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Concerns for Private Health Sector

private health sector

According to the Australian Financial Review (AFR), the private health sector in Australia is headed for trouble. While it would be easy to blame rising premiums, there’s more at play. As the AFR points out, 100,000 less Australian hold private health insurance compared to 12 months ago. Does this spell trouble for the future of private health in Australia?

Healthy Subsidising the Sick

There is a popular view that Australia’s private health sector is fair and equitable. In one sense, this is true. Private health insurance costs no more whether you’re 20 or 70. While this seems fair on face value, many view the practice quite differently. The perception is that young, healthy people who make very few claims are actually subsidising the claims of those with poorer health.

As a result, people aged 20-39 are opting out of private health cover in droves, while those over 60 are taking out cover more readily.

What’s the Risk for the Private Health Sector?

Quite simply, when relatively healthy folks who don’t make many claims discard their cover, premiums rise. Essentially, there’s less people paying their premiums, and the ones remaining are those who use private health services the most. This means insurers are making less money, and premiums naturally go up.

Private health insurance premiums have been rising faster than inflation, and this age divide is a key player.

Is Anything Being Done to Fix the Problem?

New reforms from 1 April, 2019 make it more attractive for younger people to buy and retain cover, however it may take some time for this to have an effect.

Labor has committed to a Productivity Commission review into the private health sector should it win the May 18 federal election.

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