Federal Health Minister Mark Butler has declined the health insurance industry’s request for what could have been the most substantial premium increase in over six years.
As part of annual negotiations, where the minister must approve premium hikes for each provider, insurers sought approval for raises that could have resulted in an average premium surge of up to 6%.
However, in an interview with The Australian Financial Review, Minister Butler expressed hesitancy to endorse the proposed premium increases based on the information currently available.
“I’ve written to every private health insurer, directing them to have another go and put forward a more reasonable figure that considers their years of record profits and the declining proportion of premiums they return to customers, particularly while household budgets are under pressure,” Minister Butler said.
As the industry navigates the balance of covering inflation and addressing heightened demand for hospital services, Private Healthcare Australia emphasised efforts to minimise the impact on Australians.
Private Healthcare Australia CEO Dr Rachel David said health insurers’ submissions for 2024 premium increases highlighted factors such as inflation, record claims, and essential costs, including IT upgrades to combat cyber threats.
“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 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 emphasised the collaboration between health funds and the Federal Government to maintain low health insurance premiums in 2024. Many funds continue to provide cash backs and deferred premiums to members, honouring their commitment not to profit from lower claims during the pandemic.
“The Federal Government, the Department of Health, and the Australian Prudential Regulation Authority are rightly subjecting health fund pricing to detailed scrutiny and negotiating to get premiums as low as possible. We do, however, need all health sector providers to pull in the same direction if we are to maximise value for consumers. We need to reduce low value care that can harm consumers, stop unnecessary use of medical devices and surgical supplies, and create more transparency around expenses,” she said.
Despite health insurance membership reaching record levels, Private Healthcare Australia noted that claims on behalf of members have surged, surpassing pre-pandemic levels. In the year ending September 30, 2023, health funds paid a record $23.3 billion in claims benefits, reflecting a 10% increase compared to the previous year. Since the onset of the pandemic, over one million individuals have joined health funds, constituting 55% of Australians now covered by health insurance.
