Despite mounting cost-of-living pressures, younger and healthier people are increasingly taking out private health insurance, according to a report released Tuesday, in a trend that 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 at the same hospital.
Before the pandemic, the proportion of people insured for hospital care was plummeting due to confusing policies offering poor value for money. Especially young people were giving up private coverage.
But the Australian Medical Association’s (AMA) Private Health Insurance Report Card for 2022 found a continued two-year upward trend in uptake, 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 that private health insurance profits have never been higher despite a reduced demand for hospital care as many elective surgeries were canceled during the pandemic.
The findings prompted Australian Medical Association president Professor Steve Robson to call on insurers to provide better value for money to members.
“The fact that there are vast differences in the 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 reason why the AMA asked an independent regulator — a private health care authority — to oversee private health insurance to ensure policyholders get fair value through a mandatory minimum amount that every insurer is required to return to patient care.
Ian McAuley, a researcher at the Center for Policy Development who has undertaken extensive research into the private health insurance sector, said the report reflected the latest quarterly statistics on private health insurance from the Australian Prudential Regulation Authority.
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“The data shows that older people still joined private health insurance, but in the 35-54 age group there was a large increase in uptake,” McAuley said.
“Younger, healthier people have disproportionately joined, a break from previous trends, and that surprises me. Because if you’re young and healthy, those over 55 receive grants, which is the age at which you become a net beneficiary”.
McAuley said numerous reports have found that despite industry reforms to streamline 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 rational at all to get private health insurance in the younger age groups,” she said.
“While it is unclear why young people will join again, speculatively there has been an increased awareness of vulnerability during the pandemic. When people look at the healthcare system and read about all the pressures on it during the pandemic, they think, “I’m going to squeeze out private health insurance to get ahead of the queue.” But they do it without really thinking about where the queue is and whether the system really works. It certainly isn’t rational.
McAuley said governments should stop supporting the private health industry and better fund the public health system, including massive investments in chronic diseases. He said private health insurers should eventually be phased out altogether.
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“Governments need to build trust in the public system and they can do this by investing in primary health care and the National Disability Insurance Scheme to reduce the demands on hospitals,” he said. “We need massive system-wide reform of healthcare funding, especially to support people with chronic illnesses, which is an area that private health insurers really don’t want to know about.”
The AMA, however, said the private system, which covers 40 per cent of Australian hospitalizations and performs two out of three elective surgeries, is key to keeping pressure on public hospitals. But he said there should be a mandatory minimum amount of profit that every insurer is required to pay back to patient care, Robson said.
“Insurers’ profitability has increased in recent years not only due to growth in new members but also cuts to elective surgery during the pandemic,” Robson said.
“With insurers spending on operating expenses and profit margins remaining generously high, we want the money patients pay in premiums to fund their healthcare, not increased profits for insurers. Value for money is crucial now more than ever, with consumers hit by steep increases in the cost of living.”