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4102.0 - Australian Social Trends, 1994  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 27/05/1994   
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Contents >> Health >> Health Expenditure: Private health insurance: who has it?

Health Expenditure: Private health insurance: who has it?

The proportion of the population choosing to have private health insurance has been declining.

In the early 1980s, the proportion of the population covered by private health insurance was between 60% and 70%. Following the introduction of Medicare in February 1984 there was a substantial decline in the proportion privately insured. In March 1986, 53% of people were covered by private health insurance compared to 65% in June 1983. By June 1992, people covered by private health insurance represented 48% of the population1.

Implications of this decline in private health insurance coverage include a greater tendency for people in need of hospital care to use the public hospital system and a relatively smaller pool of funds available for treatment of patients in private hospitals.

An individual or family decision to take out private health insurance is influenced by many factors including the perceived adequacy of Medicare, personal and family health status, the affordability of private health insurance and access to health services through government health concession cards2. In turn these factors are influenced by age, income and family composition. Analysing patterns of private health insurance coverage by these variables provides an insight into which groups in the population are more, or less, likely to insure privately.

Types of private health insurance

There are two distinct types of private health insurance products: hospital insurance and ancillary insurance. Hospital insurance can be used as an alternative or supplement to Medicare funded hospital services by providing the ability to seek private patient treatment from a doctor of choice in a public or private hospital. Ancillary health insurance mainly provides cover for services not funded by Medicare although some such services are provided at no, or low, cost to certain sections of the population e.g. holders of government health concession cards. In June 1992, 8.2 million people were covered by private health insurance; 6.0 million had both hospital and ancillary cover, 1.5 million had hospital cover only and 0.7 million had ancillary cover only.


Health status3
The 1989-90 National Health Survey found that about one-third of people who considered their health to be poor were covered by private health insurance. The highest levels of private health insurance coverage were found among people who considered they were in excellent health, regardless of age. However, this finding is confounded by income which is positively correlated with both age and health status.

PROPORTION OF PEOPLE WITH PRIVATE HEALTH INSURANCE, 1989-90

18-34 years
35-64 years
65 years and over
Total
Health status(a)
%
%
%
%

Excellent
51.4
65.8
48.7
57.8
Good
44.1
61.1
43.1
51.9
Fair
35.6
48.0
38.0
42.2
Poor
35.4
37.2
27.9
33.2

(a) Health status is self-assessed.

Source: National Health Survey



Income
The level of private health insurance coverage increases with increasing income, and a greater variation in coverage occurs across income groups than across age, family status or health status groups. Of people in contributor units with low incomes (less than $240 gross a week) in 1992, 24% (637,000 persons) were covered by private health insurance compared to 68% (4.6 million persons) of those in contributor units with high incomes ($600 or more gross a week). Of all persons in contributor units with private health insurance 8% were in low income units, 33% in middle income units and 59% in high income units.

Two-thirds of contributor units who ceased private health insurance in the two years prior to 1992 gave their reason as no longer being able to afford it.

PERSONS IN CONTRIBUTOR UNITS WITH PRIVATE HEALTH INSURANCE, 1992



Source: Health Insurance Survey


Contributor unit

A contributor unit, as defined in Health Insurance Surveys, consists of a contributor to a health insurance scheme plus all persons in the same family who are covered by the health insurance arrangements of the contributor. As such it may be considered analogous to a family unit. The following persons are assumed to be covered by the health insurance arrangements of the contributor:
  • all children under 15 years of age;
  • unmarried full-time students between 15 and 25 years of age without dependants of their own and who are living with their parents;
  • a spouse, unless both partners have separate health insurance arrangements, in which case they are considered to be two contributor units.


Age
Private health insurance coverage generally increases with age. However, of those contributor units where the contributor was aged 65 years or more in 1992, 61% had no private health insurance. While this is in part due to the generally lower incomes of people in this contributor age group, many also had access to government health concession cards.

