Private health insurance bodies have raised alarm over the federal government’s 2026-27 budget, warning proposed changes to the private health insurance rebate could push millions of older Australians out of private cover and strain an already stretched public hospital system.
Members Health Fund Alliance, the national alliance representing more than 20 not-for-profit and member-owned health funds, said the proposed rebate reduction would disproportionately affect lower-income retirees and long-standing policyholders. Australian Unity’s health insurance chief also flagged concerns about affordability for the nation’s 15.2 million private health insurance policyholders.
Independent actuarial modelling by Finity found about three million Australians aged 65 and over would be affected by Labor’s decision to reduce the private health insurance rebate for older Australians.
The changes are equivalent to an average premium increase of about 9% for affected members, with some facing effective increases closer to 12% on top of normal annual premium rises, according to Members Health.
For Australians with Gold hospital cover, this could mean paying more than $300 extra each year. Older couples could face premium increases from April 1, 2027, exceeding $1,000 annually and, in some cases, up to $1,600.
About 70% of insured Australians aged over 65 earn $55,000 or less, while more than 80% fall within the base income tier, meaning the impact would fall heavily on lower- and middle-income seniors, the alliance said.
The budget also comes at a time of mounting financial pressure on policyholders. The sector recorded its highest average premium increase since 2017, at 4.41% from April 1, 2026, according to Australian Unity. Rebecca Harwood, CEO of Health Insurance at Australian Unity, said the combined impact of that premium rise and the proposed removal of the rebate for those aged 65 and over represented a significant double burden for older Australians, particularly retired and fixed-income households.
Members Health chief executive officer Matthew Koce warned the changes risked undermining the viability of the private health system.
“The Australians who rely most heavily on private health insurance are the very people now being asked to pay significantly more to keep it,” Koce said. “These are older Australians on fixed and modest incomes, many of whom have maintained private cover for decades.”
Koce said the measure risked becoming a “false economy”. Independent actuarial modelling showed the changes could reduce Commonwealth rebate expenditure by about $482 million, but shift about $547 million in additional costs onto public hospitals.
“Savings in one part of the Budget should not create larger costs, longer waiting lists and poorer outcomes elsewhere in the health system,” he said.
“The Government cannot strengthen Medicare with one hand while weakening private hospital capacity with the other.”
More than 70% of surgeries in Australia are performed in private hospitals, with Australians aged over 65 accounting for a significant share of demand.
Members Health is calling on the government to reconsider the proposal and establish a parliamentary inquiry into its impact on consumers, hospitals, carers, and the broader health system.
“If the Government’s objective is a more equitable and sustainable healthcare system, the impacts of these changes need to be fully examined before they proceed,” Koce said. “We support investments that strengthen the healthcare system overall, but that should not come at the expense of affordable private health insurance for older Australians.”
Harwood said policyholders should explore what options were available to them to manage costs and get more from their cover, while calling for greater clarity from the government on the rebate changes.
Members Health welcomed broader healthcare investments in the budget, including additional funding for Medicare Urgent Care Clinics, aged care, public hospitals, and the NDIS, but said those gains could be undermined if older Australians were simultaneously pushed out of private cover.
