Young people can stay under their parents' health insurance until the age of 31 from this year as more are expected to stay in education and live at home longer.
The federal budget extended the age limit from 25 to 31 to help ailing health funds, but experts predict it will also help more young people facing the risk of unemployment in a tougher COVID-19 economy.
Catholic Health Australia policy director James Kemp said the federal government’s decision to raise the age that young people can stay on their parents' health insurance policy "could not have come at a better time".
"The last year has been incredibly tough for young Australians. Unemployment rates have rocketed amongst the under 30s and many are facing an uncertain future," he said.
"This important change will provide peace of mind and allow far more young Australians to remain on their family insurance policy and therefore be able to access private health care when they need it."
Mr Kemp said even before COVID-19 emerged, young people were battling high rents, flat wage growth and the prospect of saving for years to buy a house.
"It’s even more understandable that private health insurance is not top of your mind when you’ve had to move back home to make ends meet and are surviving on JobKeeper or JobSeeker," he said.
Mr Kemp said the private health insurance system was in crisis making it vital to retain young people who were drifting away from cover.
Federal Australian Medical Association vice-president Chris Moy said the AMA supports increasing the age of dependents on family policies.
"The AMA supports all policy levers that might arrest the decline in participation of young people in private health insurance," Dr Moy said.
"It reflects changes to demographics and household circumstances, including the trends to stay in education longer and leave the family home later than previously."
The AMA's analysis shows that the number of young people leaving the private health insurance system from the age of 25 has had a negative impact on premiums and their affordability.
Ben Harris, director of policy and research at Private Healthcare Australia, the industry’s peak body, said private health funds recognised that an increasing number of young people depended on their parents throughout their 20s.
"An arbitrary age cut-off at 24 risks leaving some people without private health cover options," he said.
"This policy is more important than ever before as public hospitals are under pressure due to the pandemic, with elective surgery waiting lists exceeding 1.5 years for common procedures.
"As the country recovers from the COVID-19 pandemic, it is crucial that we ensure private health is affordable to those who need it."
Stephen Duckett, a health economist from the Grattan Institute think tank, said he was doubtful whether the policy would result in more young people taking out health insurance policies when they hit the age of 31.
Those without private health insurance face a premium increase of 2 per cent each year from the age of 31. Dr Duckett said private health funds believe that the extension of the age to 31 will encourage more young people to take out health insurance cover in their own right to avoid a premium increase.
"I don't think it will, but that's a judgment call," he said.
"Young people have very low rates of health service use. The benefit to a young person of being covered by their family's policy is quite minimal really because their risk is minimal.
"COVID does increase unemployment among young people and reduces the average income of young people. To the extent young people are insured, they would be more likely to drop out, so this can only help them. But it wasn't the motivator."