18th May 2017

Health funds' profits soar on the back of increased premium costs

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Health funds' profits soar on the back of increased premium costs
Drew Patchell

Only months after the Government granted approval for yet another well above CPI increase in private health insurance premiums, health funds have declared profits of $1.3 billion in the year to 1 April (post-tax).

The latest insurance premium increases were introduced after strong lobbying from Private Healthcare Australia (PHA) focused on a ‘relentless upward curve of health inflation’.

"Profitability is good but the sector is also heavily scrutinised by APRA, ASIC and the ACCC. They have a lot of insight into data and reporting," said PHA chief executive Rachel David.

The YourLifeChoices Insights Survey 2017 reveals that for the first time, the number one concern for older Australians in retirement is their health, rather than their finances.



Australian Medical Association (AMA) President Dr Michael Gannon is one of the health industry leaders calling for serious questions to be asked about the insurance system, with profits ending up in the pockets of overseas shareholders.

"Australians are openly questioning the value of private health insurance, complaining about the out-of-pocket costs, increasing number of conditions, caveats, carve-outs and proliferation of junk policies," said Dr Gannon.

When questioned about the rising costs of health insurance and the profits being made by the health funds, Health Minister Greg Hunt said: "I know that every single dollar matters to Australian families and keeping private health insurance affordable is a priority. I want to work together with the states and territories to find a solution to take pressure off private health insurance premiums."

What do you think? Are the profits being made by the health funds obscene? Should profitability levels of health funds be capped to ensure an affordable service? Do you think the Government too readily agrees to the lobbying of the private health funds?

Read more at abc.net.au

Related articles:
Health insurance premiums on the rise
Private health care crisis





COMMENTS

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Tarzan
18th May 2017
10:15am
I thought that Medicare was set by the Federal Government of the time to combat this, the government couldn't compete with the private funds, [too many fat cats maybe] sold it and we are back to square one, go figure !
David
18th May 2017
10:43am
Stating a profit figure ($1.3 billion) doesn't reveal anything! Unless profit is expressed as a percentage of investment it really doesn't mean anything. If I invested $1million and had a net profit of $10,000 this is only 1 per cent. But if the same $1million netted me $100,000 this is 10 percent. So please let us know what return the $1.3 profile represents.
Super Gran
18th May 2017
11:08am
One really needs to look at the specialists fees, only a handful of Drs work under the NO GAPS then there's the KNOWN GAP where Drs pick a figure the Anethitist adds same amount on then there's NO GAPS, The SPORTS DRS add hundreds of dollars onto fees,we have private health with HCF been brilliant they now offer information ion Drs who preform with NO GAPS ECT There a only a few doing this, last couple of yrs I had to search Dr for pending operations prices varied so much from $100's to $1,000's in difference, with ops taking shorter times, less days spent in Hospitals , theatre fees prices should decrease or stay the same, who's regulation this Drs open market.
Pamiea
18th May 2017
11:32am
It's tough on a pension paying over $86pf. Makes one wonder if I should open an account and put this in it pf to cover medical costs??
KB
18th May 2017
2:46pm
It would be a good idea to have a medical fund to pay for any gaps either Medicare or health insurance. If you have hospital insurance then you meed to find 500. Are you on the right cover? I have mid cover and only 70pf with NIB.If you have ongoing health concerns then it is worthwhile having health insurance. There are a lot of good surgeons who have a no gap policy. If you need to see a specialist then just ask to be referred to one with a no gap policy.It is amatter of rearch
koshka
18th May 2017
11:39am
The politic system we have created is in favor to too many parasites. They live the good life without producing a thing, only headache and suicidal of those who cannot take anymore . We, the real workers and poor pensioners, are paying for their extravagant existence of those inhumane PARASITES.
Rickrick
18th May 2017
11:56am
The govt just caves in to increases year after year without fail and make every excuse under the sun
They are the big joke behind all this
Old Man
18th May 2017
11:59am
What is needed is for the health insurers to be open and transparent. The minister is given a percentage increase to consider but this figure is the average increase. Our insurance rises between 13% and 17.6% each time there is an increase yet the provider trumpets that the increase is only 4.7%. Again, the increase made public is also higher than CPI and it seems that a figure a bit higher is originally put to the minister so that it can be reduced to have the minister declare that he/she has saved voters money. It is also annoying to see sporting teams wearing the health providers logo with this being paid for out of members' funds.
SWOZ
18th May 2017
12:59pm
The federal govt can make the private health insurance contributions fully tax deductible, but only for health insurances that are Australia based, not-for-profit organizations with Australian call centers and open in disclosing executive salaries and benefits. This will ensure that no profits are flowing to any shareholders, other than the insured members. All other health insurance premiums are post-tax premiums. This will quickly clean up the health insurance industry for the benefit of privately insured residents without the need for any additional regulations.
KSS
18th May 2017
12:59pm
I accept that health insurance premiums will inevitably rise year on year. There is always new equipment, procedures, treatments and so on that everyone thinks they have a right to and wants and that costs money. All age groups are subsidising each other in health funds. Because one's own premium does not go into a bucket with one's name on it (and if it did and you made a claim there would probably not be enough in the bucket to cover the cost) just because you are not covered for IVF for example does not mean you are not paying for it.

