Explaining the Contraction in the Market for Private Health Insurance in Australia,1989–1995

Abstract

We use data from the ABS National Health Surveys for 1989 and 1995 to assess if adverse selection is present as an influence on the proportions the ‘insurable population’ with health insurance (the ‘incidence of coverage’); and of those covered, the ‘risk composition’ of health fund membership. Further, we assess if any changes in these characteristics between the two surveys are consistent with a continuing process of adverse selection. The characteristics of the respective sample populations used in our evaluation include age and income distributions, health characteristics of various types, and behaviour that is known to incur health risks. Our findings suggest the presence of adverse selection in both 1989 and 1995, and in terms of the age distribution of membership and especially the number of health conditions suffered, changes composition of the health fund membership between the two surveys indicate the process of adverse selection accelerated over the period.