‘Dud’: Claims big three health insurers ripping off customers
Despite Medibank, Bupa and nib earning a combined profit of $1.7 billion last year, their customers face higher than average health insurance premium hikes.
National
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Medibank, Bupa and nib customers face higher than average health insurance premium hikes despite the companies earning a combined pre-tax profit of $1.7 billion dollars last year.
Critics say the Albanese government should not have allowed the “big three” to hike up premiums to such an extent, because their profit margins are so much greater than the rest of the industry.
According to Australian Prudential Regulation Authority data, Medibank reported pre-tax profits of $784 million; Bupa $607 million and nib $289 million.
Australia’s 27 other private health insurers made a combined total of just $545 million.
Last week, Health Minister Mark Butler said he asked insurers to resubmit their claims three times, before agreeing on an average premium increase of 3.73 per cent, which will apply from April 1.
He said he had considered the insurers “years of record profits”, but approved Medibank, Bupa, which is foreign owned, and nib for above average increases of 3.99 per cent, 5.1 per cent and 5.79 per cent respectively.
Australia Institute’s David Richardson, who conducted research into the sector, said while there is a cost of living crisis, health insurance CEOs are also enjoying hefty multi million dollar salaries.
He analysed last year’s financial reports and found Medibank Private’s CEO, David Koczkar, received $4.4m, while nib’s Managing Director, Mark Fitzgibbon, who retired in December, received $3.7m. Bupa’s CEO’s salary is not listed as the company reports offshore.
Mr Richardson said the private health insurance industry “is a dud” and their profits contradict the insurance industry’s claims that “nearly every dollar that comes into health insurance goes back out to hospitals, to doctors, to physiotherapists to dentists”.
“We’ve been looking at various industries motivated by the cost of living crisis, checking out who’s ripping off who,” Mr Richardson said.
He added that when looking at their “return on equity”, or profit as a percentage of the amount the shareholders have invested in the entities concerned, it shows Medibank made a 45 per cent return; nib 40 per cent and Bupa 34 per cent.
“When you find that Medibank Private is making a 45 per cent return on equity, you have to worry, are they just charging whatever they think the market will bear?”
Mr Richardson said the profit figures suggest an industry in which the major players are very
profitable and need very little by way of higher premiums.
Bupa defended the rise saying its 2025 premium increase is well below the 8.3 per cent increase in claims paid out to customers in 2024.
Bupa Health Insurance Acting Managing Director, Kate Williams, said Bupa had to consider rising health costs and the need to support the sustainability of private hospitals.
nib Managing Director and Chief Executive Officer, Ed Close, said: “The increase reflects higher healthcare costs, and increased utilisation of services. Medical costs remain high, especially hospital costs, wages, and medical supplies, which drive premiums up.”
Medibank said customers in NSW will see a higher than average premium increase of 4.81 per cent, due to changes by the state government around costs for a single bed hospital room.
However, the business has reduced costs by more than $100 million and has one of the lowest management expense ratios in the health insurance market, as well as having a payout ratio higher than the industry average.
A survey by Finder this week found that 16 per cent – or 3.3m Australians – plan to cancel their health insurance policy in 2025.
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