Private health insurance has always been a volatile business, with consumers becoming increasingly critical of price increases that happen like clockwork every year. Since 2013 the average price of private health insurance has increased by roughly 23 per cent according to the Australian Prudential Regulation Authority, and that’s having a profound effect on coverage levels.
It’s not all bad, however. There’s an opportunity for all Australian businesses to step in and benefit from the state of the private health insurance market, while simultaneously helping to improve it.
What’s going on with private health insurance?
To understand the opportunity for businesses, we have to first look at the state of private health insurance here in Australia. We’ve already mentioned a 23 per cent increase in premiums – but that’s not the whole story. Private health insurance rebates have decreased by 4.1 per cent as well, resulting in a total cost increase of over 27 per cent.
There’s an opportunity for all Australian businesses to step in and benefit from the state of the private health insurance market.
What’s more, the government has frozen the brackets for health insurance rebate income testing for the next three years.This is not due to be lifted until July 2018.
This means that for people near the top of their brackets, any income increases will mean a reduced health insurance rebate and increased health insurance premiums.
This hasn’t gone unnoticed by consumers. The level of coverage for private health insurance coverage has decreased for the first time since the introduction of government incentives, and now sits at only 46.6 per cent.
What’s going to happen next for private health insurance?
Unfortunately for the Australian public and those in the private health insurance industry, things aren’t likely to improve in the short term. That’s because as well as forgoing coverage entirely, consumers have been reducing their insurance to decrease the costs. In fact, only 42 per cent of policy holders held full cover in December 2016, down from 45 per cent the year before.
This change has severe and far rippling implications for private health insurance consumers, insurers and even the public health system. Firstly, the quality of cover may worsen for those who decrease their coverage, and they may find that their policy doesn’t cover them when they need it most.
Secondly, insurers may receive less income from those less likely to claim (who are seeking savings), while retaining the cost exposure for older and higher risk consumers who may not want to decrease their cover. This increases the insurers costs, placing more upward pressure on premiums.
Last of all, decreased coverage for illness and injury could result in an increasing strain on the public health system, and a resultant decrease in quality of care. This is just part of the continuing cycle that’s quickly rendering private health insurance in Australia unaffordable for a significant proportion of the population.
The main reason people don’t have private health insurance is because they can’t afford it.
If these trends continue as they are, premiums could increase for the average Australian by as much as 70 per cent between 2014 and 2024. Without intervention from the government and fundamental changes to the private health insurance industry, it may not be sustainable in the long run.
How can Australian businesses benefit?
An Australian Bureau of Statistics survey found that the main reason people don’t have private health insurance is because they can’t afford it. With the cost of housing and living expenses rising rapidly, that’s no surprise.
That’s also why your employees will value a corporate health plan right now. Australians still want health cover, and by giving them what they want, you could help to incentivise your employees, increase retention and make your offering more attractive to new hires.
Your employees will get all the healthcare they need, which will help to create loyalty and improve employee’ health. Healthier employees are up to three times more productive, according to a Medibank Private study.
What’s more, with a corporate health insurance plan your employees could receive more comprehensive cover depending on the plan you choose. Not only is this hugely valuable to your employees, but it will also help to take price pressure off the rest of the private health insurance industry, helping make it more sustainable in the long run.
Corporate health insurance could be the future of the industry, and it could also mean a better future for your business and your employees. To find out more about what a tailored corporate health plan could do for you, get in touch with an insurance consultant at HICA today.