Patients footing the bill for health insurance ‘management expenses’

Private health insurance premiums continue to rise and it seems increasing insurers’ profits are the main driver behind the increases, according to research.

Analysis from the Australian Medical Association (AMA) has revealed ‘management expenses’ incurred by private health insurance providers have risen 32 per cent over the past four years.

Over the same period, total profits for health insurance providers rose 50.2 per cent.

But when it came to paying claims, the amount insurers paid out in medical services and hospital treatment benefits rose by just 3.6 per cent and 8.1 per cent, respectively.

According to the study, management expenses comprise the amount of your premium used to manage the business of the fund. These costs can include marketing costs, staff salaries, overheads and profit margins that need to be built into these expenses.

Why that’s a problem

Professor Stephen Robson, AMA president, explains that for a majority of health insurance customers, most of your premium increase is going towards the insurer’s bottom line, and not towards your health.

“When patients pay their insurance premiums, they expect that money is going mostly towards the costs of benefits for treatment and hospital stays, but what this … shows is that management expenses and insurance profits are key drivers of premium increases,” he says.

Prof. Robson says it is understandable insurers need to make money, but there need to be practical limits to this.

“Private health is a major part of Australia’s world-leading health system, and we understand the need for insurers to be profitable, but these numbers show something has gone very wrong and that significant reform is needed,” he says.

“That is why, for many years, the AMA has been calling on the federal government to mandate private health insurers return a minimum 90 per cent, on average, of premium dollars paid each year back to the consumer in the form of rebates and benefits.”

Reforms needed or health system at risk

The research showed that between 2018 and 2022, health insurance premiums rose 19.8 per cent, while insurer rebates to patients to cover procedures increased by just 8.3 per cent.

Prof. Robson acknowledges the government has played a role in this current situation by being stingy when indexing the rebates each year.

“Years of inadequate indexation of insurer rebates and Medicare is pushing more costs onto patients,” he says.

“The private health sector is in serious need of reform to ensure private health insurance is delivering value to patients.”

He says the results show a worrying trend for Australia’s health system, which will become unsustainable unless steps are taken to address the slide.

“We want to drive these discussions forward and restore private health to a point where it is genuinely affordable and offers real value for money for patients,” Prof. Robson says.

“This trend of reducing the proportion of policy premiums paid back to patients in benefits – while the companies spend more and more on ‘management expenses’ – simply cannot continue.”

Have your health insurance premiums risen recently? How much more are you paying now? Let us know in the comments section below.

Also read: Why are retirees taking out life insurance on their adult children?

Brad Lockyer
Brad Lockyer
Brad has deep knowledge of retirement income, including Age Pension and other government entitlements, as well as health, money and lifestyle issues facing older Australians. Keen interests in current affairs, politics, sport and entertainment. Digital media professional with more than 10 years experience in the industry.


  1. The private health system doesn’t need reform our policies that fund them to supply “lifetime health care” needs reform. Thanks to the Howard government we moved one step closer to the American system where we subsidise private health through our taxes and also pay for a service. And, we are penalised through the tax system if we don’t take out private health (income dependent). If it wasn’t for Labor we wouldn’t have Medicare as noted when the Howard Government privatised Medibank. Stop subsidising private health and make them compete as private enterprise is supposed to.

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