The government and private health insurers are working from very different estimates of how many older Australians will drop their cover if the proposed rebate changes proceed. That gap is where the commercial risk for brokers sits.
The government’s own impact analysis projects around 44,000 older Australians will exit private health insurance if the age-based rebate changes take effect from April 1, 2027.
Private Healthcare Australia (PHA) – the peak body for health funds – says that figure is a significant underestimate. RedBridge polling commissioned by PHA, conducted across 1,505 Australians between May and June 2026, found 39% of people aged 65 and over with health insurance said the change would make them more likely to drop their cover.
Not all independent analysis supports the industry’s position. University of Melbourne Professor Yuting Zhang, co-author of a report analysing how tax penalties and subsidies affect private health insurance, told ABC News she considered it unlikely that large numbers of older Australians would exit, because the benefits of holding cover still outweigh the cost increase for most. Her research estimated around 42,000 exits – broadly consistent with the government’s figure.
The government’s own analysis acknowledged downstream costs to the public hospital system “cannot be reliably quantified.”
For brokers, the competing projections matter less than the individual decisions already in motion. Whether exits number in the tens of thousands or considerably more, each one represents a client conversation.
The Private Health Insurance Amendment (Modernising the Private Health Insurance Rebate) Bill 2026 proposes removing the age-based component of the rebate from April 1, 2027.
Since 2004, the rebate has scaled with both income and age. Base-tier policyholders under 65 currently receive 24.118%. Those aged 65-69 receive 28.139%, and those aged 70 and over receive 32.158%. The bill removes those higher age bands, so all policyholders receive the same income-tested rate.
Health Minister Mark Butler has framed the change as restoring intergenerational equity, with the projected $3 billion in four-year savings directed toward aged care. A government spokesperson confirmed the Commonwealth expected the overall number of people with private health insurance would increase, including for people aged over 65.
The Senate Community Affairs Legislation Committee reports on October 7, 2026. The government needs crossbench support to pass the legislation.
The dollar exposure varies. PHA estimates a person aged 70 or over on Gold hospital cover could pay around $807 more per year as a result of the rebate change alone. A couple in the same bracket faces around $1,614 in additional annual costs. PHA also estimates that when combined with the annual premium increase, those aged 70 and above with Gold cover could see a total premium rise of around 21% from April 2027. These are industry modelling estimates based on current premium levels, not settled figures.
Clients who reduce cover to manage rising costs face a different problem: greater out-of-pocket exposure on the procedures most common in their age group.
Australian Prudential Regulation Authority (APRA) data shows orthopaedic episodes already carried the highest average out-of-pocket cost per hospital episode in the March 2026 quarter, at $849.93. That is the same category where device pricing gaps with comparable markets are widest – a point raised by the Members Health Fund Alliance in analysis released on September 16.
A client downgrading from Gold to a lower tier to absorb a rebate-driven premium increase may reduce their annual cost on paper while significantly increasing their financial exposure when they need care.
The Members Health Fund Alliance – the peak body for Australia’s not-for-profit and member-owned health funds, representing more than 5.4 million Australians – compared Australian Prostheses List benefits against French reimbursement prices, arguing device reform should come before any rebate reduction.
The data shows an Optimal Revision Stem used in hip surgery is listed at $4,968 in Australia versus $1,442 in France – a gap of 245%. A Prodisc-C cervical disc replacement is $6,021 locally against $2,142 in France, a difference of 181%. Some cardiac pacemakers are listed at $9,004 in Australia versus $6,292 in France. French prices were converted using the Reserve Bank of Australia (RBA) exchange rate of €1 = AU$1.63 as of July 9, 2026.
“The government should focus on removing unnecessary costs from the health system before asking older Australians to pay hundreds of dollars more for their private health insurance,” Members Health CEO Matthew Koce said.
PHA has made a similar case in its Senate submission, estimating that aligning implantable device prices with comparable markets could save consumers around $300 million a year – achieving 70%-75% of the government’s revenue target without touching the rebate.
Prostheses List benefit reductions have been running since 2022. Under a Memorandum of Understanding between the government and the Medical Technology Association of Australia (MTAA), the reforms were projected to deliver $800 million to $900 million in benefit cost reductions for insurers over four years, with 51% of listed items receiving reductions on July 1, 2022. No further scheduled reductions applied between July 1, 2025, and June 30, 2026. Members Health argues that international benchmarking – recommended by the government’s own independent evaluation – has not yet been formalised.
“Reform has begun, but major price differences remain. Manufacturers deserve a fair return, but Australian consumers deserve a fair deal as well,” Koce said.
More than 160 of the 171 submissions to the Senate inquiry opposed the legislation in its current form – 94% of all submissions. Opponents include the Australian Medical Association (AMA), the Australian Private Hospitals Association (APHA), National Seniors Australia, and the Council on the Ageing (COTA).
Major insurers have also weighed in. Bupa said in its Senate submission that “the reduction in the rebate is likely to create significant affordability pressures for older Australians on fixed incomes and may affect their ability to maintain appropriate levels of private health insurance cover.”
Insurers are expected to submit 2027 premium applications by mid-November 2026, pricing in both the rebate change and its likely membership impact ahead of the proposed April commencement.
That timetable defines when broker conversations need to happen. PHA estimates those aged 70 and above with Gold cover could face a combined premium increase of around 21% from April 2027 – premium rise and rebate reduction combined – if the legislation passes.
Members Health is calling on the government to retain the current means-tested rebate for eligible Australians aged 65 and over, establish ongoing international prostheses benchmarking, increase price transparency, and prohibit hidden financial incentives between device suppliers and third parties.
