Young Australians are continuing to dump private health insurance, contributing to increasing premium prices that again turn more young people away from the industry.
It’s what experts are calling the “death spiral”, and the latest statistics don’t show it stopping any time soon.
The Australian Prudential Regulation Authority released on Tuesday the quarterly figures into private health insurance for December 2019.
It shows the same story we’ve come to know well: Fewer young Australians are taking out cover, and premiums are going up as a result.
Grattan Institute health program director Stephen Duckett said it has been a consistent trend for the past 10 years.
How does this ‘death spiral’ work?
It was Dr Duckett who coined the phrase ‘death spiral’ for the private health insurance industry.
With the institute’s April 2019 release of paper The history and purposes of private health insurance, Dr Duckett explained that insurance premiums are rising, outpacing wages or inflation.
The old rule of get health insurance before you turn 30 is being flouted by young Australians.
Instead, nearly 130,000 Australians aged 20 to 34 have turned their backs on the insurance in the past two years.
Meanwhile, in the past 12 months, an extra 60,000 Australians aged 70 and over have signed up as policyholders.
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What does this do for those who choose to keep paying for the service?
Young people make fewer claims, but pay the same premiums as older Australians.
Older Australians make more claims as they age – meaning the cost of claims is growing at 5 per cent a year, while the premiums are only set to increase by an average of 2.92 per cent on April 1.
So young Australians are ditching the product, because it costs too much – and as a result, pushing premiums up even further.
“Young people are saying, ‘What is my likelihood of using hospital services in the next 12 months?’,” Dr Duckett told The New Daily.
“For the majority of them, not very high.
“So it’s not value for money for a young person, especially given the fact Medicare exists.”
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As insurance providers try to lessen the gap between payouts and premiums, policyholders aren’t looking in the other direction, consumer advocacy group Choice says – they can see they’re getting less for more.
It’s another reason that it’s unsurprising to see Australian ditching private health in droves, the body’s health campaigner Dean Price said.
“Private health insurance costs too much, is too confusing and offers too little value,” Mr Price said in response to APRA’s statistics.
“When you buy health insurance, you expect to be looked after when the worst happens, but our health insurance is letting us down with unexpected costs and unnecessary stress at the worst of times.”
Despite rising premiums, Australian taxpayers still help subsidise the private health insurance industry every year – by about $9 billion, Grattan estimates.
This continued propping up is part of the pickle the industry finds itself in today, Dr Duckett said.
“Every time there’s been a problem, the industry says, ‘The government needs to give us more money’, or, ‘The government needs to legislate so that more people need private health’,” he said.
“The industry has not taken ownership of the problems.”
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Dr Duckett says the system needs a massive shake up.
The problem with that, he says, is that one pocket of the sector is always going to be adversely affected.
One way to reduce costs would be to deregulate the importation of medical devices, which he said already cost Australia a lot of money compared to international counterparts.
But this avenue would adversely affect the importers of such devices.
Genuine change all rests on overhauling the regulations that support the industry spinning itself into the death spiral it’s caught in today, Dr Duckett said.
Choice’s Mr Price said with premiums increasing again in six weeks – even though it’s the lowest average increase in nearly 20 years – there’s no slowdown in sight.
“[We call] on the government to address the increasing costs of premiums, which are made worse by the increasing out-of-pocket costs that come with using your health insurance,” Mr Price said.
“We want them to review the whole system by undertaking a thorough public inquiry and commit to taking all necessary action to make sure people have access to fair healthcare.”