Health funds accused of spending up big on perks

Private health funds are spending big on executive pay and perks, a leading advocacy group claims.

Catholic Health Australia (CHA), a leading advocacy body for 75 not-for-profit hospitals, says the escalation in management expenses is unacceptable.

Australian Prudential Regulation Authority (APRA) data reveals that in the 2021–22 financial year private health funds paid an extra $389 million in management expenses – an increase of 17.43 per cent on the 2020–21 year.

However, in the same period, spending on members’ benefits increased by only 4.64 per cent.

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CHA health policy director Caitlin O’Dea said in the current environment where health insurers were pushing to remove consumer protections such as mandatory default benefits and won’t commit to continue to fund critical medical devices used in surgery, there needed to be closer oversight on what insurers are spending on themselves.

The federal government is reviewing default benefits, which are the lowest amount a health insurer is permitted to pay for a hospital admission.

CHA claims patients would typically pay at least $437 a day more for a hospital surgery if the benefits were scrapped or weakened.

“When insurers receive $26 billion a year from everyday Australians, including $7 billion in government subsidies, there should be some oversight on how that money is spent,” said Ms O’Dea.

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“It is totally indefensible that during COVID, the money spent on executive salaries, plush offices and perks by some funds is growing at a faster rate than the money they are spending on treatment and care for their members. This is a very worrying trend.

“Hospitals are facing extraordinary inflation pressures – with costs for PPE [personal protective equipment] rising at a staggering 600 per cent – and yet health funds are able to ratchet up their management expenses while simultaneously pulling back on hospital treatment.”

Private Healthcare Australia chief executive Rachel David told The Australian the increase in spending related to tech upgrades and that there was no truth in the claims health funds were profiteering from the pandemic.

She defended the increases and said funds were committed to keeping premiums affordable.

“Management expenses include IT upgrades, and there are regulatory standards that health funds have to meet,” Ms David said.

“There is no pot of gold hidden in health funds. We are incredibly transparent in how we disclose expenses through APRA. Every dollar that could possibly be spent is spent to ensure premiums stay low.

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“It’s not anything to do with executive salaries or bonuses, it is completely and utterly wrong.”

CHA is also concerned about the amount funds have in cash reserves, built up during the worst of the pandemic as people neglected healthcare and the number of claims dropped. It claims there is more than $1.8 billion on health insurers’ balance sheets.

CHA is calling for more transparency about how the health funds spend this money.

“Insurers are sitting on a mountain of cash from deferred claims with a promise to pay it back in the never-never,” said Ms O’Dea.

“Australians need to have the confidence that their health fund will pay for their treatment when they need it, not when it suits the insurer.”

According to the Governance Institute of Australia, the average annual increase to senior executives’ pay ranged between 1.7 per cent (fixed remuneration) and 3.2 per cent (total remuneration). CEO fixed pay climbed by just 1.1 per cent on average.

For board members, there was an 8.8 per cent increase and for chairs, a 10.7 per cent increase.

Should health funds be more transparent about how they spend their money? Do you know how your fund spends its money? Why not share your opinion in the comments section below?

Jan Fisher
Jan Fisher
Accomplished journalist, feature writer and sub-editor with impressive knowledge of the retirement landscape, including retirement income, issues that affect Australians planning and living in retirement, and answering YLC members' Age Pension and Centrelink questions. She has also developed a passion for travel and lifestyle writing and is fast becoming a supermarket savings 'guru'.
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