The forthcoming round of private health insurance (PHI) premium increases — touted by the government as the lowest in a decade — will mean premiums have risen nearly 80% since 2008, far ahead of inflation and a good demonstration of why PHI companies have racked up big profit increases in recent years.
Health Minister Greg Hunt has been touting a likely premium rise of between 3.5% and 4%, around twice as much as recent consumer price index (CPI) growth. An increase of that magnitude will mean that, since 2008, PHI premiums across the industry have averaged 78% growth. It will translate into an increase of about $750 a year for family insurance policies, which cost on average $18,700 a year.
That sort of growth is more akin to energy price rises and the rise in urban house prices in Sydney and Melbourne than ordinary household goods and services.
For example, if bread and milk had risen at the same rate as PHI, you’d be paying $3.60 for a two-litre, supermarket-brand milk instead of $2, and $1.78 instead of a dollar for a supermarket loaf of bread. A basic train ticket around Melbourne would cost $53.60 a week rather than $43. Back in 2008, a decent 50-inch plasma TV cost $2850. If PHI-style inflation had applied, it’d cost over $5000 now. Instead, you can get the same model in LED with ultra high-definition for under $1100.
That’s a key aspect of PHI: over the last decade insurers have reduced the range of coverage they offer, and many took to offering “junk policies” that offered minimal claims payments to customers. In contrast, other major household budget items now offer radically more for less. In 2008, a new top of the line Mazda 3 cost just over $30,000. If car manufacturers had jacked up their prices by the same rate as PHI, the same model would cost nearly $55,000. Instead, you can get a top-tier Mazda 3 for $28,000 — and it’s significantly bigger, safer and more fuel efficient that its predecessor, not to mention with far more features. A Mazda 2, which is now around the same size as an older Mazda 3, costs around $23,000.
Ditto with phones. A new iPhone SE with 16GB in early 2009 cost around $750 to buy outright; now the base model iPhone with far more features costs $200 less — compared to $1330 in 2018 PHI terms. And the same with air travel. A trip to London on Qantas would have set you back $1800-$2000 in 2008, or $3600 in PHI 2018 terms; the same fare is currently on sale for $1300.
What all these products have that PHI doesn’t have, of course, is value. Particularly for young people, PHI offers literally nothing except an exemption from the Medicare surcharge, and is hardly value for money even for families. In fact, for young people, health insurance is a double drain on their wealth. If they are foolish enough to have PHI, they are effectively subsidising baby boomers’ and generation X’s healthcare in what is yet another example of the ongoing intergenerational economic leaching that older Australians (like me) are inflicting on young Australians — not to mention lining the pockets of PHI investors who have enjoyed a profit bonanza in recent years.
But worse, because PHI is propped up by taxpayers, it adds over $6 billion a year to the Commonwealth’s deficit via the private health insurance rebate — $6 billion a year plus interest that future generations of taxpayers will have to pay off to subsidise the healthcare of generations who had more affordable housing, little or no tertiary education debt and cheap coal-fired power.
It’s not quite intergenerational theft on the level of our climate inaction, but it’s a serious assault on the finances of all Australians.
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