Australia: Medical costs, not profits, drive up health insurance prices

| 17 Dec 2019

Medical insurance premiums are increasing because health insurance funds are paying for more healthcare, says Private Healthcare Australia (PHA), the Australian private health insurance industry's peak representative body.

“It is also worth noting that premiums do not increase because of profits. PHA represents for-profit and not-for-profit members. APRA confirmed that profits are not the primary drivers of rising premiums,” said PHA in a statement.

88% of the premium increases over the last decade are driven by claims expenditure growth. In terms of health expenditure, real growth averaged 3.9% per year in the decade to 2017-18. This is above general inflation, which currently sits at 1.7%.

“Health funds don’t want to increase premiums by a single dollar, but it is necessary to ensure health funds remain financially viable, meet statutory prudential requirements and most importantly, continue to be in a position to provide members with access to quality and timely healthcare,” said PHA executive Dr Rachel David in the statement.

Referring to the government's announcement last week of its approval for private health insurers to increase their premiums by an average of 2.92% – the lowest increase in 19 years – Dr David said, “Australian health funds have delivered the lowest premium increase in 19 years, by creating efficiencies and using retained capital. The average premium increase of 2.92% will come into effect on 1 April 2020. This demonstrates that health funds are committed to providing value to their members and ensuring Australia’s successful mixed public/private health system is sustainable well into the future.

“Health funds understand that affordability and out-of-pocket costs are a major concern for consumers. The government’s next phase of private health insurance reforms is underway. We will work with government and the health industry to advocate for changes that reduce the costs of healthcare, for the benefit of the 13.6m Australians who have private health insurance.”

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