Consumer groups oppose cheaper health insurance

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CHOICE and the Consumers Health Forum are opposing cheaper health insurance for younger Australians and their families.

Their opposition to the policy could cost Australian families the opportunity to save $300 per year on their annual private health insurance premium.

In its submission to the Senate inquiry into the legislation enabling implementation of the Turnbull government's private health insurance reforms, CHOICE recommends age-based premium discounts for hospital cover are removed.

"Rather than helping people who can’t afford health insurance, the main effect of this measure will be to further entrench a two-tiered system as only people with the means to purchase PHI will benefit and are then protected later in life by avoiding the Lifetime Health Cover loading," said CHOICE in its submission.

In its submission, the Consumers Health Forum says, "Whilst we understand the need to bring young and potentially healthier people into the insurance pool this measure undermines the principle of community rating."

The government announced a raft of reforms to private health insurance in October last year. The reforms are designed to simplify private health insurance products for consumers and address concerns over affordability.

One of the reforms will enable private health insurers to offer an aged-based discount of up to 10 percent for people aged under 30.

According to the Department of Health, "Insurers will be able to offer premium discounts on hospital cover of two per cent for each year that a person is aged under 30, to a maximum of 10 per cent for 18 to 25 year olds.

"For example, this means that a young person purchasing a policy with a premium of $1,500 could save up to $150 per annum with a discount up to 10 per cent, and a young family purchasing a policy with a premium of $3,000 could achieve a saving of up to $300 per annum."

It added, "The viability and sustainability of the private health insurance system relies on a broad membership base, including participation by young Australians who generally have lower claiming rates than older policy holders. Encouraging more young people to take out private health insurance will support our community rated system by keeping premiums affordable for all Australians."

In its submission, Private Healthcare Australia says market research has revealed a pent-up demand for private health insurance in people aged under 30. It says the age-based discount will help "put private health cover in the reach of younger people."

According to the Australian Prudential Regulation Authority, currently around 45 percent of people aged 30-34 have private health insurance, compared to 30 percent of people aged 25-29.