Premiums to keep rising as young people shun health funds

The number of young people looking to join health funds has plunged by a third in the last five years in a move that threatens to further drive up skyrocketing premiums.

And health funds and other industry players are calling on the government to introduce discounted premiums for people who join a fund by age 25.

They also want existing age related premium penalties to be delayed from age 31 to age 35 to encourage more young people to take out health insurance.

When young and healthy people don't join health funds it means insurers are loaded up with older and sicker people who are more likely to claim and this pushes up the price which is already rising at four times the inflation rate.

A death spiral of rising premiums and membership drop outs similar to what happened in the late 1990s may have already begun because there have been seven consecutive quarters of decline in health fund membership as a proportion of the population.

The Howard Government tried to solve the problem in 2000 with a policy that imposes a two per cent a year premium penalty on people who delay taking out health cover after age 30.

But evidence is emerging premiums are now so high, averaging $4277 a year, that policy is no longer working.

More than 280,000 people turning 31 this year need to take out cover before July 1 to avoid the 2 per cent a year premium penalty.

Health fund comparison service iselect says the number of 30-31-year-olds using its service to take out cover has plunged by 31% since 2013.

iSelect chief executive officer Scott Wilson said in 2013 there were 50,000 people aged 20-30 searching for information on health cover, this year that has fallen to under 20,000.

"For the first time in June we are seeing more people looking to switch health insurers than take out cover for the first time," Mr Wilson said.

iSelect has observed a steady and worrying drop in the number of customers taking out cover to avoid the Lifetime Health Cover loading deadline.

 iSelect spokeswoman Laura Crowden said: "Australians without hospital cover on July 1 following their 31st birthday who decide to take it out later in life pay a 2% loading on top of their premium for every year they were without hospital cover over the age of 30, up to a maximum loading of 70%, and have to pay it for 10 years.

"LHC compounds, so the longer you are without it the bigger the LHC hit," Ms Crowden  said.

"For example, if you take out cover for the first time at 40 you will pay 50% more for hospital cover which works out to around $500 a year more for an average family policy and around $5000 extra over 10 years."

Australian Prudential Regulation Authority data shows 14,462 people aged under 29 dropped their health cover between December last year and March this year.

While over 8300 people aged 30-34 took out health cover in the same period the number of people in this age group with cover has fallen from a peak of 812,789 in June 2015 to 791,012 in March 2017.

The government set up a health insurance reform process over 20 months ago but so far it has produced only minor changes.

A new simplified array of Gold, Silver and Bronze products appears no closer, cuts to the price of inflated hip, knee and other prostheses have only been minimal and there has been no move to remove junk products from the system.

Health funds want the government to make bolder changes quickly in order to limit next years premium rises which have to be sent to the government for approval later this year.

News Corp Australia

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