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Private health insurers want rule changes to entice younger members

NIB chief executive Mark Fitzgibbon said young people, who were less likely to need to be hospitalised than older people, questioned the value of the current system.

“We need to make private health insurance more attractive to young people and make it so we can cover the things they actually need,” he said.

Sydney’s Matt Donn, 30, has put his private health insurance on hold after being put on reduced hours and taking a 20 per cent pay cut in his marketing job, due to the COVID-19 economic downturn.

Matt Donn with his dog Tank at their Marrickville home.

Matt Donn with his dog Tank at their Marrickville home. Credit:Brook Mitchell

“I was paying $20 a week, I rang up and froze it for a month,” Mr Donn said.

“I don’t know what happens next … I’m trying to save up as much as possible, in case things get worse.”

Private Healthcare Australia chief executive Rachel David the industry’s “intergenerational problem” was being made worse by the pandemic.

She said a recent Reserve Bank report showing women and young people were the hardest hit by job losses was reflected in an accelerating rate of decline in memberships among comparatively healthy working-age Australians, including families.

Dr David said industry research showed the COVID-19 crisis had entrenched people’s views of private healthcare, with those who viewed it as unaffordable becoming more convinced this was the case, while those who saw it as necessary felt this had been confirmed by recent events.

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Funds have struggled for years to maintain their viability in the face of an ageing membership base, which has contributed to rising insurer costs and higher premiums.

The latest data from the Australian Prudential Regulation Authority released last month showed the largest net fall in private health insurance membership was among 25-to-29-year-olds, with a drop of 11,176 in the March quarter after accounting for movement between age groups. A sharper fall is expected in the June quarter.

“Young people are paying for something they’ll only be able to use later,” Dr David said.

Under the risk equalisation rules governing health insurance, funds have to pay a levy on young members to ensure those who have more older members can stay afloat while paying out a higher number of claims.

Mr Fitzgibbon, whose fund has a higher than average number of younger members, said this levy accounted for about $1000 of a young health fund member’s annual premiums.

NIB delayed its 2.9 per cent premium increase until October 1 at a cost of $40 million and spent $1.5 million on financial assistance for members impacted by COVID-19 in the form of temporary premium waivers, while other funds such as AIA Health Insurance are offering cash refunds for people who did not use their extras.

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However, while many health funds announced plans to give partial refunds of premiums to members unhappy at being unable to access services during lockdown, Mr Fitzgibbon said this was “not likely” at NIB as “COVID denial of service was pretty much limited to April and May”.

Grattan Institute health economist Stephen Duckett said with unemployment rising, particularly among young people, an industry downturn was inevitable as people “reflect on whether they can afford to maintain their private health insurance”.

“Funds’ cash position has been improved by the slowdown in elective procedures and in visits to health professionals covered by extras insurance,” he said. “But if younger people, hit hard by increased unemployment, decide to drop their insurance, the industry’s ‘death spiral’ will accelerate.”

Dr David said young people could still benefit from health insurance after recent changes that made it easier to access private treatment for mental health and drug and alcohol treatment, and elective surgery would be more accessible in the private system as public hospitals struggled to clear waiting lists.

A spokesman for federal Health Minister Greg Hunt said the minister was “very aware of the financial challenges the COVID-19 pandemic is putting on many Australian’s household budgets” and was looking for new ways to improve the affordability and value of health insurance, “including measures to enable greater access to services traditionally delivered in hospitals to be provided in the home.”

The Australian Prudential Regulation Authority is closely monitoring the performance of the sector to ensure that funds remain viable, including the number of policyholders with hospital and general treatment cover.

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