Private health insurance dumped by thousands after coronavirus restrictions force service cancellations
Hordes of young Australians are abandoning their private health insurance policies after the coronavirus pandemic left health funds charging people for services many could no longer use.
- Data shows about 11,000 people aged between 25 and 29 abandoned private health insurance
- Drop coincides with the introduction of Government restrictions on services because of COVID-19
Consumer advocates say nothing has been done to address people's concerns with sector
In the first glimpse of the impact of the crisis on the private health insurance industry, the latest data shows almost 11,200 people aged between 25 and 29 dumped their private health insurance in the three months to March 31.
While there were increases in cover among some Australians, such as people aged between 70 to 79, overall the Australian Prudential Regulation Authority (APRA) statistics showed about 9,800 Australians dropped their private health cover over the three month-period, as restrictions set in and the economic consequences of the pandemic began to hit.
The trend of young people fleeing the sector has been a continuing effort for those within the industry and the Government, who fear the healthcare system could find itself in a "death spiral" if young and healthy people continue to abandon cover.
The fall in policies coincided with the introduction of the Government's coronavirus restrictions, and the subsequent economic consequences of the pandemic.
Consumer group CHOICE said the full impact of the crisis on the rate of private health insurance coverage would be seen in next quarter's statistics, with the latest data only taking into account the beginning of the pandemic.
But CHOICE health campaigner Dean Price said even before COVID-19, the statistics were dire.
The coronavirus pandemic saw the Government put a stop to all "non-urgent" elective surgeries to conserve valuable resources like personal protective equipment (PPE) and help the health system prepare for an anticipated influx of patients.
Some routine services like dental and eye care were also cancelled, as clinics prioritised urgent cases or shut down all together.
It meant health funds were charging people for services many were no longer using.
The APRA statistics showed, as a result, there was an almost 8 per cent decrease in hospital treatment benefits compared to the last quarter, while total benefits for medical specialties were also down about 8 per cent.
Health funds bracing for 'backlog' of claims
Private Health Care Australia chief executive officer Rachel David said if the drop in benefits paid meant health funds were sitting on additional profits, they would look to pass that onto members.
"Health funds gave a commitment that any additional funds resulting from COVID-19 related restrictions causing cancellation of some elective surgery and some allied health services would be returned to members," Dr David said.
She said now the Government had given the green light for elective surgeries to resume, the industry was bracing for a surge in claims.
"Health funds must remain well capitalised and prudentially sound throughout and beyond the COVID-19 crisis to fund the backlog of elective surgeries and allied health benefits," Dr David said.
Health funds have acted to soften the financial blow of COVID-19, delaying a scheduled premium increase and reducing or cancelling waiting periods for people to make claims.
Dr David said any Australians who were still suffering financial hardship as a result of COVID-19 were encouraged to contact their health fund directly to discuss other options.
But CHOICE reignited calls for a review into the system, accusing the industry of dragging its feet in passing on profits to consumers.
"Policies that were poor value before COVID-19 have only become worse value as the industry dithers on returning their unexpected windfalls back to their customers," Mr Price said.
"The Australian Government must review the whole system by undertaking a thorough public inquiry."
Australia's health care system has become increasingly unfair, costly and confusing, according to a new report, which has declared the Federal Government is facing an impending crisis which can only be averted by urgent reform.
- The report forecasts an 'exodus' of young and healthy people from the private health system
- Private HealthCare Australia says insurers are struggling to cope with older, sicker patients
- The Grattan Institute says the Government needs to consider industry reforms within 18 months
The Grattan Institute report paints a bleak record of the private health system, saying it has become "riddled with inconsistencies and perverse incentives".
It said if recent trends continue, Australia will find itself in a "death spiral", where young and healthy people abandon private health cover, leaving a larger proportion of unhealthier, older and expensive users.
That will keep forcing premiums up, leading to a further exodus of healthy users, and placing insurers under immense pressure to contain costs.
The Grattan Institute's Health program director, Stephen Duckett, said inevitably, the government would be faced with the question of how to manage such a crisis.
He said government subsidies and financial penalties to encourage people to take out private insurance were already becoming less effective, and the government needed to ask itself whether subsidising private health care was justified.
"The [government] is going to have to step in sometime, probably in the next 18 months or so, and it's going to have to confront the issue about its very policies, its red tape, needs to be addressed and how is it going to do that, and what is the future of the industry," he said.
"Just supporting the private health insurance rebate is not enough, the industry needs reform, it needs reform in terms of the way it's regulated, it needs reform in the way the various parts of the industry react to each other.
'It's a waste of money'
Nathan Wood, 33, works in the music industry and is one of those healthy young people who has recently abandoned private health insurance.
He used to have basic cover, but when he had to pay more than $1,000 in out-of-pocket costs for day surgery, he questioned the value of his insurance.
"I had a procedure done and was talking to one of the nurses when I went in and she asked if I had health insurance, and I said I did, but I had a basic package and it didn't seem to cover anything," he said.
"Pretty surprised to hear that from a healthcare worker herself.
"If it comes up in conversation I fair much refer to it as a waste of money."
The private health insurance industry's peak representative body, Private HealthCare Australia, agreed the exodus of young people like Mr Wood presented a challenge for the sector.
Private HealthCare Australia chief executive Rachel David said just like the Medicare system, private health insurers were struggling to cope with older, sicker patients.
"We know people are not willing to pay much more in premiums than they currently are doing," Ms David said.
"But the shy is when you have this large population that's going through the system and they're requiring more surgery and they're living longer, what the younger person — the younger and healthier person — sees is their costs are going up, and they're not perceiving they're getting anything for it because they're subsidising the older generation.
"Those challenges are well documented and we think it's time to stop talking about the problems and start to implement some practical solution to premium increases to improve access to things like elective surgery."
But she said the private health sector had an important role to play in relieving pressure on public hospitals.
"If more people drop out, I think what you are going to see is increasing pressure on hospital waiting lists, particularly for essential non-emergency surgery like joint replacements," she said.
"We know if participation was to drop from 45 to 30 per cent there would be an additional 10 million people on hospital waiting lists."
Report sparks calls for inquiry into healthcare sector
Consumers Health Forum chief executive Leanne Wells said the report should spur the Government into establishing a wide-ranging inquiry into the sector.
"The deep-seated questions to be asked about private health insurance and its value to both individuals and the system given the long-term challenges it faces are not new," she said.
"The unique arrangements are eroding that, and we need to turn that around."
In a statement, a spokesman for Health Minister Greg Hunt said the Government was already delivering the most significant reforms to private health insurance in over a decade, which will make insurance simpler and more affordable for Australia.
"Work has already commenced with the healthcare sector to identify and implement the next wave of positive reforms for private health care to stay to improve the affordability and value for consumers and ensure the system remains sustainable," he said.
"Australia has one of the best health systems in the world which is underpinned by private and public health care."
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