Despite rising cost of living pressures, younger, healthier people are increasingly taking out private health insurance, a report published on Tuesday found, in a trend one health policy expert described as “not rational”.
The report also found a variation of up to $700 in rebates paid to patients of different funds undergoing the same procedure performed by the same doctor in the same hospital.
Prior to the pandemic the proportion of people with insurance for hospital treatment was plummeting thanks to confusing policies that offered little value for money. Young people especially were opting out of private cover.
But the Australian Medical Association (AMA) Private Health Insurance Report Card for 2022 found a continued two-year upward trend in membership, with the proportion of people with hospital insurance rising from 43.6% in June 2020 to 45.2% by June 2022.
The report also found private health insurer profits have never been higher despite a reduced demand for hospital treatment due to the cancellation of many elective surgeries during the pandemic.
The findings prompted the president of the Australian Medical Association, Prof Steve Robson, to call on the insurers to provide better value for money to members.
“The fact that there are big differences in amounts paid for the same doctor performing the same procedure is frustrating for consumers,” Robson said.
“This variation in out-of-pocket expenses is one of the reasons the AMA has called for an independent regulator – a private health system authority – to oversee private health insurance to ensure policyholders are getting fair value for money through a mandated minimum amount that every insurer is required to return to patient care.”
Ian McAuley, a research fellow at the Centre for Policy Development who has undertaken extensive research into the private health insurance industry, said the report reflected the latest quarterly private health insurance statistics from the Australian Prudential Regulation Authority.
“The data shows older people have still been joining private health insurance, but in the age bracket of 35-to-54 there has been a big gain in membership,” McAuley said.
“Younger, healthier people have been joining disproportionately, a break from previous trends, and that surprises me. Because if you’re young and healthy you’re subsidising anyone over the age of 55, which is the age at which you become a net beneficiary”.
McAuley said numerous reports have found, despite industry reforms to simplify private health insurance policies, consumers are still confused by their insurance coverage and are paying more than ever for less coverage.
“I don’t think it’s at all rational to be taking up private health insurance in the younger age brackets,” he said.
“While it’s unclear why younger people are joining again, speculatively there has been increased awareness of vulnerability during the pandemic. When people look at the health system and read about all of the pressures on it during the pandemic, they think ‘I’ll take out private health insurance to get in front of the queue’. But they do so without really thinking of where the queue is, and whether the system really works. It’s certainly not rational.”
McAuley said governments should stop supporting the private health industry and should better fund the public health system, including massive investment into chronic disease. He said private health insurers should eventually be phased out altogether.
“Governments need to feed confidence in the public system and they can do this by investing in primary health care and the National Disability Insurance Scheme to reduce demand on hospitals,” he said. “We need huge, system-wide reform of health funding particularly to support those with chronic illness, which is an area private health insurers don’t really want to know about.”
The AMA, however, said the private system, which covers 40% of Australia’s hospitalisations and performs two-out-of-three elective surgeries, is crucial to keep pressure off public hospitals. But said there should be a mandated minimum amount of profit that every insurer is required to return to patient care, Robson said.
“Insurers’ profitability rose in recent years not only because of growth in new members, but also elective surgery cutbacks during the pandemic,” Robson said.
“With insurers’ expenditure on management expenses and profit margins remaining generously high we want to see the money that patients pay in premiums fund their health care – not increased profits for insurers. Value for money is critical now more than ever, with consumers being hit with high cost of living rises.”
