| Publication: | The Australian |
|---|---|
| Date: | 18 May 2009 |
| Section: | Health |
Siobhain Ryan, Analysis | May 18, 2009
PRIVATE health insurance is at a tipping point, fund membership at risk of reversing this year for the first time since 2006.
That's the bad news. The good news is the decline should be smaller and slower than the Opposition has warned.
Budget cuts won't help the sector, but are less damaging than last year's increases to the Medicare levy surcharge threshold. The Government gave 250,000 Australians a reason to drop or avoid hospital cover by removing the tax penalty faced by non-insured singles and couples earning up to $70,000 and $140,000 a year respectively.
This year, the Government announced cuts to the private health insurance rebate that will affect eight times the number of fund members, but should see far fewer abandon the sector.
Singles earning more than $90,000 a year and couples on more than $180,000 will be hit by 25 per cent to 50 per cent hikes in the Medicare levy surcharge, making it more expensive to drop hospital cover than to keep it.
The stick and carrot approach reflects the stated preference of Labor and the Coalition for a balance between private and public funding for the health system.
As the population ages, the strain on the public purse has increased, raising the incentive for governments to encourage self-provision.
Both sides of politics have, despite their differences, left the third and most effective pillar of the private health insurance industry supports intact: the "loading" added to premiums for each year uninsured after age 31.
Australia's only listed health fund, NIB, believes policy lapse rates will be "minor", and far less than the fallout from last year's threshold increase.
But rival BUPA predicts the sector's revenues will still be squeezed, as middle- to high-income members downgrade their level of hospital cover, or drop their "extras" policies, since they can do both without risk of the surcharge increase.
Selective leaking of official data on membership trends, ahead of its delayed online release, shows how sensitive the issue is for Government.
In absolute terms, the Private Health Insurance Administration Council figures show membership increased by 45,000 in the March quarter, but in percentage terms, membership is beginning to look shaky.
Growth in membership as a share of the total population has halted for the first time since mid-2006 at 44.6 per cent.
The September and December quarter data reported percentage increases at 44.7 per cent and 44.8 per cent respectively, but those rises have been revised out of existence in the latest figures.
Hospital and "extras" policies have so far held their own against the global economic crisis.
But any slip in membership will give the Opposition ammunition against rebate cuts.
