Barry Leung, Head of Strategy and Actuarial Services at Defence Health, discusses the affordability of private health insurance (PHI) - which 50% of Australians hold.
Read Barry's paper
Despite the attention rising PHI premiums have received, there is no consistent definition or measure of PHI affordability, partly due to the wide variety of products on the market. Barry walks us through a three-step process, drawing on information from the Housing Affordability Index and Australian Bureau of Statistics, to develop an affordability index.
Applying the index to a number of scenarios, some startling insights are revealed such as: Health insurance is less affordable in the younger and older age groups, and more affordable for people in their 40s and 50s.
Projecting the index over the next 20 years, Barry’s model reveals that health insurance will become less affordable over time: Under the worst case scenario, nearly 25% of the “average” household income will be consumed by a comprehensive combined health insurance policy.
Barry leaves us with questions on how sustainable private health insurance is in Australia, and what can be done to arrest the decline in affordability.