The peak body for Catholic not-for-profit hospitals is calling on the government to stamp out the rise of inefficient ‘junk’ health insurance policies by making ‘bronze level’ insurance the new minimum requirement for Australians seeking to avoid the Medicare Levy Surcharge (MLS).

In its federal budget submission, Catholic Health Australia is urging the federal government to reform the private health insurance system, which currently allows health insurers to sell virtually worthless insurance called ‘basic’ insurance – dubbed ‘junk’ by some –  to consumers who are primarily interested in avoiding the MLS at tax time.

CHA Health Policy Manager, Alex Lynch said it was alarming that ‘junk’ policies had grown from a third of all policies sold in 2015, to nearly two-thirds today.

"Most of these ‘junk’ policies merely allow holders to enter the public system as a private patient. Junk policies allow individuals to avoid paying extra tax and provide a super-easy revenue stream for private health insurers. But they offer zero relief to the overburdened public hospital system, nor value to customers," Mr Lynch said.

"We need to recalibrate the system so people are either paying the MLS to fund more Medicare, or receiving proper insurance that reliably allows them to be treated in the private health system. Our current system, which encourages private health insurers to make big profits from selling near-worthless products, is a shocking waste our health system can no longer afford."

CHA is calling for bronze-level policies, which cover 18 categories of services in private hospitals, to be the new floor for Australians who wish to be exempt from the Medicare Levy Surcharge.

“A private health policy should give you the chance to exercise choice and use private hospitals where suitable," Mr Lynch said.

"The pandemic has highlighted the need for government to encourage the use of private hospitals so they can take pressure off the public system. But this can only happen if we start winding up the sale of ‘junk’ private health insurance that sees people pushed into public hospitals anyway."