The Australian government is hoping millennials will help save private health insurance

Photo: Agung Parameswara/ Getty Images.

The Turnbull government is hoping to enlist millennials to tackle skyrocketing private health insurance premiums, offering people under 30 a range of incentives if they sign up.

Health minister Greg Hunt has labelled the change the biggest reforms to health care in 15 years and “hopes” premium increases, which have risen by around double the rate of inflation for a decade will stabilise as a result. Premiums have now jumped by an 5.6% annual average since 2010.

The government is attempting to arrest falling private health insurance levels among under 30s, which would also help prop up the heavy demand from an aging boomer generation.

Under the changes, people aged between 19 and 29 would get a 2% discount on their premium annually up to a maximum of five years (10%). The discount will last until age 40.

Currently, the government has a 2% annual loading on premiums for anyone who fails to take out a premium after 30.

But the government will also end rebates on a range of complementary therapies popular with younger people, such as pilates, yoga, tai chi and naturopathy, following a review into the sector by the Department of Health earlier this year.

The changes will also see health insurance offers categorised into Gold, Silver, Bronze and Basic levels in a bid to make it easier for consumers to compare policies.

Access to mental health services will also be improved and waiting periods scrapped, like other insurances, so people will have the option of increasing their excess to $750 for singles and $1500 for families in return for lower premiums.

And in a big win for the insurance industry, the prices they pay for prostheses are set to be cut, responding to concerns from the sector that they were being overcharged prosthetic limbs in private hospitals. Minister Hunt estimates the savings for insurers at $1 billion over four years.

Bupa health insurance managing director said Dr Dwayne Crombie said the changes will make private health insurance more appealing and affordable.

“For far too long, Australians have unjustifiably paid the highest prices in the world for medical prostheses. We thank Minister Hunt for helping address this critical issue and guarantee our customers that we will pass on every cent saved through lower health insurance premiums,” he said.

Dr Crombie also praised the focus on mental health and the medal-style ratings system for policies.

“The mental health safety net is an important first step, but the work the minister has foreshadowed to reduce low-value day care admissions and other low value care is also critically important,” he said.

Matthew Koce, CEO of peak body HIRMMA, representing 24 not-for-profit and member-owned health funds, said prostheses accounts for around 14% of the cost of an average hospital policy.

“That is why we are pleased to see next year’s prostheses prices cut by $188 million,” he said, estimating an average saving of around over $34 per policy.

“We are pleased that the minister for health has listened to the concerns of the private health insurance industry and acted to place the interests of consumers before the profits of large international medical device manufacturers,” he said.

“We also welcome the efforts to deliver further savings for consumers by improving informed financial consent obligations in public hospitals and improving transparency to address excessive out of pocket charges imposed by some medical specialists.”

Central to the problem faced by the government is that hospitals are charging two prices to patients — a lesser amount for public patients, while cross-subsidising the public system with higher charges for private patients.

Matthew Koce said the minister’s changes are welcome relief for more than 11 million Australians with private health insurance.

“The fact that the Minister for Health has recognised that in order to put downward pressure on premiums, action must be taken to reduce service provider costs in key areas, such as medical specialists, hospital operators and prostheses is welcome,” he said.

Speaking on ABC radio’s AM program today, Health Minister Greg Hunt said the changes were about making private health insurance “more affordable and easier to understandable” but he would not guarantee that premiums increases would reduce as a result of the government’s changes.

“My hope is that we’ll have the lowest premium changes in over a decade,” he said.

The government signs off on premium increases as the regulator.

“These are matters for the private sector, but they have guaranteed that they will pass through every dollar,” Hunt said.

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