Pressure builds on private health cover business model

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Is Australia’s private health insurance industry nudging closer to the precipice?

As premiums continue to increase each year, the number of younger people joining is dropping, according to the latest report from the Australian Prudential Regulation Authority (APRA), and it’s putting the business model under pressure.

Ian McAuley, fellow at the Centre for Policy Development and an expert in healthcare policy, told Fairfax Media that the trend of funds “losing paying customers while gaining claiming customers was unstable for private health insurance in the longer run”.

In Switzerland, where private health insurance has been compulsory since 1996, protestors marched in several cities at the weekend because of average 3.9 per cent increases over the 22 years since 1996. In Australia, health funds increased their premiums, on average, by 5.59 per cent in 2016, 4.84 per cent in 2017 and 3.95 per cent in 2018.

YourLifeChoices members told us in our 2018 Retirement Matters Survey that private health cover was the second biggest drain on their income after energy costs. The survey also revealed that private cover was very important to most, with 70 per cent of survey respondents saying they have health insurance, and 81.5 per cent of that number saying they planned to maintain their cover for life.

However, for some, that aim will be severely tested.

The number of people aged under 55 who have private health insurance has dropped by 251,126 since 2015, according to the APRA report. At the same time, the number of over-55s with private health insurance has risen by 203,028.

New research by Roy Morgan found a marked decline in fund members who agreed it was “essential to have private health insurance” from nearly two thirds (65.8 per cent) in 2014 to 56.9 per cent in August this year.

Roy Morgan industry communications director Norman Morris said the decline in numbers was a concern to both health funds and the government as more pressure would be placed on the public health system. He said polling showed there was a perceived lack of value in health insurance due to cost and uncertainty about what was covered.

The Australian Competition and Consumer Competition (ACCC) noted in its annual report on health insurance that policies were “complex, with varying exclusions, restrictions, waiting periods, excesses and co-payments expressed using technical, medical and legal language”.

The Labor Party says that if it wins the election next year, it will cap increases in health fund premiums to two per cent for two years and launch a Productivity Commission inquiry into the industry.

The Government has introduced several reforms for private health insurers that will start next April in a bid to make private health insurance easier to understand and more affordable.

Are you concerned that private health cover may become too expensive just when you need it the most? Do you have a plan B?

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Written by Janelle Ward

39 Comments

Total Comments: 39
  1. 0
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    Greed by the medical profession is the main problem some have a god like approach to patents .What ever is privatised it will become a great big rip off.Working people just can’t afford it any more the system is broken and this government with its greed is good policy only encourage this behaviour.

    • 0
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      Greed of the medical profession is one major issue, as prices are jacked up by collusion by members of their Union – funny the Libs tolerate this Union!
      Secondly, the Govt & it’s laws are to blame for the big gaps (they should limit these by law), unrealistic Schedule fees, as well as not forcing the Insurance companies to cover all Gaps.
      Thirdly, the greed of the Insurance companies and their CEOs (similar to Banks) – which will ultimately bring them down.

      A Royal Commission is well and truly overdue to radically restructure the whole Health sector and irresponsible Govt policies. And what does Labor offer? A Productivity Commission review! The mob which usually favours the business sector over the common people?

  2. 0
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    So the Labor party says it will cap premiums at 2 percent for 2 years, what happens in the 3 year, maybe an increase of 5 percent or more.

    The whole thins is a con.

  3. 0
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    Yes, I am concerned it will become too expensive and the excess is the biggest burden.

    I understand why it is so expensive. Take a tally of everyone you know that would be dead now if it wasn’t for medical science. I could almost cross out half the 65ish people. The cost of cancer and major heart, brain etc ops is very expensive.

    While specialists fees are expensive so is their equipment and the drugs.

    There is a limit to what a country can provide to “save” its people. The question is – “what is the limit?”

  4. 0
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    My plan B is paying 12 months in advance next month. Gives me enough time at the older rates to see what eventuates. I certainly expect the % increase to be greater than the bank interest I am currently earning on that money.

    • 0
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      That is our way of paying the premiums as well, Thoughtful. If the whole thing collapses then I cannot really see any other way than hoarding cash out of sight and use that if the proverbial hits the fan. Sort of self-insurance. Presently our bills are $4800 per year and when you look at all these years we have been paying in, that money would be enough for quite a hospital stay. As the article above says – health insurance in Switzerland is compulsory (my family lives there) and maybe we should introduce something like that here as well. Not popular but if everyone pays in the premiums might not be as high either. Lived for 8 years in Africa and there if you have no insurance or cash the cemetery awaits you.

