In Australia, participation in Private Health Insurance has declined in recent years, whilst Private Health Insurance premiums have continued to increase.

Required:

a) Discuss the key reasons for these two trends and its implications for effective functioning of the Australian Private Health Insurance market. (10 marks)

b) Explain the process of Community Rating in the context of health insurance in Australia and discuss how this form of ratemaking differs from conventional insurance ratemaking. (5 marks)

c) Briefly discuss three incentives put in place to encourage the public to purchase private health insurance.