NCPA - National Center for Policy Analysis

Australians Encouraged To Buy Private Insurance

June 30, 2000

In the biggest private health insurance push in the country's history, the government aims to lock Australians into lifetime private health insurance coverage, reports the British Medical Journal. It is the culmination of a "stick and carrot" approach to encourage the affluent to leave the public health system, called Medicare, and return to the private health insurance funds that have declined since the 1950s.

  • Lifetime coverage replaces the current system of community rating -- in which all policyholders are charged the same regardless of age or risk -- with a system in which private insurance customers will be charged 2 percent more for each year they are over age 30, up to a maximum of 70 percent for those age 65 and over.
  • The "carrot" is a 30 percent rebate on health policies, which range in annual price from about £150 ($225) for the most basic hospital cover to £780 for the most inclusive, if people signed up before the July 1 deadline.
  • The refund has proved controversial, costing the government an estimated £1bn for nearly a third of premiums.

In the 1950s, 70 percent of the population had private health coverage, but that fell to 30.1 percent in December 1998. Since the new policies began to be implemented 18 months ago, the privately insured total has risen to 33.5 percent or 6.4 million Australians.

Source: Christopher Zinn, "Australia moves to boost private health cover," British Medical Journal, July 1, 2000.


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