Gap widening between health insurance premiums and benefits

The gap between what Queenslanders are forking out for health insurance and what they’re getting back has significantly widened in the past five years. SEE THE FIGURES

The gap between what Queenslanders are forking out for health insurance and what they’re getting back has significantly widened in the past five years, with customers paying $332 a year more for their coverage than they’re receiving in benefits.

There were 2.6 million Queenslanders with private health insurance in 2022-23 paying an average of $2066 a year in premiums, but getting $1734 in benefits paid out to them by their health funds.

The gap between what they paid in premiums against the benefits they received has risen 31 per cent since 2016-17, when it was just $253 per person analysis of Australian Prudential Regulation Authority data reveals.

But insurers say it is a case of the pandemic and rising medical costs driving up the difference.

Federal Health Minister Mark Butler

Health Minister Mark Butler warned insurers needed to ensure members were getting value for money.

In total, Queenslanders paid $870 million more in premiums in a year than they received getting back in benefits.

Premiums rose by between 2.33 and 3.39 per cent earlier this year.

In 2018, then Opposition health spokeswoman for Labor Catherine King said the gap between premiums and benefits showed more action was needed to “make private health insurance fairer for Australians” and called for increases to be capped at 2 per cent for two years.

Health Minister Mark Butler did not recommit to this previous policy, but said the government was working to improve the affordability and value of private health insurance for consumers.

“Private Health Insurers must ensure their members are getting value for their money. All Australians deserve access to affordable treatments and the devices they need to stay healthy and live full and productive lives,” Mr Butler said.

He urged customers to shop around for the best value for money.

APRA data also shows the health insurance sector paid 86c in benefits for every $1 of premiums, compared to 65c for the general insurance sector.

Private Healthcare Australia CEO Dr Rachel David

Private Healthcare Australia CEO Rachel David said the widening gap was due to the pandemic lockdowns and that if this was taken out the claims ratio remained steady.

“Because claims have been slower, the funds have been able to pay that money back to consumers,” Dr David said.

“Even though it’s reported as less services, they’re getting cash back.”

She said about $4bn in cash payments had been made by funds to customers since April 1, 2020.

Dr David said it was still worth taking out private health insurance, while acknowledging affordability was the top issue for policy holders.

“If you use it, it’s often the most miserable time of your life … the public system is under pressure. The waiting list is as long as it’s ever been,” she said.

“If something does happen, it will be very hard to get surgical treatment or patient care quickly.”