The country’s two largest health insurers will push for lifetime discounts on private cover for young people who sign up before they are 30.

The pitch by Medibank Private and Bupa to Health Minister Sussan Ley is that young people are healthier and claim less, so encouraging them to sign up will help to keep premiums under control by spreading the rising cost of care across a larger base.

The ballooning cost of private health insurance cover, which is rising at four times the rate of inflation, has become a hot button issue.

Frustrated members have responded by downgrading their cover, or swapping insurers. These trends put at risk both the level of care available to members in the private system, as well as the profitability of the $19 billion sector.

In addition to a public survey on health insurance concerns, which has already received over 20,000 submissions, Ms Ley will hear from the industry on how to ensure the industry is delivering value for money. The government spends $6 billion a year subsidising the sector via the rebate. 

‘Reverse’ lifetime cover

Ms Ley has already signalled that policies with exclusions and the rebate on extras cover could be in the firing line.

Bupa health insurance managing director Dr Dwayne Crombie said the insurer would be willing to cop losing the rebate on selected extras, but only if some savings were directed back to the industry.

Dr Crombie told Fairfax Media that about $1.7 billion annually could be saved by cutting back on subsidy of extras identified by Bupa that are “maybe not deserving of the rebate”. Bupa continued to support subsidy of physio and dental, but was less concerned about protecting extras like massage, he said.

Bupa and Medibank, which account for 60 per cent of the market, have both separately proposed a form of ‘reverse’ lifetime health cover [LHC] loading.

The introduction of a lifetime penalty in July 2000 for people who signed up to private cover after their 31st birthday has been one of the most successful measures to boost coverage – about 47 per cent of the population now has private hospital cover. A reverse LHC would deliver a discount on cover that consumers could carry with them for life.

Bupa has suggested those aged between 25 and 30 could capture a 2 per cent discount from when they sign up for each year they are younger than 30. That means a 25-year-old who gets private cover could save 10 per cent a year for the rest of their life.

Participation is key 

Dr Crombie said the proposal would strengthen the principle of ‘community rating’, which prevents insurers from charging different rates based on age, medical history or lifestyle factors like whether someone smokes or is overweight. “The key thing is you’d get a whole lot more people participating and they help to shoulder the burden,” he said. 

Bupa would also argue for the rebate to be returned to 30 per cent of the cost of policies. It has been eroded to 27 per cent following indexation of the rebate to the rate of inflation, rather than the rate of premium rises, which have been running at 6 to 7 per cent.

“Our submission is not aiming to cost the government anything more,” Dr Crombie said.

He acknowledged that even with a discount private cover could be a tough sell to young, healthy people who may not see the need. Affordable policies and a focus on digital health initiatives could help, he said.

Medibank chief executive George Savvides told a finance website that low membership in younger age groups put pressure on premiums. “Increasing coverage would significantly reduce the upward pressure on premiums from an ageing population,” he said.