On a population basis, an ABC News analysis shows it is young people who are rejecting private health insurance at the highest rate, suggesting that current policy settings designed to attract them into the private system are no longer working.
The proportion of people with hospital insurance fell in all age groups under 70 in the year to December 2017.
The biggest falls were in the Generation Z age group (20 to 29 year olds) and millennials aged 30 to 39. Together, there are now 49,000 fewer people in these age groups who have hospital insurance than there were a year ago.
Overall, hospital insurance coverage reached its high point in 2014, when 47.3% of the population was covered, according to APRA data. That has now fallen to 45.5%, the lowest proportion since 2010.
The maximum age one can be a dependant on one's parent's insurance policy is 25, so the falling coverage for millennials points to this group not signing up to hospital insurance when they come off their parents' cover, reports ABC News.
To encourage the young to subscribe to private healthcare insurance plans, insurers will be able to offer them discounts up to 2% a year up to a maximum of 10%, phased out by age 41. This measure is to take effect from 1 April next year.
Mr Stephen Duckett, health programme director at the Grattan Institute, says that 25-year-olds with insurance will certainly benefit from the discount, but few Australians were in this category.
He said, "Whether a 10% discount is enough to increase health insurance uptake by young people, many of whom are in precarious employment arrangements or unemployed, is a question for the marketeers."
Lesley Russell, adjunct Associate Professor at the Menzies Centre for Health Policy at the University of Sydney, said that the young may no longer be prioritising health cover. Calling the group the "young invincibles"—they're out of university, starting jobs, unmarried and more interested in getting on the property ladder.