    • 0
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      We already pay it’s called Medicare at 2%. Maybe increase it to 3 or 4 %

    • 0
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      The thing is, 1984, when the government does something like that everybody jumps on the wagon and raises their prices so you’re no better off.

    • 0
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      I’ll pay another 12 months in March so that I’ll be about 18 months in advance again then. Every time I pay 12 months in advance I seem to get more than 12 months membership. I can’t find out how that works but It’s in my favour so it’s not my problem.

  5. 0
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    Labor makes promises that have no substance. When they were in power, the increase in health insurance premiums was higher than ever and the current government has brought the average down from Labor’s peak costs. What Labor won’t tell us is that they have only promised to cap the average increase which means very little. As has been written here before, average increases of 3%/4% don’t translate to what the funds charge everybody. Increases of up to 13.4% have been made but governments don’t want to ask questions.

    What health fund members want to see is transparency when increases are sought. Members don’t want to see an average increase, they want to see a maximum increase and governments should be insisting on the full details of a request to increase premiums being made available.

    • 0
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      I would like to see things like gym shoes, memberships for fitness clubs and such like eliminated. Do not like feel good initiatives – leave the extras in for eyes and teeth as they are optional.

    • 0
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      I agree, Cowboy Jim, and I would include sponsorship of major sporting clubs.

    • 0
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      Yep. I quit when I copped ”gap” bills for thousands for surgery, but they offered me a discounted entry to Dreamworld with free rides, discounted entry to SeaWorld, and free gym shoes.

    • 0
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      Actual you are correct. The LNP made a lot of promises they broke straight up as well.

      You can’t trust either side in the Game these days.

  6. 0
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    I’ll probably be an ‘opt out’ come April I think!
    Greed too great for me.

    • 0
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      If prices keep rising for everything opting out becomes a sensible choice of where to cut costs especially if you are healthy and have some savings just in case. Doctors can find cheaper alternatives if you have cash to bargain with.

  7. 0
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    I was in private cover last year and had to have a skin graft for a skin cancer. The only thing that was covered was the private hospital. I ended up out of pocket $4000. I question why pay for private health cover when it doesn’t pay anything. I have decided that if I need an operation I will either take out a personal loan or use some of my superannuation.

    • 0
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      Lucky it was in a hospital. My treatment a few years ago was in a private clinic and I wasn’t covered by either medibank nor the private health fund.

      Yet another example of paying tax and private insurance for no return at all.

      I’m getting a tad tired of seemingly paying for others to get for free and go without or pay for myself.

    • 0
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      Me too! A few years back I had a kidney removed because of cancer, and after discharge from hospital I thought that the bills arriving daily in the mail would never stop.

      Later I had dealings with a number of people who had the same treatment in a public hospital and paid nothing, leaving me wondering why I bothered to insure.

      The answer came some time later. I needed treatment as a preventive measure for cataracts and both eyes were done over a period of around 6 weeks. A friend urgently needed the same surgery as me, he waited 3 years for one eye, then 2 years for the next eye.

      The injustice in this is that I have been insured all of my life, my friend was insured all of his working life, but had to drop out when he became a pensioner and premiums were no longer affordable. Rejoining was not an option because the massive loadings on his new premium would make it even more unaffordable than it was when he was forced to drop out.

  8. 0
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    Not only too expensive but on top of that HBF are charging more and covering less. It doesn’t matter which government is in power, they are all useless and squander taxpayers’ money and then make is pay for their mismanagement and incompetence!

    • 0
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      Yes, my health fund has offered me a big discount to renew my policy, of course the new policy will not cover hip replacement, knee replacements and some cancers, just at an age when I might, hopefully not need any of that.
      Of course they ruled out cover for pregnancy, which is good for a 66 year old male.

      They are taking the piss.

  9. 0
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    It’s becoming more & more obvious that those with private health insurance are being slugged unjustified increased premiums each year to help prop up the system for the uninsured.
    It will be interesting to see how much above inflation the next increase is.

  10. 0
    0

    Has been too expensive for a very long time. Its not rocket science, make it unaffordable and what will happen?

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