However, like Old Man, my premiums also increase at around the 17% level when the 'reported' increase for a FAMILY is around the 4% level and I do struggle to accept an increase so many times the CPI.

As the insurance companies are private companies as Old Geyser has stated many times with the banks, their first duty is to their shareholders who are no doubt happy with the profit even though those same shareholders (just like bank shareholders) are also customers. And just as with the bank people with superannuation accounts are also shareholders just like they are with the banks.

Health care costs are rising for everyone whether under private insurance or in the public system. The role Government has is really about negotiating the cost of purchasing not only equipment for hospitals but also the consumables that go with it (e.g. medications and other drugs). When New Zealand pays less for the same medications that are available here we must ask why? It is not a market size issue given their population is significantly smaller nor a geographical issue given they are 'just up the road'. No I think just like many other sectors, Australians will pay whatever they are asked. So the suppliers charge what they think they can get away with. Can't say I blame them actually. Pretty sure you would do the same thing. It is not about the Government telling a private business how much they can charge for their products. The Government role is to ensure that access to the 'tools of the trade' (the medical devices, drugs, equipment etc) are priced at levels comparable with other countries and not over-inflated with the 'Australia tax'.
Old Man
18th May 2017
1:06pm
Not all health insurers are private companies KSS, there are still some not-for-profits in there. As regards public hospitals, why do they charge health insurers when people present at hospitals? Patients get absolutely nothing extra if they are privately insured but the costs collected are coming out of the health insurers funds.
KSS
18th May 2017
1:16pm
I agree Old Man you don't even get a private room in the public hospital as a private patient most of the time.

