The sustainability of the private health insurance sector is in peril, according to an Australian Prudential Regulation Authority (APRA) board member.

Smaller funds have to take urgent action to improve their business models by 2022 or only large publicly-listed companies will remain, says Geoff Summerhayes.

He has warned smaller funds to “merge or fold”, and says if they refuse to merge only big funds such as Bupa, Medibank, and NIB will survive.

Program Health Director at Grattan Institute Stephen Duckett tells Brooke Corte the industry is creating a lot of its own problems.

“Young people are dropping out of health insurance. In fact, every age group under 65 is dropping out of health insurance.

“What that means is the risk pool for health insurance is getting worse. Older people generally have higher health service use than younger people.

“As each younger person drops out, the costs go up because the remaining people have to pay for more use.”

Click PLAY below to hear the full interview