About 3.2 million Australians aged 65 and over could pay more for private health insurance from April 2027 under a federal government proposal to remove the higher age-based rebate currently available to older policyholders.
The government estimates the average affected person could pay about A$250 more a year, although the increase may be higher for people with more expensive policies. The proposal has triggered a wider debate over affordability, public hospital pressure and whether higher-income Australians without private hospital cover should instead face stronger tax penalties.
Importantly, the private health insurance rebate itself is not being abolished. The proposed reform would remove the extra rebate linked to age and make the rebate calculation depend on income in the same way it does for Australians under 65.
How the private health insurance rebate would change
For the period from April 1, 2026 to March 31, 2027, eligible people in the base income tier receive a rebate of 24.118% if they are under 65, 28.139% at ages 65–69 and 32.158% at age 70 or older.
Under the proposed reform, people aged 65 and over would receive the same rebate percentage as younger policyholders in the equivalent income tier. People in the highest income tier already receive no rebate.
The Australian Parliament’s Private Health Insurance Rebate Bills Digest says the measure is expected to save about A$3 billion over four years, with the government saying those savings would be reinvested in aged care.
How many older Australians could leave private cover?
Government modelling estimates there could be about 44,000 fewer Australians aged 65 and over with private health insurance by 2028–29 than if the existing rebate remained unchanged. That represents about 0.4% fewer insured people than otherwise expected.
University of Melbourne researchers reached a similar broad conclusion after analysing roughly a decade of tax data covering about 130,000 Australians. Their study estimated that around 14,821 to 42,498 older Australians could drop their cover, equivalent to approximately 0.1%–0.4% of the total insured population.
The researchers also estimated that removing the additional age-based subsidy could eventually save around A$730 million to A$940 million a year by 2028–29, while having a relatively small effect on overall insurance participation.
Insurers want a different solution
Private Healthcare Australia has argued that the government should instead increase the Medicare Levy Surcharge for higher-income Australians who do not hold qualifying private hospital insurance.
More than 900,000 higher-income Australians are reportedly paying the surcharge rather than maintaining appropriate private hospital cover. Under the industry proposal, the surcharge for some higher earners could rise from a maximum of 1.5% to 3%.
Industry modelling claims that approach could encourage about 383,900 additional people to take out private cover and generate around A$410 million a year in additional government revenue.
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Pensioners and lower-income households are at the centre of the debate
Industry groups argue that older Australians on tighter budgets could feel the change most. Private Healthcare Australia has estimated that up to 62,000 people could leave private cover and another 200,000 could downgrade their policies, although those estimates are higher than government and academic modelling.
The Australian Private Hospitals Association has argued that a couple aged 70 could face an annual increase of about A$1,614 in a scenario combining the rebate change with an expected premium rise.
The Australian Medical Association has called for protections for lower-income older Australians, while the federal opposition has indicated it intends to oppose the changes.
Would public hospitals face more pressure?
This remains the biggest policy dispute. Insurers, private hospitals and medical groups warn that people leaving or downgrading private cover could increase demand on the public hospital system.
The government disputes that there would be a material increase in public hospital activity. Researchers have also argued that subsidising private insurance does not automatically produce an equivalent reduction in public demand because the two systems share much of the same clinical workforce and private insurance generally does not cover emergency-department treatment.
Affordability pressures are already influencing household decisions, with Australians dealing with July 1 tax, superannuation and cost-of-living changes alongside rising insurance premiums.
Consumer confidence is another issue for the sector. Recent scrutiny of Bupa’s health cover claims and A$35 million penalty has added to wider concerns about policy value, transparency and the cost of maintaining private health insurance.
When could the 2027 rebate changes begin?
The Private Health Insurance Amendment (Modernising the Private Health Insurance Rebate) Bill 2026 was introduced in the House of Representatives on June 25, 2026 and remains before the House. It has not yet become law.
The Senate Community Affairs Legislation Committee is examining the bill, with public hearings scheduled for September 3 on the Gold Coast, September 4 in Sydney and September 11 in Canberra. Its report is due on October 7, 2026.
If the legislation passes Parliament, the new rebate rules are scheduled to begin on April 1, 2027. Until then, Australians should treat the changes as proposed rather than final.
For people aged 65 and over, the most useful figures to check will be their income tier, current rebate percentage and annual policy premium, because the financial impact will vary from one household to ano ther.
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