Pressure builds for health funds to return COVID profits

Australia’s health insurers have received a massive windfall, thanks to recent bans on elective surgery, prompting calls for the funds to return part of the profits to members.

Restrictions on elective surgery over the past two years have delivered big profits to health insurers, thanks to paying customers who couldn’t claim. Now the healthcare industry is calling on the government to make the funds pay back some of this money.

The pandemic has wreaked havoc on the Australian healthcare system, overloading hospitals and medical professionals nationwide.

To secure the system for those most in need, many jurisdictions implemented bans on so-called ‘elective’ surgery. In Australia, elective surgery is defined as “non-emergency surgeries which are medically necessary but can be delayed for at least 24 hours”.

Read: Do pensioners or seniors need private health insurance?

This move, while freeing up capacity for the rush of COVID cases, also delivered big savings to health insurance funds that weren’t required to pay out elective surgery claims to members. This sent the share prices of major health funds such as Medibank and NIB skyrocketing.

In June 2020, not long after COVID-19 first reached Australia, the Australian Prudential Regulation Authority (APRA) instructed health insurers to set aside money for “deferred claims liability”.

These funds were expected to be paid out when full elective surgery resumed, but ongoing restrictions in 2021 meant a second year of below average payouts.

Now, health industry groups are calling on these funds to return some of this profit to customers, especially since they paid premiums but were unable to claim.

Read: The Australian state paying the highest health insurance premiums

Australia’s ‘big five’ health insurance firms – HBF, Medibank, NIB, Bupa and HCF – have all made voluntary pledges to return millions in profits to members, but experts say that’s not enough.

The Australian Private Hospitals Association (AHPA) is putting pressure on the federal government to implement a legally binding mechanism to force health funds to return COVID super profits to members.

“There needs to be some formal government monitoring of health fund balance sheets to determine how much money they’re collecting that they thought they’d pay out – and how do we actually ensure that that gets back to members,” AHPA chief executive Michael Roff told The Australian.

“To date, there’s been no process and it’s been less than transparent.”

The nation’s top consumer watchdog, the Australian Competition and Consumer Commission (ACCC), recently noted that some insurers were only counting their deferred claims liability fund as excess COVID profits.

Read: Best private health insurance for over-50s

Insurers were allowed to exclude money from the fund for procedures that were blocked by COVID restrictions but are not expected to be claimed for at a later date. This leaves millions in profits that won’t be returned to members despite them having no way of claiming them.

“The deferred claims liability is not a proxy for total profitability from COVID restrictions, and nor was this ever the intention when financial regulators directed insurers to create a deferred claims liability,” ACCC deputy chair Delia Rickard says.

“We expect insurers to return all benefits from procedures that were not performed and are not expected to be performed later. This may be particularly applicable to extras treatment and geographic areas that were subject to extended lockdowns.”

Have you received any money back from your health insurance fund? Does this cause you to question the value of your insurance? Let us know in the comments section below.

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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.
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