The Australian Medical Association is warning the private health industry is at risk of falling apart if rates continue to rise.
A new report has found nearly 2 million Australians are downgrading or dumping their private health cover because of increasing costs every year.
Health Minister Greg Hunt said the average premium rise of 4.84 per cent was the lowest it’s been in years, but AMA president Michael Gannon said the rate rises are surpassing people’s annual income.
“Look, I mean, Minister Hunt’s correct to say that the rate is the lowest it’s been in ages this year, and that is the average rise and the top rise is not much more than that,” he told ABC Radio Darwin.
“But let’s not forget that people’s wages, if they’re lucky, are growing more like 1.5 per cent, we’re seeing a rise in unemployment. In many parts of Australia, we’ve got an economy that’s going okay, but if you don’t own a house in Sydney, then perhaps you’re not seeing some of the rises that the economists say we might be seeing.”
He said many of the health funds were propping themselves up on extras to entice healthy people by giving them cover for alternative treatments.
These healthy participants are less likely to claim for expensive surgeries and hospital cover, so the fund gets their annual fee without having to fork out for costly procedures.
However, the large number of people opting out of their health cover this year puts more pressure on private insurers to pay up without having their kitty refilled.
“The insurance pool only works if there’s a pile of healthy people who might infrequently call on their health insurance,” Dr Gannon said. “If we end up with a pool of insured that are only the people with chronic disease, the whole show falls apart.”
The government is currently running a Private Health Ministerial Advisory Committee to look into creating a more streamlined version of private health cover.
The AMA understands the new system could run on a tiered platform of Gold, Silver and Bronze cover so people better understand what they’re covered for and don’t overpay on extras they don’t use.
Many people misunderstand their insurance and go into hospital believing they are covered for something they’re not.
“What our problem is that so many people think they’ve got a level of cover to be looked after in the private system, and when it finally comes time to use their insurance after years of loyally paying their premiums, they get told that’s not covered,” Dr Gannon said. “That’s simply not good enough.”
Lauren Crowden from iSelect says nearly a third of baby boomers haven’t made changes to their private health cover in the past 10 years, meaning many are paying for benefits they don’t even need.
“The biggest mistake we see with older customers is they stay with the same private health insurer for many years and don’t update or review as their health needs change,” she told Starts at 60.
“For older customers we know affordability is becoming more on an issue for private health.”