Insurers propose reforms to get young people back

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Private Healthcare Australia has called on the federal government to restore the rebate to 30 per cent for people aged under 40 as a vehicle to increase participation by younger adults.

The association released the proposal in a new report - Levers to increase young adult participation in private health insurance - with chief executive Dr Rachel David saying restoring the rebate for younger Australians would help maintain the balance in the mixed private-public health system.

According to Dr David, the health funds “have now gone as far as they can to manage premium costs at the consumer level and health inflation still remains significantly above CPI. This is why we have developed a well-researched proposal for the government on improving youth participation in PHI, which will help keep premiums down for everyone.”

Speaking on ABC's The Drum, Dr David said the long-standing regulatory requirement for community rating contributed to the challenge of attracting younger Australians into private health insurance.

"In health insurance, everyone pays the same," she said. "We have no difficulty, whatsoever, selling health insurance to people aged 55. Baby boomers are hitting 70 and are at what I call - peak surgery - and are using the system more than ever before but that means younger people coming into the system are having to cross-subsidise this to the tune of around $900 each.

She added, "The perception a younger person has is that they are paying more and getting less."

In response to the suggestion the federal government should remove the $5.9 billion rebate, Dr David said it would only result in a significant fall in the number of Australians with private cover. She said it would ultimately cost governments around $19 billion per year in additional hospital costs.

The new report has identified three reform options, starting with restoring the rebate to 30 per cent for people under 40, which it says would deliver an effective 5 per cent reduction in premium.

Other options include a Fringe Benefits Tax exemption to employer-funded private health insurance premiums for people under 40 and an awareness campaign to promote existing initiatives such as the recently introduced age-based discount and the Lifetime Health Cover policy.

“This is a modest, targeted proposal that will put PHI within the reach of young people who will benefit from healthcare services not readily available to them in the public sector, such as mental health treatment and dental care," said Dr David.

"The proposal will assist teachers, nurses, police, first home buyers who have traditionally held PHI to take the first step to protecting their family’s health and well-being.”

Prime Minister Scott Morrison said the government would "always listen to suggestions but you’ve got to make those decisions consistent with your budget rules and your priorities.’’

He added, “We’re very keen to ensure that we arrest, particularly amongst younger people, the takeup of private health insurance having fallen in recent times."

AMA President Dr Tony Bartone said the proposal had "some pluses and minuses” but that “we need to increase the product value and the product appeal and attractiveness for young Australians."

“Really at the end of the day what’s really important to understand is that the public system is completely overloaded and stressed, and the more and more people that opt out of private health insurance the more and more strain will be put on the system,” said Dr Bartone.

Private Healthcare Australia said its proposals could restore participation in private hospital cover for the 18-39 age group to 38 per cent by 2024. It said the current projection is 32 per cent if no action is taken.

Dr David said the estimated $1.2 billion annual cost of the package would be partially offset by $310 million in savings due to the shift to private funding for hospital care.

“This investment would not only drive increased young adult participation in PHI, but would critically support the public hospital system and stabilise public hospital elective surgery.

“Additionally, it would enable the funds to stabilise premium growth in the industry, and therefore ensure the sustainable coexistence of Australia’s publicly funded universal healthcare system, and its vital private healthcare services,” added Dr David.