The private health funds that have shortchanged NSW hospitals by $700 million

The NSW government will use legislation to force the big four private health insurers to pay their hospital bills in full, after their refusal to do so since 2019 cost the state $700 million.

After four months of failed negotiations, NSW Treasurer Daniel Mookhey will this week introduce new laws which will force the insurers – HCF, NIB, Bupa and Medibank – to pay the correct rate for single rooms in public hospitals.

Private health insurers have not been paying their bills in full to NSW Health since 2019.Credit: James Brickwood

In the last financial year, the single room rate for private patients in public hospitals was gazetted at $892, but HCF has only been paying $463, NIB $491, Bupa $501, and Medibank $515. Each year this costs NSW Health about $140 million.

The new laws will mirror legislation introduced by then-treasurer Mike Baird in 2013, which has since lapsed, meaning the insurers have been underpaying since 2019.

The government says since insurance companies stopped paying the correct rates, profits have doubled. In 2022-23 alone the industry recorded a $2.2 billion profit, a rise of 110 per cent from the previous year.

At the same time the proportion of premiums they return to their customers has fallen from 88.03 per cent in 2019-2020 to 82.61 per cent in 2022-23.

Treasurer Daniel Mookhey wants the big four insurers to pay their NSW hospital bills.Credit: Dominic Lorrimer

However, not all insurers are underpaying, with 44 of 53 private health insurers either already paying the correct rate, or having now agreed to resume paying after discussions with the government.

This includes Teachers Health, Nurses and Midwives Health, and Emergency Service Health. However, according to the government, the four biggest funds have a combined share of 74 per cent of the private health insurance market.

Since June, the government has sought to resume the long-standing arrangement with private insurers, which dates back more than 40 years. A fortnight ago, the government wrote to the major funds seeking final clarity on whether they will pay for private patients in public hospitals.

Mookhey said Baird was “right 10 years ago when he demanded the insurers pay their fair share”.

“And we are right to enforce that agreement now. It is unfortunate that it has come to this – but the insurers can resolve the impasse by paying their bills,” Mookhey said.

“My door remains open for the insurers to do the right thing.”

The government has calculated that in the same period that they have not paid their bills to NSW Health (2019 –2024), NIB paid its executive team more than $11.2 million in bonuses, while Medibank spent almost $8 million on executive bonuses.

The government will also introduce its long-promised rental reform to parliament this week, which will include a new rule of one rent increase per year, closing a loophole in the existing legislation.

No-ground evictions will be banned, and it will be easier to have pets in rental properties.

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