Of contributor units where the contributor was aged 65 years or more, 79% were covered by government health concession cards. However, 74% of those not covered by government health concession cards had private health insurance. This left about 80,000 contributor units where the contributor was aged 65 years or more with neither private health insurance nor government health concession cards.

Type of private health insurance coverage also varies with age. Persons in contributor units where the contributor was aged 35-64 years were four times more likely to have ancillary only insurance than those contributor units where the contributor was aged 65 years or more. Part of the reason for this may be that for the aged some ancillary services are available at no, or low, cost through public hospitals and community health centres. Some States also have low cost dental and eye care schemes for the aged.

Age and income
When age and income are combined as factors involved in private health insurance cover, a more complicated pattern is revealed, although, in general terms, private health insurance coverage increases with age and income.

In 1992, the youngest, low income contributor units had the lowest level of private health insurance coverage at 21% and the oldest, high income units had the highest at 84%. Private health insurance coverage increased for each age and income group except the oldest, middle income contributor units whose level of coverage was lower than that of middle aged, middle income units. Contributor units with high incomes were more likely than other groups to have combined hospital and ancillary insurance, 77% compared to 59% of contributor units with low incomes.

CONTRIBUTOR UNIT INCOME BY AGE OF CONTRIBUTOR, 1992

15-34 years
35-64 years
65 years and over
Total
Income
'000
'000
'000
'000

Low income(a)
    Privately insured
194.5
134.9
180.1
509.5
    Not insured
717.7
456.7
468.9
1,643.3
Middle income(b)
    Privately insured
516.2
578.5
256.6
1,351.3
    Not insured
1,006.5
763.7
361.8
2,132.0
High income(c)
    Privately insured
497.9
1,116.6
73.2
1,687.7
    Not insured
347.3
461.1
14.0
822.5
Total(d)
    Privately insured
1,252.3
1,962.5
562.0
3,776.8
    Not insured
2,141.3
1,764.5
872.2
4,777.9

(a) Less than $240 gross per week.
(b) $240-$599 gross per week.
(c) $600 or more gross per week.
(d) Includes income not known.

Source: Health Insurance Survey



Family composition
Contributor units consisting of couples (with or without dependent children) had the highest levels of private health insurance coverage (over 50%), while those consisting of one contributor and dependent children had the lowest (23%). For all contributor unit types level of insurance coverage increases with income. The higher level of private health insurance coverage for contributor units containing couples reflects their generally higher incomes. Of such contributor units, 48% received high incomes, 42% received middle incomes and 4% received low incomes. Of contributor units consisting of a contributor (with or without dependent children), 15% received high incomes, 40% received middle incomes and 42% received low incomes.

Couples with dependent children were more likely than other types of contributor units to have hospital and ancillary cover while couples without dependent children had the highest rate of hospital only cover. Ancillary only cover was more prevalent in contributor units with dependent children than in those without.

PROPORTION OF CONTRIBUTOR UNITS WITH PRIVATE HEALTH INSURANCE, 1992

Contributor and dependent children
Contributor only
Contributor and partner
Contributor, partner and dependent children
Total
Income
%
%
%
%
%

Low income(a)
11.2
23.6
37.2
38.0
23.7
Middle income(b)
22.8
42.8
38.8
34.4
38.8
High income(c)
57.0
63.8
67.8
69.4
67.2
Total(d)
23.3
37.9
51.6
55.7
44.1

(a) Less than $240 gross per week.
(b) $240-$599 gross per week.
(c) $600 or more gross per week.
(d) Includes income not known.

Source: Health Insurance Survey


CONTRIBUTOR UNITS WITH PRIVATE HEALTH INSURANCE, 1992



Source: Health Insurance Survey


Endnotes

1 Unless otherwise stated statistics presented in this review are drawn from the Health Insurance Survey.

2 Willcox S. (1991)
A Healthy Risk? Use of Private Health Insurance National Health Strategy Issues Paper No. 4.


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