Australia’s rigid gold, silver and bronze tier system makes it tough for funds to design sustainable, affordable top hospital products that still meet mandatory requirements.
Gold policies must include mental health and maternity care, pushing up costs and making it harder to attract anyone under 50 to private cover.
Industry body Private Healthcare Australia raised the alarm at the Financial Review Insurance Summit, labelling the exodus from premium hospital policies a fundamental threat to the sector.
Concern centres on whether insurers can keep offering comprehensive cover without pricing working-age members out.
Industry data now shows that the number of people holding gold hospital policies has fallen below those on silver cover, reversing a long-standing pattern.
Pressure intensified after the latest federal budget cut a significant portion of the private health insurance rebate for policyholders over 65.
Government modelling projected about 44,000 people would drop private cover under the change.
Private Healthcare Australia’s estimate is higher, suggesting 53,000 could quit insurance altogether and around 200,000 might downgrade to cheaper products.
Reduced uptake of top-tier cover is likely to shift more older and higher-risk patients into the public system, adding strain to already stretched hospital resources.
Many people who drop or downgrade their policies are expected to rely on public services instead, increasing waiting lists for elective surgery and specialist care.
The trend deepens the divide between what private health funds are required to cover and what younger, healthier members are willing or able to pay.
That tension now sits at the centre of the industry’s concerns about its long-term viability.
