Health insurance could consume 20% of Aussie family income by 2051
The spiralling costs and perceived value of health insurance continues to be a major concern for many Aussies.
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Is it worth it? Can you afford not to have it? What would you do if you became really sick and didn’t have the safety net of private health insurance? These are all questions people need to consider amid the increasing costs of living in all areas of life.
If insurers continue to increase their costs at the same rate as they currently are, and wages growth remains minimal, the Australian health insurance system could rapidly start to resemble that in United States, where American households already spend than 10 per cent of their income on healthcare.
New research from financial comparison site Finder.com.au, estimates that Australian families are currently spending 8.8 per cent of their disposable income on health cover. More worryingly is Finder.com.au’s prediction that this figure could jump to 20 per cent of household income by 2051.
Following the official health insurance price rise announcements by insurers at the end of January, Finder.com.au’s latest research showed that insurance premiums have increased on average by 5.42 per cent every year since 2010 – but wages have only grown by an average of 2.86 per cent each year.
According to Bessie Hassan, Finder.com.au’s money expert, the steadily increasing cost of health insurance is putting a huge financial strain on Australian households, with the average policy costing $392 a month. The average Australian family’s disposable income spent on health insurance could reach 10 per cent by as early as 2023 and 20.2 per cent by 2051, if health insurance premiums continue to grow faster than wages at their current pace, Hassan said.
“Although this year’s premium increase is the lowest it has been since 2001, it’s still double the rate of wage growth. If increases continue at the current rate, health cover will become increasingly unjustifiable for many Australian families – especially since the average policy is forecasted to reach $2,354 in 2051.”
The cost of health insurance was a key theme for Labor Leader Bill Shorten in his first major speech of the year. ABC News reported last week that Mr Shorten had attacked insurers in an address to the National Press Club, saying private health insurance was too expensive and excludes too much.
“Prices are up, profits are up, quality and value down. Australians are paying a lot more for their health insurance policies and getting a lot less,” Shorten said in the ABC News report.
The Opposition Leader said that less than nine per cent of private health insurance policies had exclusions ten years ago, but that now, some 40 per cent contained exclusions. “These exclusions, often hidden in the fine print, mean that people are paying for insurance without being covered,” he said. “It is turning health insurance into a con.”
The managing director of private health fund Bupa, Dwayne Crombie, was amongst a number of insurers to refute Shorten’s claims.
“I have no problem with [Mr Shorten] pointing the finger at everyone around affordability. But I don’t drive the costs, I have to pay for what doctors think are reasonable. We respond to demand, we don’t generate demand,” Crombie told the Australian Financial Review.
Medibank chief executive Craig Drummond agreed, telling the Australian Financial Review the challenge was making the Australian health sector sustainable “and to do that requires real reforms”.
While the insurers and politicians continue their slinging match about what should happen, Aussie households are bearing the brunt of rising healthcare costs – and it doesn’t look like the situation will improve any time soon.