Dire sign as thousands of Australians downgrade private health insurance

The ongoing cost-of-living crisis has forced hundreds of thousands of Australians to downgrade something more than half of us have.

Hundreds of thousands of Australians are downgrading their private health insurance as the cost-of-living crisis continues to cripple the country.

Despite a steady increase in people choosing private health insurance, new government data suggests between 2020 and 2023, more than 400,000 people dropped from their gold health insurance coverage to a lower level, with Australians increasingly choosing a silver or bronze tier.

More than 400,000 people have dropped to a lower level of coverage between 2020 and the end of 2023. Picture: NewsWire / Ian Currie

Despite health insurance membership growing, more than 216,000 policies were downgraded in the first half of 2024, according to representative body for private insurers, Private Healthcare Australia (PHA).

Moreover, revenue from private health premiums have dropped by $52m this year, as the private health insurers reportedly start making their submissions for a premium rise next year.

Federal Health Minister Mark Butler is responsible for approving – or knocking back – the increases.

“Our research shows people are very reluctant to let their health insurance go because they don’t want to wait in long queues for public hospital treatment,” PHA chief executive Rachel David told NewsWire.

“Increasingly, many people want to be able to choose their own doctor and hospital for specialist care, too.

“This shows how hard cost-of-living pressures are biting across the country and how desperate people are to retain their health insurance.”

More than half of Australians have private health insurance. Picture: NewsWire / Nikki Short

With 14.9 million, or about 55 per cent of, Australians accessing private health insurance in some capacity, Dr David said it was imperative to reduce as much pressure off the system as possible.

“The private health system takes an enormous amount of pressure off the public health system,” she said.

“Health insurance funds about two-thirds of all elective surgery in the private system, so if people start dropping their health insurance, this will drive thousands of people into busy public hospital emergency departments and to the back of long elective surgery queues.”

The majority of Australians who have downgraded their health insurance coverage are younger, which Dr David believes is a direct result of ongoing cost-of-living pressures.

“There is a belief amongst some that health funds can be tapped as ‘rivers of gold’ to plug budget deficits and cover government and provider financial mismanagement,” she said.

“The evidence shows this is simply not true.

“Like the rest of the economy, funds are facing inflation pressures, and even in the face of these headwinds, continue to provide significant value to their members and play a crucial role in Australia’s health system.

“The trend of policies being dropped or downgraded is very concerning.

“The fact consumers are cutting back their health cover shows just how deep the cost-of-living crisis is biting.

“For 14.9 million Australians, private health insurance is essential and the smallest increase on their budget – be that an increase in rent or utility costs – can have a profound impact on their access to healthcare and in turn our health system.”

Young people are the most likely to reduce their private health insurance coverage. Picture: NCA NewsWire / Christian Gilles

Dr David said without an alternative solution, the cost of health insurance premiums would keep rising.

She said premium costs were constantly rising for an older population with more chronic disease.

“Health funds cannot pay these surging costs without increasing premiums,” she said.

“In the year to June 30, health funds paid 10 per cent more for healthcare than the year before, and premiums rose 3.03 per cent this year.

“Health funds cannot remain viable unless they pass these costs on via premiums and they need to ensure they can continue to pay members’ future claims.”