Why health fund premiums will go up again in five months’ time

If you’re having a baby or need an operation, it could help your hip pocket to switch health funds right now. Here’s why.

Exclusive: If you are having a baby, a knee replacement or need a hernia operation, it may pay to switch health funds to avoid a gap fee.

The Australian Medical Association (AMA) has revealed there is a huge 45 per cent difference between the amounts different health funds shell out for the same procedure.

The AMA’s latest Health Fund Report Card report shows the benefits paid by insurers to patients for the uncomplicated delivery of a baby differed by $550, or 34 per cent, from the lowest to the highest.

For hernia surgery, there is a $300, or 45 per cent, difference.

Health fund nib paid the lowest, or among the lowest, benefits for many common services including uncomplicated delivery of a baby, where its benefit was $1640, compared to HBF’s top of the range $2190.

nib paid just $663.75 for a hernia repair, compared to the $964 paid out by Australian Health Service Alliance AHSA funds (including Teacher’s Health, Australian Unity etc).

For a coronary bypass, nib’s contribution was $3498 — $747 less than the $4246 paid by AHSA funds.

These lower benefits mean less of the doctor’s charges are covered by the fund and nib members living in the ACT, NT and Queensland are more likely to face gap fees for surgery than if they were with other funds.

Up to 31 per cent of nib members will have gap fees in the ACT, 18.7 per cent of nib members in the NT face gap fees and 10.7 per cent in Queensland. In WA, it is 8 per cent, 7.2 per cent in Victoria, 6.4 per cent in NSW, 5.6 per cent in SA and 4.8 per cent in Tasmania.

This is despite the fact nib charges the highest premiums of the big four health funds for its Gold health cover, $128 a month more than Medibank for families and $64 a month more for singles (these prices use Medibank premiums from January 2023).

It also has the highest management fees as a percentage of premiums of the big four insurers.

Ed Close, Chief Executive, nib Australian Residents Health Insurance, said the fund had recently introduced a scheme which saw members save $223 on out of pocket anaesthetist fees.

“We try to keep premiums low, as evidenced by our last 2.66 per cent premium increase, the lowest of the major health funds and our lowest in 20 years,” he said.

“The fact that there are big differences in amounts paid for the same doctor performing the same procedure is frustrating for consumers,” Australian Medical Association president Professor Steve Robson said.

The AMA’s latest Health Fund Report Card report shows the benefits paid out by insurers.

“This variation in out-of-pocket expenses is one of the reasons the AMA has called for an independent regulator — a Private Health System Authority — to oversee private health insurance to ensure policyholders are getting fair value for money through a mandated minimum amount that every insurer is required to return to patient care.”

Private Healthcare Australia chief Dr Rachel David said: “Private health insurance is a competitive market and importantly all information about what health funds cover and the benefits they pay for procedures is publicly available, ensuring consumers can make an informed choice”.

The report also reveals a huge variation in the amount insurers spend on management fees with some insurers paying more than 15 per cent of their contribution income, while the industry average is 11.7 per cent.

“When management expenses are gobbling up premiums, there is less money for members’ claims for hospital treatments,” Professor Robson said.

AMA president professor Steve Robson. Picture: Supplied

With Health Minister Mark Butler currently considering whether to approve health funds their second premium rise in five months from April 1 next year, the report shows a worrying trend that will drive up premiums.

Since June 2021, there has been a rise in the number of people taking up private health insurance policies — especially older people, who are more likely to use their cover which will drive up premiums in the future.