Private Health Insurance in Australia: Community rating, but at what price(s)?

Connelly, Luke B and Brown, Henry Shelton, III (2010) Private Health Insurance in Australia: Community rating, but at what price(s)?. Journal of Health Care Finance, 36 4: 80-92.

Author Connelly, Luke B
Brown, Henry Shelton, III
Title Private Health Insurance in Australia: Community rating, but at what price(s)?
Journal name Journal of Health Care Finance   Check publisher's open access policy
ISSN 1078-6767
Publication date 2010-06-01
Year available 2010
Sub-type Article (original research)
Open Access Status Not Open Access
Volume 36
Issue 4
Start page 80
End page 92
Total pages 13
Place of publication Frederick, MD, U.S.A.
Publisher Aspen Publishers
Collection year 2011
Language eng
Formatted abstract
Australia has voluntary private health insurance (PHI) markets in which open enrollment and community-rated premiums are mandated by government. Historically, adverse selection in these markets led to a substantial decline in coverage, giving voice to fears about the viability of PHI markets in the longer-run. In order to preserve community rating but improve the PHI pool, the Australian government instituted a novel scheme of age-based penalties (ABPs) for individuals who join a PHI fund later in life. This article computes the price of PHI under the so-called Lifetime Cover (LC) scheme and shows that the LC scheme per se is not appropriately calibrated to prevent another adverse selection death spiral.1 Based on our results, we recomputed age-based penalties that would result in a fair price of PHI for all age groups. The premium multipliers we derive suggest a premium ratio of 10:1 for the oldest and youngest joiners. Our premium multiplier sequence is well-approximated by a linear ABP scheme that is approximately three times that of the present LC scheme for older joiners. © 2010 Aspen Publishers.
Keyword Community rating
Lifetime Cover (LC)
Private health insurance (PHI)
Q-Index Code CX
Q-Index Status Confirmed Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: Non HERDC
School of Medicine Publications
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Created: Fri, 03 Dec 2010, 11:02:39 EST by Chesne McGrath on behalf of Medicine - Royal Brisbane and Women's Hospital