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?