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September 04, 2018 at 07:29 PM
Australia’s millennials have found another reason to resent cashed-up baby boomers: they’re subsidizing their health care.
Fed up with paying for insurance that mostly benefits older patients, young Australians are quitting private health cover in droves. For many of them, it’s a no-brainer: premiums have soared as much as 70% in the past eight years. The amount of insured people in their mid-to-late twenties alone has dropped 14% in the past three years.
(Related: Health Mandate Softens)
Millennials are switching to public health care — known as Medicare — as the system prepares for an onslaught of retirees: around a fifth of Australians will be aged over 65 by 2040. With health costs continuing to rise amid stagnant wages growth, that leaves not only insurers exposed to funding pressures, but the economy as well. As health’s burden on the budget grows, the government is hoping that its forecast return to surplus in 2020 won’t be a one-off.
“If you’ve got an increasing proportion of the population reliant on Medicare, in particular younger people, then that obviously puts pressure on the funding,” said Shane Oliver, chief economist at AMP Capital Investors Ltd. in Sydney. “That puts pressure on the budget deficit.”
Australia’s health insurance is structured so that members are pooled into a so-called risk equalization system that requires healthy young people to support the claims of older patients. Older persons tend to claim more frequently than younger, on average.
The industry’s changing dynamics can be seen in Australia’s listed health insurance firms. Medibank Pvt Ltd., the nation’s largest provider, said the outlook for the local industry remained flat when it posted a slightly lower profit in August. Its rival NIB Holdings Ltd. is seeking to diversify away from its flagship health insurance business.
