Why are Australians ditching health insurance?
Over three million Australians won't be renewing their health insurance this year, according to new research by Finder.
The Finder survey of 1,070 Australians found that 16% of Australians admit they plan to cancel their health insurance policy in 2024.
38% of us plan to stick with the same health insurer, while 15% will switch if they find a better deal.
More women (18%) than men (14%) plan to part with their cover. Young Australians are most likely to abandon their health cover.
One in four (25%) of gen Z and 19% of millennials are planning to dump their private health insurance by the end of the year.
Why are Australians abandoning their cover?
There's one main reason for it: it's expensive.
58% of Australians told Finder that price was the most important factor when deciding on a health insurance provider.
It's also a reason for people leaving in droves. The cost of health insurance has increased by 204% since 2000, according to our analysis.
This is more than double the rate of inflation over the same period (86%). A $1,000 per year policy would now cost you $3,038.
To put this in context, health insurance premiums have risen slightly less than residential house prices, which have grown by 276% since 2002.
To compound the bad news, last week, the government announced that health insurance premiums would go up by an average 3.03% in April, marking the biggest rise in 5 years.
Private health insurers initially wanted a bigger increase. Thankfully, the government rejected the proposal.
Every provider plans a different increase. Medibank premiums will rise by 3.3%, Bupa's will go up by 3.61%, HCF has approved a 2.89% increase and NIB customers will get hit with a 4.1% price rise.
Why are prices increasing so much?
The cost of services
"The cost of medical and hospital services increased 5.9% this year and there's been a 9.6% surge in hospital admissions funded by insurers. This is putting pressure on premiums," said Private Healthcare Australia CEO Dr Rachel David.
Dr David also says premiums are rising due to the Government's 'Prescribed List' of generic medical devices.
"We are paying 30-100% more for common medical devices such as insulin pumps compared to people in New Zealand, the United Kingdom, France and South Africa."
Less young people taking out cover
Despite the introduction of the lifetime healthcare loading a few years ago, older people still tend to take out insurance at a higher rate than younger Australians.
40% of the insured population are over 60. Only 6% are aged between 20-39 and 24% are aged 40-59.
Although health insurance is community rated – meaning you don't pay more based on your age and health – older people are more likely to need healthcare. This places more pressure on the system which in turn drives premiums up.
Health insurers making significant profits
Insurers are still making significant profits though, according to the Australian Medical Association's 2023 Private Health Insurance Report Card.
In 2022–23, gross insurer surplus from hospital insurance was about 18% of hospital premiums paid. This is an increase of $1.36 billion from the previous financial year.
Since last week's price hike announcement, AMA President Professor Steve Robson has called for a new independent body to ensure appropriate oversight of the sector.
The AMA is advocating for a mandatory minimum payout where 90% of every premium dollar goes back to the patient. It currently gives 86% of every dollar spent on premiums back to members in benefits.
This is higher than any other form of insurance – although home and car insurance are arguably in even greater need of reform. Our research shows their prices have increased by as much as 25%.
Not sure if health insurance is worth it? Take our 1-minute quiz.
