Community rating and private health insurance: a fair deal for all

Thanks to community rating, you won’t pay more for your health insurance because you’re getting older, or have health issues. 

Health Agenda
April 2019

One common misunderstanding around health insurance is that you’ll be penalised for claiming, or being more likely to claim. Not true.

The community rating system means that everyone is entitled to buy the same health cover, at the same price, regardless of age, sex, race, health status or claims history.

“Maybe the best way to explain it is to compare it with car insurance, which is risk rated,” says Sheena Jack, CEO at HCF.

“This means that the risks associated with insuring your car, such as your driving record, age, gender, where you live, what type of car you have, all impact the cost of your insurance.

“Health insurance in Australia is community rated and, in essence, it means none of your health risk factors matter.”

Why is community rating important?

There are 2 objectives of community rating:

1. It makes the private health insurance system fair for all Australians. People with a history of health issues aren’t disadvantaged by having to pay more for their cover.
2. It enables private health funds, like HCF, to reduce the burden on the public health care system (Medicare).

If we moved to a risk rated system, the sick and elderly would be adversely affected, potentially causing them to drop their private health insurance and rely on the already stretched public system.

It’s important to have young, healthy people and the sick and elderly in the private system. The healthy population’s participation balances out those who claim more frequently and at a higher cost.

As time passes, those young, healthy people will find they have more complex health needs and will be supported by a new generation, completing the circle.