Public hospitals do that (and some use very strong-arm practices to do so) because they can charge more for the same services. They make money off the 'private' patient so that they don't have to use their public funds i.e. they 'save' money. I read somewhere in the last few days that this particular issue is coming under scrutiny because this is not what they are meant to be doing. There is also an increase in private patients being treated in public hospitals for the same reason and those private patients are waiting less than half the time of public patients for the same operations.
Eddy
18th May 2017
1:53pm
Given that public hospitals are 'not for profit' you must ask why do they request privately insured patients to go 'private'. The reason is money, they can claim the full cost from a health fund whereas the contribution made by the Government is less. Why should a health fund be spared the cost of what they insure for simply because the insured is in a public hospital. I have been in both private and public in the last 5 years and the standard of care in both was exceptional.
As an aside I went to a private hospital because that was where my surgeon operated, I went to the public hospital because that was where the ambulance took me when I collapsed on the street.
maxchugg
18th May 2017
5:22pm
I don't accept that health insurance premiums should continue to rise. Once upon a time, if you had practically any surgery you could count on 10 - 14 days in hospital, now it would be a fraction of that time.
Premiums will rise until the government calls the funds to account, asking them to justify annual increases which are always well ahead of inflation. This lemming like attitude can only have one outcome, the funds price themselves out of existence and we all go back to relying upon the public system.
As it is apparent that the health funds are very profitable, maybe next time they ask for the next increase in their premiums the government should take a harder line.
The taxpayer did badly when the government privatized the Commonwealth Bank and Medicare and in so doing lost the ability to control greed with competition.
MD
18th May 2017
2:04pm
So a survey showed; "The YourLifeChoices Insights Survey 2017 reveals that for the first time, the number one concern for older Australians in retirement is their health, rather than their finances."
Great news, are survey respondents generally happy with their financial lot otherwise? The treasurer will be reconsidering pension increases no doubt.
As regards 'retirement', maybe it's high time we (everyone - some would have it - society) looked seriously at expectations of the (approaching retirement) demographic. The past - being gone and buried - is history and for those that continue to cling tooth and nail to the 'good ole days' or 'we never had it as good as the present generation - they've no idea', then some quick research of where mankind - civilization is presently headed might frighten more than a few into rethinking priorities, shallow or otherwise. The world, as we (those of us at/in retirement) have known it is in flux, most everything now is prone to 'disruption', youth readily adapt, the aged populace are loath to.
Private health funds/banks/utilities/specialists (aren't all professionals nowadays), doctors and so on and so forth viewith one with the other to squeeze the max returns from a gullible public/consumer. So what's new ? Either we put up or shut-up. Belly aching Ad infinitum is unlikely to change the course of the ever upward spiraling increases.
Aging brings its own inherent problems to old bodies and contrary to more than a current few that might think otherwise, nobody, however fit (or burdened with money) will outrun the undertaker.
Doctors are too ready to diagnose insignificant ailments, prescribe requisite drugs, call for pathological tests, send for xrays and/or refer patients onto 'specialists' who in turn skim their share of the cream. Hey! they are only doing their job after-all.

Individuals,doctors, the health system (private and public), governments are heading for one such 'disruption'; as previously mentioned, whether collectively, individually or combination of the above is irrelevant. It is incumbent on each of us to set our own house in order. This might best be achieved by some serious soul searching, as to where each of us see our 'fit' in this current gimme, gimme, I'm entitled society.
floss
18th May 2017
2:29pm
We were told privatise or perish in reality privatise and we will perish.
KB
18th May 2017
2:39pm
If Health insurance us not made affordable then the public health system will become clogged with people needing care Time the government put a halt to charges going up every year.
Dim
18th May 2017
3:08pm
The so called not for profit health funds seem to be a bit of a con, I am not sure how they are supposed to work, but I have been a member of both not for profit and private health funds, I recently changed from a private fund to a not for profit fund, the ammount I could claim back percentage wise is about the same, but the annual limits have dropped significantly the cost difference is about $10 per month. I use the dentist that is recommended by the fund and have found them to be more expensive than my previous dentist, and their optometrist's glasses are far more expensive than the optometrist I have always used, naturally I will continue to get my spec's where I have always got them. The question regarding charging the health fund when we go into a public hospital is a good question, I was in hospital recently and was asked by the admissions officer if I was coming in as a private or public patient, I said public, she asked me why and I told her that if I came in as a private patient my health fund would charge me a $500 excess which is part of my policy, the admission's officer replied no we will pay the excess for you, that way the public system doesn't have to bear the cost of my stay.
Dim
18th May 2017
3:08pm
The so called not for profit health funds seem to be a bit of a con, I am not sure how they are supposed to work, but I have been a member of both not for profit and private health funds, I recently changed from a private fund to a not for profit fund, the ammount I could claim back percentage wise is about the same, but the annual limits have dropped significantly the cost difference is about $10 per month. I use the dentist that is recommended by the fund and have found them to be more expensive than my previous dentist, and their optometrist's glasses are far more expensive than the optometrist I have always used, naturally I will continue to get my spec's where I have always got them. The question regarding charging the health fund when we go into a public hospital is a good question, I was in hospital recently and was asked by the admissions officer if I was coming in as a private or public patient, I said public, she asked me why and I told her that if I came in as a private patient my health fund would charge me a $500 excess which is part of my policy, the admission's officer replied no we will pay the excess for you, that way the public system doesn't have to bear the cost of my stay.
Troubadour
18th May 2017
3:16pm
Yes in agreement with KB - it is time that the Government stood firm with the Health Funds and put a stop to these regular increases and worked out a fare level of payment for us all. If not, and many pensioners like us have to seriously re-consider our Private Health payments - the Public system is going to be in chaos. All sides of the political spectrum should tackle this NOW.
George
18th May 2017
5:04pm
For the Health Minister to say "...keeping private health insurance affordable is a priority", it's a complete joke!

