The government’s proposal to remove larger private health insurance rebates for over-65s could see premiums rise for around 3.2 million of the 12.7 million Australians with hospital cover. Subject to legislation, it would be a headwind for Medibank and NIB policyholder numbers starting April 2027.

Why it matters: Depending on income, the proposal increases premiums by up to 6% for 65–69-year-olds, and up to 12% for those aged over 70. While households have prioritized private health insurance in the past, the proposal increases the risk of lower participation and policy downgrading.

  • We reduce our policyholder growth forecast to 0.2% per year, well below 1.2% population growth. Less participation among older cohorts is expected to lower average claims and offset the revenue impact. Over 65s account for around 25% of participants, but in 2025, over 55% of claims.
  • NIB’s exposure to the National Disability Insurance Scheme via its plan management business also faces headwinds as the Government targets a 20% reduction in participants by the end of 2030. We expect NIB’s participants to fall 15% and spending per participant to drop 16% by 2030.

The bottom line: Our fair value estimate for narrow-moat Medibank is unchanged at $4.60. Lower NDIS plan management earnings and increasing the cost of equity in our valuation to 8%, from 7.5%, lead to a 5% reduction in our NIB fair value to $7.30.

  • We think the higher COE is warranted given the NDIS business is entirely reliant on government funding, paid on a per-use basis, and is vulnerable to change as the government seeks to save money.

Between the lines: From fiscal 2027, we assume Medibank and NIB policyholder growth averages around 0.6% and 0.8% per year, respectively.

Benefiting from cost advantages, we expect the big funds to take market share with bigger advertising budgets, introductory bonuses, and enhancing the value proposition with lower out-of-pocket costs, alternative care options, and other rewards.