Young people can’t afford private health cover during coronavirus pandemic

Younger Australians are opting out of private health cover due to a lack of affordability, new figures show.

Young Australians are turning their backs on private health cover during the coronavirus pandemic, with the prudential regulator warning a lack of affordability will further deteriorate conditions within the industry.

Statistics from the Australian Prudential Regulation Authority (APRA) show premium revenue within the June quarter fell 1.4 per cent compared with the previous quarter to $6.1 billion, largely off the back of declining membership numbers.

APRA said aside from lower premium revenue intake, the private health insurance industry had also been impacted from higher claims payouts and increased management expenses.

Medibank Private is one of Australia’s largest private health providers. Picture: Scott Barbour/Getty Images

Claims rose 2 per cent to $5.4 billion, while management expenses were up 15.8 per cent on the March quarter.

The negative impacts have caused the annual net profit within the sector to fall by 45.3 per cent compared with June 2019.

However, quarterly net profit for June was $159.3 million, reversing the $53.9 million loss experienced in the previous quarter.

APRA said falling membership was predominantly within younger demographics who couldn’t afford premiums.

Bupa is another of Australia’s largest private health providers. Picture: Supplied.

“The industry continues to face the challenge of falling membership among younger

people and growing membership in older age groups, with hospital membership for the 20-49

age group declining by 55,646 persons due to worsening affordability and the associated value proposition of PHI products for younger population,” APRA said.

“Policy suspensions due to COVID-19, some of which may be reinstated in later periods, also contributed to the reported membership decline.”

Private Healthcare Australia chief executive, Rachel David said the updated data put to bed any suggestion the industry was reaping benefits from COVID-19 restrictions stopping claims payouts for surgeries.

“No industry sector is immune to the impact of the COVID-19 pandemic,” she said.

“This is a timely reminder that we must bring costs down to keep premiums affordable.”

Dr Rachel David, Chief executive of Private Healthcare Australia says premiums need to remain affordable. Picture Kym Smith

APRA said demographic trends are contributing to the increase in average claims paid out, as older age groups generally claim more than younger members.

“In the year ending June 2020, claims per policy rose 3.8 per cent, further exacerbating the affordability issue in the industry,” APRA said.

Dr David also said the pandemic will likely cause a higher amount of claims for mental health related issues.

“Health funds expect to fund many more high claims for mental health in 2020 as a result of the pandemic,” she said.

The net insurance margin for the June quarter declined by 4.5 basis points to negative 0.4 per cent, the lowest margin position in the past 12 years.