Private Health Insurers in Australia Accumulate $1.3B Surplus

AUSTRALIA: A recent report from the Australian Medical Association reveals that private health insurers in Australia have amassed a staggering $1.3 billion more in surplus from hospital premiums in the current year compared to two years ago. 

However, this financial boon has not translated into increased benefits for policyholders, with notable differences of over $500 reported between insurers for identical medical procedures.

Profits Surge Amid Resumed Elective Surgeries

The Australian private health insurance landscape has witnessed a surge in profits over the past year, particularly as elective surgeries in private hospitals resumed following pandemic-related disruptions. 

The 2023 private health insurance report card exposes a concerning trend where the value derived by consumers from their health insurance is diminishing relative to the substantial profits recorded by insurers.

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The report indicates that gross surplus for hospital insurance, representing premiums paid in less hospital benefits paid out, constituted approximately 18% of hospital premiums paid in the most recent financial year (2022–23). 

This marks a significant increase from two years earlier (2020–21), with the surplus difference amounting to $1.36 billion. The Australian Competition and Consumer Commission (ACCC) reported a 110% increase in the industry’s net profit after tax during the same period.

However, the report underscores that as profits escalate, the proportion of hospital insurance policy premiums returned to patients through rebates or other benefits is declining. While insurers returned over 88% of hospital insurance policy premiums to patients in 2018-19, this figure has decreased to 81.6% in the most recent financial year.

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Industry Response and Calls for Government Intervention

Rachel David, CEO of Private Healthcare Australia, contested claims of declining value, stating that health funds paid 5% more on average for hospital treatment per policyholder in 2022–23 compared to the previous year. 

Additionally, the average amount paid by insurers for extras, such as dental, physiotherapy, and optical treatments, increased by 8.4% per policyholder in the same period.

The AMA report has ignited a call for federal government intervention, urging the introduction of a mandate that requires every insurer to allocate a minimum amount to patient care each year. Critics, such as Ian McAuley from the Centre for Policy Development, suggest reevaluating the reliance on private health insurance and enhancing the efficiency of the public Medicare system.

As health insurers in Australia bask in profits, concerns over the diminishing value for policyholders and significant differences in benefits highlight the need for comprehensive reforms to ensure equitable and transparent healthcare practices.