Heath fund profits plunge as premiums set to rise

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Private health insurance needs a “thorough rethink”, according to the Consumers Health Forum (CHF), with premiums at most funds set to rise and thousands of younger people abandoning the sector despite the pandemic.

Due to COVID-19, most health funds deferred increases scheduled for 1 April, but Bupa, Medibank, HCF and nib will lift premiums on 1 October. HBF has cancelled its 2020 price rise. The average increase is 2.92 per cent, although some funds are set to lift premiums by as much as 5.6 per cent.

CHF chief executive Leanne Wells said the pandemic had accentuated the unequal access to healthcare and social support between the haves and the have-nots. “The scrambling for more support for health insurance at this time tells us there are deeper issues of access to healthcare that need to be fixed,” she said.

“The falling demand for health insurance combined with the profound changes to the health system wrought by COVID presented challenges that will not be fixed by seeking cash-strapped 20-somethings to sign up.”

During the pandemic, some elective surgeries have been cancelled and routine services such as dental or eye care have not been available.

The ABC has reported that insurers paid about 12.9 per cent less in hospital benefits in the June quarter. General benefits such as physiotherapy and optical dropped by 32.9 per cent.

Almost 29,000 Australians dropped their cover in the three months to June.

“Australian Prudential Regulation Authority (APRA) figures show in the year to June, 56,000 Australians aged between 20 and 49 dumped their cover, with the report stating ‘the industry continues to face the challenge of falling membership among younger people and growing membership in older age groups’.

“The trend of young people fleeing the sector has been an ongoing concern for those within the system, who fear a ‘death spiral’.

“That’s where young and healthy people continue to abandon private health cover, leaving a larger proportion of less healthy, older and more expensive users.”

Net profit after tax in the private health insurance sector has fallen by 45.3 per cent in the year to June.

Rachel David, chief executive of Private Healthcare Australia, admits the industry has suffered.

“Obviously, the sector has had a very tough quarter and with some of the volatility in the market, the profitability has reduced,” she said.

Private Healthcare Australia’s budget submission paper states: “Providing subsidies to private health insurance is the most cost-effective way for the Australian government to support the growth in hospital and health services over the coming decades.

“Subsidies for private health insurance-funded services cost the commonwealth budget around 30 cents in the dollar. The alternative, providing more services in public hospitals, costs the commonwealth budget 45 cents in the dollar.

“In addition, the government should look at a possible fringe benefits tax exemption for private health insurance premiums for people aged under 40.”

Medibank Private chief executive Craig Drummond says premium increases are essential.

“There are very thin margins and very little scope to provide discounts to everyone,” he told The Sydney Morning Herald and The Age.

“Forgoing a premium increase by funding claims out of surplus equity reserves is unsustainable.”

Mr Drummond said predictions of significant savings during the pandemic had not eventuated. He said insurers had to maintain reserves to pay for elective surgeries that will be undertaken after the pandemic.

On Monday, nib managing director Mark Fitzgibbon told Nine it was tough to predict the impact of the pandemic on the sector in the coming months. He assured members that nib would not look to profit if claims slowed again and would pass on savings.

“If there is a second downturn in treatment as we’ve seen in Victoria, we’ll allow for that in our own pricing,” he said.

Health Insurance Comparison says that five years ago, the average annual family policy cost $4268.90. That family would be paying $5219.09 after 1 October. “That’s an extra $950.19 for a policy that’s essentially the same as it was five years ago,” it says.

You can check your fund’s expected increase here.

Do you intend to review your health insurance because of COVID-19?

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Written by Will Brodie


Total Comments: 4
  1. 0

    Hang on a minute. Weren’t we informed recently that Covid-19 had seen a substantial reduction in both elective surgery and visits to hospitals, specialists, dentist, doctors, etc.?

    Supposedly this prompted some funds to consider rebates to customers.

    Now the industry’s lobby group is telling us that premiums need to be raised????

    Private Health Insurance is exhibiting the same traits as the failed private Aged Care Industry.

    Time to take back health insurance from this pariah.

    • 0

      Agree. Also where the article said
      During the pandemic, some elective surgeries have been cancelled and routine services such as dental or eye care have not been available. The ABC has reported that insurers paid about 12.9 per cent less in hospital benefits in the June quarter. General benefits such as physiotherapy and optical dropped by 32.9 per cent.
      So a premium rise is not justified and all funds should follow the example of HBF
      See :
      “”HBF has cancelled its 2020 price rise””

  2. 0

    At my age I cannot afford to drop our Health Insurance, I think of it as buying lottery tickets for $100 a week, hoping not to win. That is the amount we are currently paying, payment is yearly and every year there is that amount out of the bank account. Have a part pension and if the increase comes we pay it – in a couple of years we might be on the full pension. Medibank should not have been privatised but neither should have the people’s bank, the Commonwealth bank of Australia. Alas I cannot change that.

  3. 0

    As a point of principle I think that any industry that requires government subsidy is probably not sustainable. That is not to say that subsidies are not necessary in some circumstances such as subsidising industry that has a strategic value. One example is ammunition for our armed forces. We can buy ammo cheaper overseas but we must retain the capability of manufacturing it in-country. We could also include essential medical supplies or steel making plus many others industries. Adequate health care is available through Medicare rather than ‘for-profit’ insurance companies. If non-essential industries require subsidies then they are not sustainable and we are wasting government funds.



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