Are older generations short-changing the young when it comes to health insurance? And what does it mean for the long-term future and affordability of health insurance?
Many health fund customers would be receiving notifications of upcoming price increases, some effective from 1 July.
With inflation, rising interest rates and living costs combining to put pressure on household budgets, a rate rise for health insurance adds to the pain.
For older generations, health insurance is a necessity as medical problems mount with advancing years. But that’s not true for younger people.
Yet without a big pool of younger, healthy people paying into health insurance, the system faces the prospect of collapse.
Andrew Davis, CEO of Compare Club, told The West Australian the private health system has “been intentionally designed for the young to subsidise the old” and that there is a logic to that which can’t be avoided.
“This is generally how insurance of any kind works,” he says, “where the premiums of those not making claims pay the claims of those who are.”
But placing too much of that burden on young people – and giving them too little in return – could force younger people to walk away from health insurance, putting the system as a whole at risk, he argues.
“There is a lack of policies designed for the needs and desires of young people,” Mr Davis says.
“This pushes them out of the system altogether, or into paying unreasonably high premiums for services they don’t need in order to get access to what they do want or need.”
For example, many services that are particularly relevant to younger people, such as pregnancy and psychology, are only usually available on the most expensive gold cover plans.
On the other hand, services most commonly used by older people, such as hearing aids, joint replacements and cataracts, are usually available on cheaper silver level policies.
“When you drill down into the policies, the inequalities between young and old become even clearer,” Mr Davis says.
“Even when covered, the gaps are often high. Annual claim limits for hearing aids are typically over $1000, but only $200-$300 for psychology.”
If something is not done to address the inequality, the system will become unsustainable, if it hasn’t already. Rather than increasing costs for older people, Mr Davis says covering young people for what they need will reduce costs in the long run.
“The health funds rightly point out that prevention is better than the cure,” he says.
“They [insurers] should be allowed to be involved with primary care to try to reduce the need for hospitalisation, which increases their costs, and of course the burden on the system.”
Are you struggling to maintain your health insurance? Is it a non-negotiable? Let us know in the comments section below.
Also read: Most expensive health insurance policies revealed
YourLifeChoices is owned by Compare Club.
I have to disagree. I had to sit down with my insurer to have things like pregnancy, post natal care etc removed from my Silver policy. The older generation do have knee and hip replacements but the young are more likely to experience sporting injuries also requiring surgery. When you look down the list of extras there are all of the same things like alternative health care – acupuncture, massage, gym memberships even – and these are non-discriminatory regarding age. I just think there’s an attitude in society in general of ‘why pay for health insurance, I’ll go public’, that is until something goes wrong and they realise how long the waiting list is.
I agree with you. Why, for example, does an older woman still have to pay for miscarriage/termination services on a silver policy when all other pregnancy services, including IVF, are in the Gold policy? And why does an older woman have to pay for male fertility/reproductive services on that same silver policy? And then, on top of that, a cursory comparative search shows most policies that would cover the ailments that beset older people are priced well over $2000 for silver cover. The lowest offers are not much cheaper and frankly don’t seem to cover much, if anything at all. For an older person, no matter whether on the age pension or self-funded, this is a very expensive outlay, especially when you also consider you will still have to pay out-of-pocket expenses, which alone can be considerable. A cancer patient, for example, will pay nothing in the public system yet will be up for hundreds if not thousands of extra payments if they have health cover. The question then becomes, why bother with health insurance at all at any age?
It is crazy prices for private insurance for anybody – this companies are making a lot of money and the gov. support all this – sounds a copy of USA terrible health service (No money no insurance – USA) so where we are going from here – Look at the Spanish, Thailand and many other conuntries in the world that have Gov. support for everybody young or old AND FREE because everybody pay tax and contribute to health also the Health services are controlled not like in AU that the Doctors can charge you any $$$ they want including Medicare charges that are incredibly crazy and the Docs taking advantage of this …. so ofcourse Health charges increase and increase ….
I have had private health insurance since my 20’s and am now 75. Our current policy is an “old” policy no longer available to new policyholders and comparing it to the current raft of policies available we would not consider changing over. Basically, we have only ever used the Extras Cover of dental and optometrist and then only annually in the last 6 or 7 years.
But at our ages 75 and 85 we cannot afford to not have both hospital and extras cover.
Thankfully we can afford it but many of our friends have either opted out to just extras cover or cancelled all cover, putting more pressure on the public system.
I recently spent the best part of two days getting quotes at different levels trying to work out the best insurance deal. It was simpler to stay put which of course is exactly what they want
Breaking the insurance cover to be appropriate for three age groups, young, middle aged and seniors would be a start. As mentioned elsewhere, why should a 25 year old be insured for knee surgery or palliative care and a 70 year old male or female for reproductive care? At least it would be easier for all ages to see what they are paying for.
Excess surgeon’s charges are a major cost. My wife and I paid over $22,000 excess on two essential operations with gold insurance cover. Yet the surgeons say they give the same care to public or private patients. A solution would be for the ability to hire a private room in a public hospital and insure for that alone as an option.
There has to be and there is a more efficient way of delivering health care but clearly there are vested interests against it.
I think you have to see it in the long term. When I was younger, without kids, my premiums subsidised older people with their issues, as well as younger people starting a family. But as time progressed and ‘life happened’, I became the recipient, claiming for pregnancy, etc, and then my husband who was diagnosed at 35 with Type 1 Diabetes, and who recently needed a defibrillator for a heart condition. It’s swings and roundabouts. It seems selfish to complain about subsidising others, only to have the tables turn as we age. It’s also unfair to single out older people by saying they are sapping off the younger generation’s premiums. Us ‘oldies’ have done our time paying and now its ‘payback’ time for us. The current ‘young ones’ time will come around also and it will be the following generation who will subsidise them.
Where do I start? I am so tired of the media saying that the young are subsidizing the aged. Simple fact, as other people have said, they aren’t! I am in my 60s and paid for private health insurance since I left school and came off of my parents policy. I have well and truly paid to cover whatever medical costs I should require now. As Julie said, the young ones will reap back their premiums as they age.
Your example of needs are irrelevant, there are many younger people who requires hearing aids, hearing impairments are not governed by age! Psychology, again nothing to do with age. ($200 cap is completely inadequate). It is, as others have said, that if anything, we are subsidizing the young. To cover a lot of the things that are required as we age we have no choice but to opt for the higher tables, yet in doing so we are paying for pregnancies and fertility treatments, services that we definitely have no need for, with both costing a phenomenal amount of money, the older generation are definitely subsiding those because the young ones haven’t been paying premiums long enough to cover the costs.
I suggest before writing articles such as this you do more research and do some calculations using commonsense.
As far as health insurance in general, I consider hospital cover is a necessity. It’s not really about the cost of treatments because everything is available under Medicare, it’s about timing. There was a time where private health cover paid for costs that weren’t covered by the public system, for example I had scarring removed when I was younger, it couldn’t all be removed in one operation, by the time I was able to have the second surgery it was classed as Cosmetic surgery and no longer covered. Taking away the extra benefits didn’t reduce premiums, just as several years ago when they removed cover for certain treatments, the premiums weren’t reduced, they just got higher. The only real benefit of private insurance now is that we can have an operation or treatment as soon as it’s required rather than deteriorating while waiting 12 months or more on the public system. Having the option of going into a private hospital is also a perk, but then, we have to pay an extra +excess payment for that before we are admitted!