Home Wealth Insurance Are private health insurers profiteering?

Are private health insurers profiteering?

Time to pull the plug, or is this a Labor political stunt?

Senior Digital Journalist, Your Money

(iStock/andrei_r)

Shadow health minister Catherine King has lashed out at private health insurers for raking in the profits even as more Australians are forced to ditch their cover.

More than 5,000 people dropped private health cover in the last quarter, according to data by the Australian Prudential Regulation Authority, meaning less than half of the population is now covered.

King accused company executives of profiteering and spending more on “management expenses,” such as costly overseas trips, exacerbating consumer premiums.

The federal Opposition has blamed rising premiums for the fall in health cover – part of the argument in its campaign to bring in a two per cent cap over the next two years on premium increases.

Labor claims the move would save Australians household hundreds of dollars over that time.

“These figures show yet again why Labor’s plan to improve affordability – by capping premiums and ordering a major review of the industry – is needed.” King pointed to APRA’s data showing health insurers have taken home $3.6 billion in premiums so far this year.

Political stunt?

But industry bodies have rejected Labor’s view that health insurer profitability is driving up premiums.

APRA chair Geoff Summerhayes said earlier this year that “APRA does not consider industry profits or capital levels to be the primary drivers of rising premiums.”

Instead, it says the rising cost of health care in Australia is the bigger cause.

Australia’s ageing population means greater numbers of people are seeking expensive medical procedures.

Rachel David, chief executive of peak body Private Healthcare Australia, dismissed King’s comments as little more than a  political stunt to push their “misguided” campaign to cap premiums.

“This is a way of retrofitting a justification to why it was announced, but unfortunately the facts don’t bear that out,” she told YourMoney.com.au.

She called out Labor’s campaign as a “quickly thought up retail fix” which doesn’t address the real issues behind rising health costs.

“The fact is that baby boomers are reaching the age now where they are requiring surgery, and that’s pushing costs up,” David explains.

Despite finger-pointing by Labor, David argues that private health care margins are “wafer thin” compared to the rest of the industry and that blaming the funds for making a profit won’t help.

David said private healthcare services consistently pay 86 cents to the dollar back to members 20 per cent more than general insurance.

“Health funds pay the highest percentage back to customers of all insurance types – it has been above 85% for 16 years,” said David.

“The focus on profits seems to be misguided, as the industry net margin has actually gone down in the last quarter. With a claims ratio at over 86 I have a hard time working out where this is going.”

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