Patients bear brunt of surge in private health’s “management expenses”
Patients bear brunt of surge in private health’s “management expenses” | Insurance Business Australia
Insurance News
Patients bear brunt of surge in private health’s “management expenses”
Peak organization highlights the need for reform
Insurance News
By
Jonalyn Cueto
Private health insurance consumers are feeling the pinch as their premiums swell, with a significant portion of their payments being diverted into “management expenses,” leaving them with escalating bills and questions about the value they receive.
Recent analysis conducted by the Australian Medical Association (AMA) has uncovered a staggering 32% surge in management expenses for private health insurance providers over the past four years, reaching an increase of $716 million by June 2023.
Amid consumers grappling with rising costs, the AMA’s scrutiny reveals a stark contrast: health insurers have experienced a substantial 50.2% surge in profits during the same period, reaching new heights by June 2023.
The proportion of funds dedicated to medical services and hospital treatment benefits has seen a mere 3.6% and 8.1% rise, respectively, over the same four-year period.
Concerns over benefits returned to patients
AMA president Prof. Stephen Robson expressed concern, stating, “When patients pay their insurance premiums, they expect that money is going mostly towards the costs of benefits for treatment and hospital stays, but what this graph shows is that management expenses and insurance profits are key drivers of premium increases.”
Robson emphasized the urgency for reform, urging the federal government to mandate that private health insurers allocate a minimum of 90%, on average, of premium dollars back to consumers in the form of rebates and benefits.
Furthermore, the AMA advocates for increased investment in out-of-hospital care models, citing a report from last year that highlighted potential savings within the system.
“Private health is a major part of Australia’s world-leading health system, and we understand the need for insurers to be profitable, but these numbers show something has gone very wrong and that significant reform is needed,” said Robson.
The AMA’s 2023 Private Health Insurance Report Card exposed a troubling trend: the proportion of hospital insurance policy premiums returned to patients as benefits for hospital treatment plummeted to 81.6% in 2022–23, down from 88.02% in 2018–19.
During the same period, private health insurance hospital policy premiums soared by 19.8%, while rebates to cover medical costs during hospital treatment increased by just 8.3%.
“Years of inadequate indexation of insurer rebates and Medicare is pushing more costs onto patients,” Robson said. “The private health sector is in serious need of reform to ensure private health insurance is delivering value to patients.”
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