The Australian government is hoping millennials will help save private health insurance

Stefan Postles via Getty Images

Stefan Postles via Getty Images

Modelling commissioned by the Private Health Insurance Ministerial Advisory Committee showed removing "basic" cover would increase premiums by between 15 and 21 per cent and result in more than 100,000 people dropping their cover.

Young Australians who sign up to private health cover will benefit from discounts on their premium under sweeping Turnbull government reforms created to entice more young people into the system and slow the rising cost of health insurance.

The ABC revealed that the savings won't be so much a lifetime discount but one that remains in effect until the policyholder reaches 40 years of age.

Rather than an annual premium rise of 5-6 per cent next April, as has been the case for several years, the plan is aimed at keeping premium rises as low as 3 per cent.

The changes will also cut off government rebates for a range of homeopathic and so-called "natural" therapies, including reiki, reflexology, yoga and Pilates.

The changes will also see health insurance offers categorised into Gold, Silver, Bronze and Basic levels in a bid to make it easier for consumers to compare policies.

"That's significant, but set against the $1.5 billion in total health claims we paid members a year ago, it's not a game changer", Mr Van Der Wielen said.

The ABC understands that privately insured patients entering hospital with a mental illness will be offered an immediate upgrade of their policy to fully cover mental health, with no waiting period. The Australian Medical Association has called for the "junk" policies to be banned.

Another big change will be in the way health insurance products are categorised.

The government also said the private health cover reforms would make mental health services easier to access.

Central to the problem faced by the government is that hospitals are charging two prices to patients - a lesser amount for public patients, while cross-subsidising the public system with higher charges for private patients.

"We are pleased that the minister for health has listened to the concerns of the private health insurance industry and acted to place the interests of consumers before the profits of large worldwide medical device manufacturers", he said.

Young Australians are being targeted in the biggest overhaul of private health insurance in decades, with premium discounts on the cards and a big focus on mental health.

The government also said it had "struck an agreement" with the manufacturers of pacemakers and prosthetic hips and knees to reduce prices.

"We want to get the absolute lowest outcome".

"These are matters for the private sector, but they have guaranteed that they will pass through every dollar", Hunt said.

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