The Private Health Insurance system in Australia is a fraud on the people, as the Govt forces it on people (with penalties), approves large increases in premiums every year, and yet forces Patients to bear the Risk of Gaps and high Doctors fees. Insurance companies need to bear these Risks of Gaps (all except 15% of Medicare Scheduled Fees) and high Doctors Fees, including for costs of Diagnostic Tests and Pharmaceuticals. Otherwise it is not Insurance, simply a scheme to refund part of costs. Insurance companies are getting away with a complete con on people without taking on these Risks, and making great profits.

The Govt needs to change Laws as needed, and allow / persuade / force Insurance companies to cover all Risks for Gap Fees and all Medical Costs (all except 15% of Medicare Scheduled Fees), and then create a competitive market by ensuring Standard Products with full coverage are offered.

Also, the Govt needs to have some guts and set Maximum Doctor's fees for each item, not let them charge exorbitant fees causing the large Gaps.
Dollars over Respect?
18th May 2017
10:06pm
Specialist fees are too often exorbitant and private health cover is unaffordable for a large section of our society. Why not standardise the charges? No other industry would get away with the series of hikes we have had to cop over the past years as allowed by the Government. There is something very wrong with the system and perhaps capping the profitability levels for health insurance funds would be a start at least, next a review of senior executive salaries and bonus systems along with their accounting methods made transparent. An independent investigation is long overdue.
inextratime
19th May 2017
12:00am
One of the big costs involved with health cover is indemnity insurance. A surgeon explained to me that the amount they get back from Medicare nowhere near covers their indemnity insurance which is compulsory and deducted from their bank accounts. The government know this but turn a blind eye. Medical insurance claims are a major medical cost and like car insurance claims are not always bona fide.
bob
19th May 2017
8:10am
This is the continuing story of government stuff ups(called policy)we had the commonwealth bank,the state government insurance company,medibank,the government insurance office all designed to keep the sectors relevant and all sold and making huge profits.
maxchugg
19th May 2017
12:09pm
Although I have been insured with the same company for over 50 years, I recently sought information to help decide if I should change insurers. Obviously because of my age, they simply could not have cared less if I left them. Quite happy to take my money for the years when I was low risk, totally indifferent when my age makes me a greater risk.
A friend retained health insurance for his entire working life dropped out when he became a pensioner and could not afford the premiums. I needed cataract surgery as a preventative for glaucoma and surgery was completed within less than 3 months. My friend's eyesight prevented him from safely driving. He waited 3 years before receiving surgery on one eye, then almost 2 years for the next.
Yet, despite the massive savings that must accrue to the government when people make their own arrangements for funding their health care, and without whom the health funds would not exist, the politics of envy has caused the government to downgrade the concessions payable to pensioners who retain their health insurance. In reality the opposite should happen and the government should help pensioners to be able to afford their insurance.
Spondonian
19th May 2017
7:24pm
I believe our Gov. Subsidises the Premiums paid to private Health Co.s . If so they should only pay any subsidy to fully Australian companies so any profits do not go off shore . I agree that Public hospitals should not be allowed to let Health funds pay for their customers to Queue Jump. If a Public Hospital has a vacant bed , operating room and staff then the Public should come first.


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