Health insurance rises to exceed inflation again in 2020

Health funds have been caught charging more for Silver policies than Gold and providing wildly different benefit payments — now they want to raise costs again. VOTE, HAVE YOUR SAY

Exclusive: Health fund premiums are on track to rise by a further $150 or more a year from next April as funds enter a death spiral with thousands of members dumping unaffordable cover.

The funds must submit their annual premium rise applications to Health Minister Greg Hunt for his approval within the next two weeks and the rise is expected to be almost twice the inflation rate again.

News Corp understands health funds are under pressure from the minister to drive annual premium rises below three per cent but funds have advised that will be difficult.

“We are aware what the minister is after and we are trying as hard as we can,” NIB boss Mark Fitzgibbon told News Corp.

“We expect it will be less than last year’s but whether it’s less than three per cent we are still doing the count,” he said.

Other funds have told News Corp they expect premiums to rise by at least three per cent.

Nib Managing Director Mark Fitzgibbon hopes to keep premium rises lower than this year’s 3.38 per cent. Picture Hollie Adams

A spokesman for Mr Hunt said the Government’s reforms had delivered the lowest average premium changes in 17 and 18 years respectively.

The premium rise was 3.25 per cent this year — under Labor and previous Coalition governments premium rises were sometimes over 6 per cent.

“Last year’s average premium change was more than 40 per cent below premium changes under Labor,” he said.

“Each application is closely scrutinised to ensure any changes are fully justified and assessed on its own merits.”

But Consumers Health Forum chief Leanne Wells said: “It is no surprise that without reforms designed to address affordability that premiums are once again slated to be set at rates higher than inflation.”

“This is only likely to prompt even more to opt out of private health insurance.”

An AMA report card released last week shows in the last five years around 100,000 young people have quit health funds while over 360,000 people aged over 60 have joined.

Since 2015 the proportion of the population covered by health funds has plunged from 47.4 per cent of the population to 44.2 per cent.

This has increased pressure on health fund payouts because older people are more likely to claim.

Health funds have made over $5 billion in profits in the last five years and this is another factor driving up premiums.

The funds are scrambling to improve the value their members receive by entering agreements with obstetricians and orthopaedic surgeons to provide gap free cover for their members.

The government introduced major reforms to health insurance in April, grouping all policies into Gold, Silver, Bronze and Basic categories.

Young people who join before age 25 became eligible for a premium discount of up to 10 per cent but the change has not delivered a membership spike.

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Dr Rachel David, Chief executive of Private Healthcare Australia, the health fund lobby group. Picture Kym Smith

Private Healthcare Australia chief Dr Rachel David said funds are also under pressure because the Australian Prudential Regulation Authority is requiring them to increase the amount of money they hold in reserve.

This will make it harder for the minister to pressure health funds to lower their premiums, she said.

Funds say they were not able to realise promised savings from the $1 billion cut to medical device prices like hip and knee replacements and this means premiums will be higher.

While prices for some medical devices did fall doctors used more screws and glues during procedures pushing up health fund costs Dr David said.

Funds want these miscellaneous items covered by private hospitals as part of the general hospital charges instead of being billed separately to health funds.

“Last year surgeries increased by 0.3 per cent but the growth in medical device claims was 8.3 per cent,” Dr David said.

The Consumer’s Health Forum, The Australian Medical Association and other health groups are calling for a major inquiry into private health insurance to reform the system and control premiums.

Originally published as Health insurance rises to exceed inflation again in 2020