Under-30s need to be shown the cover is relevant to them and worth their while in terms of their budgets, insurer NIB says

The young and healthy need more convincing about the benefit of taking out private health insurance, and government reforms should show “imagination” and aim at making insurance more “attractive” to that market, insurer NIB says.

In its submission to the Senate inquiry into the value and affordability of private health insurance, NIB said “current sticks and carrots, including the Medicare levy surcharge, lifetime health cover and the private health insurance rebates” were not working well enough to attract healthy under-30s.

“For older consumers, the private health insurance value proposition can be summed up as ‘peace of mind’,” the submission says.

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“For younger people, however, the message is ‘just in case’. Younger people, especially teens and twentysomethings, usually are in the peak of their health and fitness. Major illness and injury are seen as things that happen to other people.

“The private healthcare sector and government need to show flexibility and imagination to do more to not only bring younger people into PHI, we need to make it worth their while in terms of their budgets, and to help them see private health insurance cover is relevant to them.”

NIB proposed amending the lifetime health cover, which now has people paying 2% loading on top of their premium for every year they fail to take out private health insurance after the age of 31. It is designed to encourage them to take out hospital insurance earlier in life and to maintain their cover.

It suggested a “reverse” lifetime health cover to encourage people to get private health insurance before the age of 30 – giving them a 2% private health discount for every year between their age of joining to 30. The discount would be capped at 10%.

“Therefore, the full discount would apply to people joining at age 25 or younger,” NIB said. “The discount would continue until the customer turns 40, after which they would pay the actual premium for their policy and, of course, no premium loading. The cost of providing this discount would be absorbed by each individual insurer, offset by lower claims costs for the insurer’s entire membership.”

Politicians and experts have proposed removing the private health insurance rebate for “extras” that often go unused, such as dental, physio or optical, as a savings measure. But in its submission, Private Healthcare Australia warned that this would be a mistake, in part because such a move would further dissuade young people.

“Extras cover delivers real value to younger people who are less likely to make hospital claims, but who derive considerable value from cheaper access to dental and allied health services in the community,” the association said .

“Without extras cover, we would expect deferred enrolment in insurance, which is then compounded by lifetime loading, and consequently prices many late entrants out of the market.”

NIB agreed, saying: “When a young person’s chances of hospitalisation are low, they need other reasons to be persuaded that private health insurance is relevant to them.”

With private health insurance premiums rising, young people are opting not to take out the cover until they reach 31, or are lowering their level of cover or dropping their policies altogether.



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It is a trend that has the insurers worried. Medibank Private, Australian Unity and ahm have launched ads and articles targeting the younger market around the theme of “adulting”.

But Jennifer Doggett, a fellow at the Centre for Policy Development, who has worked as a political adviser within the federal health department, said it was “deceptive for insurers to imply taking out private health insurance is a mark of maturity or responsibility”.

“All they really want is for young people, who are more likely to be healthy and at low risk of needing to use their insurance, to subsidise the cost of their older, sicker members who are using their policies.

“It doesn’t make intrinsic sense for young healthy people to take out private health insurance. Some people get scared into it without looking at what their situation is and whether the public health system, which is world-class in Australia, might actually meet their needs.

“If young people are making a rational choice, it would be hard for them to justify the need for private health insurance in a well-functioning public health system.”

Stephen Duckett, a health economist with the Grattan Institute, said it made sense as a strategy if insurers wanted to bear the cost of trying new ways to target young people. But he did not believe it would work.

“There are other competing financial demands for young people, and at 25 your average earnings are much lower. People at that age are not thinking about protecting themselves against adverse events that might affect them when they’re 50 or 60.”