The price of choice: private health insurance in Australia

Abstract

Private Health Insurance (PHI) is an integral part of the financing of the Australian health care system. PHI is popular and has strong political support because it is perceived to give choice of access and responsiveness. However, in the past increasing premiums have led to a progressive decline in membership. A package of reforms by the Commonwealth Government in support of the private health insurance has reinvigorated the industry over the last three years. Some strategies for achieving a sustainable PHI industry are described. The key challenge is to control claims cost to maintain affordable premiums. Many techniques to do this compromise choice and challenge the very rationale for purchasing the product. Funds and providers will have to establish a new level of relationship to meet this challenge.