Young people and families dumping their health cover

THOUSANDS of young Australians have dumped their health cover in recent months due to soaring costs.

HEALTH fund membership has plunged with nearly 13,000 people dumping their cover in the three months to December as young adults and families quit the product.

The drop came even before health funds announced their latest twice-the-inflation rate premium hike of 3.95 per cent due to take effect in April.

This also follows a hike in out of pocket expenses when people use their insurance.

More than 10,000 singles and families aged 30 to 34 dumped their cover in the last three months of 2017.

This is alarming because it means government’s Lifetime Health Cover penalty that hits people with a two per cent a year surcharge on their premiums if they don’t join a health fund by age 30 is no longer working to force people to take out insurance.

These younger healthier members are needed to cross subsidise the highly expensive older members in health funds.

News Corp reported recently that a tax penalty that forces people to buy health insurance has also lost its sting.

Health fund premiums have soared so high it’s now cheaper for many to pay the tax penalty than buy insurance.

Health fund membership has declined almost 2 per cent Picture iStock.

Health fund membership has dropped by almost two per cent since June 2015 when it peaked at 47.4 per cent of the population, now just 45.6 per cent have health insurance.

Latest government data also shows the average medical out of pocket expenses faced by health fund members has risen by 31.7 per cent.

The rise in out of pocket expenses is due to high surgeons charges and the government’s continuing freeze on Medicare rebates for specialist services.

Health fund profits were up 7.3 per cent to over $1.857 billion but the industry denies this means there is a pot of gold in the industry even though some funds have posted a return on equity of 29 per cent, better than the banks.

The government late last year announced a rescue package for the industry and slashed by $1.1 billion the amount health funds have to pay for medical devices like hip and knee replacements.

From April 2019, health funds will be able to offer discounts of up to 10 per cent for those under the age of 30 to encourage them to join up.

Funds will no longer get a government subsidy for providing rebates for natural therapies.

Dr Rachel David says there is no pot of gold in health insurance. Picture supplied.

Health fund lobby group Private Healthcare Australia said the latest figures “confirms that health funds are delivering value for their members”.

“Health funds are consistently paying out the highest percentage of the premium back to customers of all insurance types – an average of 86c in the dollar (it has been above 85% for 15 years). This compares with 67c for property insurance and 64c for general insurance,” Private Healthcare chief Dr Rachel David said.

“There is only one reason premiums increase and that is because health funds are paying for more healthcare … such as the cost of medical devices, hospital accommodation, and provider fees charged by medical specialists and allied health providers.”

While public hospitals have just been guaranteed a 6.5 per cent funding increase through the COAG process this year’s average increase for Private health insurance is 3.95 per cent, she said.

A spokesman for Health Minister Greg Hunt said the Turnbull Government is committed to supporting the 13 million Australians that have taken out private health insurance.

“Our package of real reforms have just delivered the lowest annual premium change in 17 years. At 3.95 per cent, it’s far lower than every year under the Rudd and Gillard governments,” he said.

“In comparison Labor’s policy is nothing more than a recipe for higher prices, bigger out-of-pockets and policies with less coverage,” he said.

Opposition Leader Bill Shorten has pledged to cap health fund premium rises at 2 per cent for two years if he is elected saving families an average $340.

Health funds have attacked the plan which could be at odds with rules that require funds to hold a certain amount of money in reserve to pay for rebates.

Last time a government imposed a limit on health fund premium rises (0 per cent in 2001) premiums rose by 6.8 per cent when the freeze ended.

Opposition health spokeswoman Catherine King said the latest official figures showed private health insurers were “cashing in on the back of Turnbull’s protection racket – raking in record profits in 2017 while patient out-of-pocket expenses soar”.

“Australians are paying more than ever for private health insurance, and still being stung when they try to use their cover. Families are paying an average of more than $1,000 every year for private health than they were when the Liberals came to power in 2013,” she said.

Originally published as Young people and families dumping their health cover