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Employers should pay workers’ private health insurance: health funds

Jessica Yun
(Source: Getty)
(Source: Getty)

Employers should do their part to encourage young people to take up private health insurance, according to a new policy package proposed by Australia’s private health care body.

According to one of the proposals outlined in Private Healthcare Australia’s report, submitted to the government, bosses should be given tax breaks if they pay for the health insurance for workers under 40 years old.

The proposals aim to reverse the “death spiral” of an ‘unfair’, ‘costly’ and ‘confusing’ private health insurance industry that has seen the proportion of members aged 20-39 year olds fall from 40 per cent to 34 per cent in the last five years.

Young people are turning their backs on private health cover due to the high costs, irrelevant cover, and the premiums that have risen out of step with wage growth and inflation.

In order to turn this around, PHA is offering three proposals:

  1. Introducing a Fringe Benefits Tax exemption applicable to private health insurance premiums for employees under the age of 40;

  2. Restoring the rebate to 30 per cent of PHI premiums for participants under the age of 40, effectively delivering an additional 5 per cent reduction in PHI premiums for younger members;

  3. Raise awareness of existing initiatives, such as the newly introduced aged-based discount; awareness of the Lifetime Health Cover policy; and encouraging conversations about insurance around major life transitions such as purchasing a first home.

Taking action on these three policy proposals would raise the participation in hospital cover of those aged 18-39 to 38 per cent by 2024, said PHA CEO Rachel David. Without action, participation rate would fall further to 32 per cent.

The proposal package would cost the Commonwealth $1.2 billion in the 2024 financial year, but is expected to be partially offset by roughly $310 million in savings “due to the shifting of privately insured members to private funding for their hospital care”.

Further declines, destabilisation ahead without reform

According to PHA, lack of action from the government will be “destabilising” for the insurance sector.

“Without intervention this trend is expected to continue, and hence lead to further declines in private health insurance participation particularly among people aged 18-39,” the report said.

“This would risk destabilising the foundations of a private health insurance system built upon the principles of community rating and risk equalisation, and have flow-on effects to both the public healthcare system (e.g., by driving increased need for beds and further increasing waiting times for elective surgery in public hospitals) and the privately insured pool (e.g., through increased premiums for remaining participants).”

These proposals would not only bring back young people to the private health insurance sector, but would also support the public hospital system and “stabilise” public hospital surgery waiting lists.

“Additionally, it would enable the funds to stabilise premium growth in the industry, and therefore ensure the sustainable coexistence of Australia’s publicly funded universal healthcare system, and its vital private healthcare services.”

In July, Grattan Institute health program director Stephen Duckett said Australia’s health care system needed reform.

“The current system is an unhappy mix, in which private care complements the public system by offering additional services and dimensions otherwise not publicly available, but also to some extent competes with the public system by offering substitute services.”

‘Health insurers have done all they can’

David said that health funds have “gone as far as they can” to manage premium costs for consumers.

“We’ve really reached the end of what we can do on our own without strong cooperation from government to assist us in reducing costs and to rebalance the carrots and sticks for younger people to promote diversity in the system,” David told The Australian.

New rules in the private health insurance sector kicked in on 1 April this year, which saw a new system of categorising hospital products into ‘Gold’, ‘Silver’, ‘Bronze’ and ‘Basic’; the option to increase excess for lower premiums; discounts on premiums for those under 30 depending on age; and more.

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