The number of Australians with “all inclusive” private health insurance policies with hospital cover dropped by more than 500,000 between 2014 and 2015, official figures show. Health Minister Sussan Ley said that problems with the regulatory foundations of the government’s private health system could potentially caused the decline.

Despite the vast decline, the figures from the Australian Prudential Regulation Authority, or APRA, show that the number of health policies with hospital cover increased by nearly 560,000, which exclude some medical services and require patients to pay an excess and co-payment. It has been estimated as an increase of 48.1 percent in a single year, considered to be the largest-ever single increase of its kind.

“A longer-term trend of premium increases above inflation across successive governments also suggests there is a something wrong with the regulatory foundations of our private health system,” Ley said in a press release. “Private health insurance is a fundamental part of our health system for Australians of all ages and income types, with half the population having some form of cover.”

However, Ley noted that the Turnbull government aims for “recalibrating the private health system” in the country to promote the value for money for consumers as their core focus.

The government has recently launched a national public consultation to ask Australians about private health insurance and their view of how it would promote a better value-for-money proposition for patients. The government aims to analyse the pulse of the consumers upon allowing private health insurers to cover GP visits and medical tests like X-rays under possible reforms.

“It’s important we’re able to ask consumers what they expect from their private health insurance and there’s plenty of room to do that without moving towards US or UK models that exclude sick people and make it only available to the rich, which we don’t support,” Ley stated.

The Sydney Morning Herald reported that the government would also allow private health insurers to charge higher fees for Australians who smoke or are overweight. It added that the health minister would cut subsidies for health insurance policies, including optical and dental services, as "they may not be best value for money."

The survey include the question: "If insurers were permitted to extend coverage to health care services not currently covered, and knowing that this would lead to an increase in the price of premiums, which services should be covered?"

The action of the government would potentially push seriously ill patients to public hospitals and could be alarming for each health fund member in Australia, according to Opposition health spokeswoman Catherine King.

"If the poll endorses charging smokers more for health insurance, how long before the government moves to look at charging people more based on their age, weight, alcohol consumption, general fitness, genetic testing or family history of cancer?" King said.

However, Ley said that the government would consult insurers, hospitals and doctors to analyse a structural reform to the system, to encourage better value for consumers.

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