The pasts and futures of private health insurance in Australia

Abstract

By 1997 only about 30% of the population in Australia was covered by private health insurance. Using what has been labelled a ‘carrot and stick’ approach, the government implemented three policies to alternatively entice and coerce Australians into joining private health funds. These were the Private Health Insurance Incentives Scheme, the Private Health Insurance Incentives Act 1998 and lifetime community rating. They were of two basic types: financial incentives based upon subsidies and punitive taxation, and ‘equity’ incentives which mitigated premium rating restrictions. At various times prior to and since the implementation of these policies, there has been much and varied prediction of both their impact on demand for private health insurance and the likely result if they had not been implemented. This paper follows up these predictions to determine which if any were borne out, or were likely to be. It also adds to these predictions its own estimates of future membership of health funds now that lifetime community rating has been introduced by using a non-deterministic Autoregressive Integrated Moving Average process. Among the results of the study is the conclusion that, if the long-term decline in membership witnessed in the 1990s resumes, the government has most likely bought itself a decade of respite before demand for private health insurance falls once again to levels seen in Australia.