NSW targets private health insurers with new law to recover hospital costs

The New South Wales government has introduced new legislation mandating that private health insurers pay outstanding fees owed to public hospitals, addressing what officials estimate to be an annual funding shortfall of about $140 million.

The bill – passed in the Legislative Council by a vote of 21 to 17 with backing from the Greens, Shooters, Fishers and Farmers, Animal Justice, and Legalise Cannabis parties – aims to secure payments from private health insurers when their policyholders receive care in public hospitals.

In the Legislative Assembly, the bill passed with a vote of 50 to 31, supported by six of eight independents and the Greens.

Ensuring private health insurers contribute to public healthcare

The NSW government noted that this move reverses a policy stance from 2013, when then-Treasurer Mike Baird pushed for legislation to ensure that private health insurers contribute appropriately to public healthcare costs.

At the time, the current opposition leader, Liberal Leader Mark Speakman, supported Baird’s approach. However, the Liberal Party now opposes the new measure, which closely resembles the legislation it once endorsed.

Since 2019, major insurers have reportedly started reducing their payments, coinciding with a period of rising profits in the sector.

Impact of private health insurers’ non-payments

NSW Treasurer Daniel Mookhey stated that the new law reinforces prior agreements with insurers to contribute to public hospital costs, noting that premiums for policyholders remained stable even as insurers withheld payments.

“Premiums didn’t go down when the big insurers stopped paying their bills. They shouldn’t threaten families with an increase now,” he said, emphasising that insurers have the option to settle the issue by resuming payments.

Health Minister Ryan Park highlighted the financial impact of non-payments on the state’s budget, estimating a daily cost of more than $338,000 due to missed payments from certain insurers.

“All we’re asking is that private health insurers pay their fair share of their use of public hospital beds,” he said.

The government commended non-profit insurers – including Teachers Health, Nurses and Midwives Health, and Emergency Services Health – for continuing to pay public hospital fees at agreed rates.

Officials also noted that the government remains open to discussions with larger insurers to reach a sustainable resolution.

Health insurers call for federal-level healthcare reform

At the national level, Members Health Fund Alliance has released a report urging major reforms to improve the affordability, access, and transparency of Australia’s private healthcare sector.

The report highlighted contributions made by 24 not-for-profit and member-owned insurers, who collectively cover over 5.3 million Australians, including more than 1.1 million people in rural and remote communities.

It outlined four policy recommendations designed to improve private health insurance affordability and ease pressures on public healthcare systems:

• raising the government rebate on private health insurance premiums to 30%, up from its current level of less than 25%
• enhancing transparency of hospital and clinician costs and performance, allowing consumers more insight when selecting healthcare providers
• removing restrictions on insurers covering out-of-pocket costs for GP visits to improve access to primary care and reduce reliance on hospitals
• exempting private health insurance premiums from the Fringe Benefits Tax, which would allow faster care access for employees and potentially support productivity growth

Members Health also emphasised the importance of enabling consumers to make informed choices about their healthcare providers, suggesting that access to detailed cost and performance information could lead to better outcomes for patients and families alike.