Pressure builds on private health cover business model

Fears for public health system as more people shun private cover.

waiting room

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?



    To make a comment, please register or login
    20th Nov 2018
    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.
    20th Nov 2018
    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?
    20th Nov 2018
    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.
    20th Nov 2018
    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?"
    20th Nov 2018
    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.
    20th Nov 2018
    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.
    Karl Marx
    20th Nov 2018
    We already pay it's called Medicare at 2%. Maybe increase it to 3 or 4 %
    20th Nov 2018
    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.
    Old Geezer
    20th Nov 2018
    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.

    20th Nov 2018
    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.
    20th Nov 2018
    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.
    20th Nov 2018
    I agree, Cowboy Jim, and I would include sponsorship of major sporting clubs.
    20th Nov 2018
    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.
    21st Nov 2018
    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.
    Barbara Mathieson
    20th Nov 2018
    I’ll probably be an ‘opt out’ come April I think!
    Greed too great for me.
    21st Nov 2018
    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.
    20th Nov 2018
    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.
    21st Nov 2018
    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.
    21st Nov 2018
    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.
    20th Nov 2018
    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!
    20th Nov 2018
    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.
    invisible sock
    20th Nov 2018
    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.
    Ted Wards
    20th Nov 2018
    Has been too expensive for a very long time. Its not rocket science, make it unaffordable and what will happen?
    20th Nov 2018
    People will flock to the public system as they are now The queues and waiting times will grow longer.
    20th Nov 2018
    Keep looking for better deals Just changed over from NIB to HCF a non for profit fund,Pay less than my old fund and get more back, With health issues such as the need for another hip replacement have chosen to stay .
    invisible sock
    20th Nov 2018
    You can now look forward to an expensive looking magazine each quarter and a lifetime limit on orthodontics of just over $2000.
    20th Nov 2018
    Good article.
    20th Nov 2018
    Health Insurance is the biggest scam I've dumped tens of thousands into over the years.

    All because of some stupid ideology of the Liberals and conservatives ie fascist economic theory.

    If people were paid fairly for their time and taxed sensibly and public goods and services provided effectively and without profit gouging we wouldn't have problems and inequalities making Australia poorer and a less decent country to live in.
    20th Nov 2018
    So it’s only been the conservatives and the LNP that have had control of the system for the last 50 years strange outlook.
    21st Nov 2018
    No not just the LNP Jim but the ALP too. I'll swear they got hold of the Berlin Handbook of Economic Theory 1934 and are both running with it.

    Both have contrived to destroy the revenue base, create massive structural imbalances, ignore private debt and ensure wages stagnate in real terms while private owners of everything take the profits off shore.

    We should have the best public hospital system in the world but the choice was to subsidise health insurance companies instead. Lower taxes time after time for the highest earners and encourage private providers of services forcing costs higher and higher.

    Both Parties are singing the same song because there is money to be made from all these deals and contracts. Big money.

    The "conservatives" have had control for most of the time though and seem to have taken this private profit at public expense to heart.
    20th Nov 2018
    The 3.9% increase in Switzerland is that each year or is that an average increase each year for 22 years. I actually thought the Swiss system was a tax % of a persons salary, so that means the more you earn the more you pay and as far as I know everyone who is working pays, no exemptions. Our compulsory Medicare % is means tested so many people don’t pay, and I think the upper % is capped, I am sure someone will have the correct information, but either way as usual we are not comparing apples with apples. It seems that the young don’t take out insurance believing that they are in good health and won’t need medical attention, if that’s the case it’s no wonder the insurance premiums are on the increase, our public health system must be fantastic if so many can opt out of health insurance, I know I have held health insurance since I was 18, so have contributed for over 50 years, I have noticed that I seem to be getting less and less as a return, my wife and I are considering dropping out, and there seems to be many others thinking the same. What’s going to happen to our public health system if more people drop out, the Medicare level will have to rise significantly.
    20th Nov 2018
    I suggest the primary reason for the decline of health insurance is that there are two many players in the field. Just how many health funds are there? They all have their overhead costs. Each fund has a CEO and an executive team who expect a salary commensurate with their position, plus a Board of Directors who expect to be royally looked after. Similar to superannuation there seems to be 'retail' funds and 'industry' funds. Possibly a program of mergers to bring the number of funds to a manageable level may be one answer, similar to what happened in the banking industry not so long ago. Any comments?
    20th Nov 2018
    This is an entirely sensible comment and probably valid. The difficulty is the government has this idea that competition in every area is good and will drive down prices. Expect no help with legislation.
    20th Nov 2018
    The premiums are very high and healthy young people aren’t stupid. We have been in for too long and are concerned about the long waiting lists in the public health system. However, we dropped out of Extras and put the money into a seperate account hoping it will cover the out of pocket expenses. That is the real problem because they are so high. Choose your own specialist and not one on your Health Funds list and the costs are even higher. Soon, everyone will drop out.
    21st Nov 2018
    Spot on! When, in their later years those who are now young people will have health issues and consider insurance, they will be swiftly dissuaded from the premiums they will have to pay. The loadings for late joining will ensure that they will never be insured.

    They system is doomed.
    20th Nov 2018
    Maybe look at having incentives for people to have insurance and to stay in once they have it. The waiting lists in some areas are the main reason people need private cover followed by the desire to choose their own doctors and hospital. People pay for this privilege and it must take a burden off the public system. Whether we can continue to
    pay this forever will be dependent on several factors like the cost of living and how much the cover goes up each year.

    20th Nov 2018
    Health insurance should be compulsory

    Don't worry - labor will make it compulsory if they win
    21st Nov 2018
    Building a new hospital for every 300 000 added to the population should be compulsory too. It's all very well to have two separate health systems and to ramp up the population to increase GDP but the Government is not supplying services for those extra people.

    Whole regions are running out of doctors and good luck getting a bed in a hospital.

    My son delivered his last baby because Dubbo Base Hospital has no spare maternity beds. Same hospital and four times the population that it was built to serve.

    Incompetence by both Parties.

    22nd Nov 2018
    Well, no wonder health costs are high after what I saw yesterday. A bill for $359 dating back 8 months was ''explained'' by providing previously unseen hospital records that evidence four bills of $322, $322 and $290, $290 each - all paid. Those bills were later (after being paid) changed to $359, $359 and $270, $270, with no advice to the patient and an outright refusal to provide either an invoice or a receipt (Payment was made on 'estimates', but required and paid prior to admission!). Then a fifth bill (that was never owed) was rendered (this time an invoice) for $270 and it was marked 'Paid: $17 outstanding'' but one of the $290 credits was credited against it - so in fact it was overpaid by $20."! Then an amount of $359 was claimed to remain unpaid, but no advice of this was provided until 8 months later, despite verbal confirmation at the time of admission that everything had been paid in full. When the $359 claim was queried, it was suddenly and unexplainably changed to $376.

    A total of $1494 has now been paid against apparent charges totalling $1258 that, until 8 months after the hospitalisation, were billed at $1224, yet a balance of $376 is claimed owing and requested with a statement demanding immediate payment of $359.

    If this is the general level of competency in hospital accounting offices, no wonder health costs are soaring. Is anyone else confused yet?

    Join YOURLifeChoices, it’s free

    • Receive our daily enewsletter
    • Enter competitions
    • Comment on articles