The Federal Government and private health insurers are in a tug-of-war over the next round of premium increases, with the industry pushing for more than usual to keep up with rising costs.
Health Minister Mark Butler has reportedly poured cold water on industry attempts to secure an average premium rate hike of up to 6% — which would have been the most substantial increase in six years.
About 55% of Australians currently have private health insurance – with numbers boosted during the pandemic.
Premiums usually rise on April 1 each year, after insurers make their case to the Federal Government, with an average increase this year of 2.9%.
But as part of this year’s annual negotiations, where the minister must approve premium hikes for each of the 31 providers, Mr Butler has told them to “have another go” and put forward a more reasonable figure.
Private Healthcare Australia argues that while funds are doing everything they can to keep premiums as low as possible, inflation and the soaring use of private healthcare will inevitably affect the cost of health insurance over the next year.
PHA CEO Dr Rachel David said health funds’ submissions to Government to increase health insurance premiums for 2024 reflected inflation, record claims over the past year, and essential costs such as IT upgrades to combat the growing threat of cyber-attacks.
“The cost of medical and hospital services increased 5.9% this year and there’s been a 9.6% surge in hospital admissions funded by insurers. This is putting pressure on premiums,” she said.
Inflation biting
“Inflation is hitting the health sector hard. Hospitals are struggling with the rising costs of recruitment, power and food and this flows through to health funds. Every week, hospital groups are asking major health funds for additional funding beyond their agreed contracts to chase inflation.”
Dr David said any approved premium rise for 2024 was likely to fall well short of other types of insurance, such as home and car insurance, which jumped 14% this year, and electricity, up 13%. Health insurance continued to deliver high value for members, with 86 cents in every dollar spent on premiums going back to members in benefits paid for their healthcare.
“Health funds are working closely with the Federal Government to keep health insurance premiums as low as possible in 2024,” she said. “We know many Australians are doing it very tough right now.
“Many funds are still providing cash backs and deferred premiums for their members as part of their promise not to profit from lower claims during the pandemic.”
Dr David said the inflated price of generic medical devices in Australia due to the Government’s ‘Prescribed List’ was also driving up premiums, as surgical claims returned to pre-pandemic levels.
Medical device rip-off
“Australians are paying the highest prices in the world for medical devices due to an outdated price setting arrangement with multinational medtech companies,” she said.
“We are paying 30-100% more for common medical devices such as insulin pumps compared to people in New Zealand, the United Kingdom, France and South Africa.”
Dr David said Federal authorities were rightly subjecting health fund pricing to detailed scrutiny and negotiating to get premiums as low as possible.
But while health insurance membership was at record levels, so too were the claims being paid, with both hospital and extras claims skyrocketing this year to exceed pre-pandemic levels.