Risk advisers say the rise in the Medicare levy outlined in last week’s federal budget could have a major effect on the affordability of insurance premiums for clients.
The government said in a statement it will legislate an increase in the Medicare levy from 2 to 2.5 per cent as a means of guaranteeing full funding of the National Disability Insurance Scheme (NDIS).
The increase in the Medicare levy will apply from 1 July 2019 and will raise an extra $3.55 billion in revenue in its first year, rising to $4.25 billion in 2020-21, the statement said.
Speaking to Risk Adviser, Life Insurance Direct chief executive officer Russell Cain said the levy will have a large impact on Australian families’ disposable income.
“The increase will limit their ability to afford appropriate and relevant insurance products against disabilities, which could alleviate them from relying solely on the scheme,” Mr Cain said.
“The Liberal government needs to start considering policies which will reduce underinsurance, increase competition and make insurance protection affordable to all Australian families.
“Failure to do so will only create further burden on the NDIS.”
Orion Financial Group director Sacha Loutkovsky added that the change in the Medicare levy would mean the affordability of insurance premiums will continue to be a discussion with clients trying to cut back costs.
But she noted that the government hasn’t started taxing superannuation funds and insurance companies.
“[This] means that premiums won’t be affected by rate rises that insurers would likely pass on to clients in the form of higher premiums,” Ms Loutkovsky said.
Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.
You can contact him on [email protected].
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