably, 65% of individuals with health insurance in NSW have a taxable income of $90,000 or less, while 38% earn $50,000 or less, the news release said.
“It will make NSW the most expensive state in Australia to hold health insurance,” David said. “This will increase pressure on public hospitals, which are already at breaking point. NSW already has the longest waiting times for surgery in Australia.”
PHA said that the rural and regional areas of NSW are likely to be particularly hard hit, as many residents have opted for private health cover in recent years.
“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,” David said.
What are your thoughts on the state’s proposed health tax? Share your comments below.
