The terms ‘death spiral’ and ‘private health insurance’ are used together with such frequency that they almost warrant a listing in the next update to the Macquarie Dictionary.
We have problem, that is not going away, and it seems the sector itself has one solution – raise premiums every year.
The latest to weigh in with an idea – quickly debunked by the industry as destabilising for older Australians – is public policy think tank, the Grattan Institute. A report, led by health economist Stephen Duckett, recommends partially deregulating premiums to allow insurers to charge younger people less than older people for the same level of coverage.
It says that fewer than 40 per cent of the population will be covered by private health insurance by 2030 unless reforms are made.
“The system faces a death spiral – younger and healthier consumers get a bad deal so they’re dropping their insurance, which means premiums need to rise, so even more young and healthy people drop out, and the cycle continues,” it says.
“This youth exodus means the recent moderation of premium increases is likely to end, and premiums will probably return to increasing at five per cent or more each year. Young people’s premiums have to get cheaper.”
And the response from the sector?
Chief executive of Private Healthcare Australia, Dr Rachel David, says funds are not permitted to discriminate against members based on health status or claims history.
“The latest report from the Grattan Institute highlighted issues of concern in the private health sector previously identified by government and stakeholders, however it failed to offer any workable solutions,” she says.
“While maintaining a system of community rating [which means the same service is available to everyone for the same price] posed challenges for Australia’s health system, it was also one of the features which helped Australia maintain its international reputation for fairness in healthcare.
“Community rating underpins Australia’s private health insurance regulations, and changes to a risk-rated system would severely destabilise premiums for older Australians and threaten the future of fair and equitable healthcare.
“Generational transfer of risk would mean a lot of Australians would have a very uncertain future.”
The chair of the Australian Health Care Reform Alliance, Jennifer Doggett, says the Grattan proposals merely “tweak the numbers” in a bid to attract more young people.
“My biggest criticism is that the paper assumes that the current system of private health insurance is a system worth saving which, in my opinion, is not the case,” says Ms Doggett, a health policy analyst.
“They don’t address many of the fundamental problems with private health insurance: that it is overly complex, cost-inflationary, has high administrative costs, leads to over-servicing, is inequitable, doesn’t help those most in need and disadvantages people in rural areas – although some of these issues are addressed in other Grattan papers.”
In another recent report, the Grattan Institute said private health insurance premiums could be cut by up to 10 per cent if private hospitals were made more efficient and doctor ‘greed’ was contained.
Private health insurance premiums are set to rise again from 1 April 2020, with Health Minister Greg Hunt struggling to keep the increase to three per cent. A jump of 3.2 per cent would be double the current rate of inflation.
Are you just hanging in there with your private cover? Are you concerned that there seems to be no viable alternative to increasing premiums each year?
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