Australia’s private health insurance industry has come under scrutiny over what is covered by the products it sells, how it sells them and high premiums. This all means consumers are left questioning the value of buying health insurance, says Associate Professor Francesco Paolucci, head of the health policy program at Murdoch University.

Paolucci argues all of this is a symptom of the way Australia’s health insurance system is set up. The government uses various incentives, including the the Medicare levy surcharge, to encourage people to use health insurance even though Australians already have universal health care coverage. However, this means people are choosing to purchase private insurance based on tax incentives rather than exposure to health risks.

Another structural distortion is created by community rating regulations, where individuals pay the same premium for same product of the same insurer, regardless of their risk profile. He says while this is well-intentioned, it encourages insurers to market and provide products to low risk customers while discouraging high risk customers.

What’s the alternative? Paolucci says insurers should be allowed to offer insurance for primary care (including general practice) and more importantly the system needs to change in response to health policy shifts to treat the growing number of people with chronic health conditions.