Australia’s top health insurers return $1.6bn ‘Covid savings’ to members after Medibank splashes cash

Health insurers are returning hundreds of millions of dollars to members from surgery cancellations and other pandemic restrictions. Here’s how much you will get.

Medibank has returned $682m to its customers via cash ‘givebacks’, financial hardship packages and deferrings its annual premium increase. Picture: Paul Jeffers/NCA NewsWire

Australia’s biggest health insurer Medibank will give its members up to $620 each as it returns an extra $205m of so-called ‘Covid-19 savings’, following record profits across the sector.

The move takes total Covid support – which includes returning cash to members, financial hardship packages and deferring premium increases – to $1.6bn from Australia’s five biggest health funds.

It comes as net profit across Australia’s entire private health insurance sector soared from $952m to $2bn in the year to March 31, according to Australian Prudential Regulation Authority data.

Health insurers have been under pressure not to bank pandemic savings. The Australian Competition and Consumer Commission put funds on notice about being “too conservative” in calculating savings after elective surgery bans and other Covid-19 restrictions limited access to healthcare services.

Medibank chief executive David Koczkar said the insurer had assured its customers from the start of the pandemic that it would not profit from the pandemic.

“We’ve stuck by that promise with our broader package now reaching a record $682m. Returning these Covid-19 savings back to our customers is the right thing to do,” he said.

“The cash give back will be welcomed by our customers as they grapple with pressures on household budgets due to rising inflation, interest rates, fuel prices and home energy costs.”

Medibank customers will receive up to $145 each for extras only policies and up to $620 for hospital and extras policies deposited into their bank accounts in September. On average extras-only policy holders will receive $28, while those with hospital and extras coverage will get $123, Mr Koczkar said.

Medibank will also delay its annual premium increase of 3.1 per cent by another month until November 1. The increase was scheduled to be effective from April 1 before it was delayed until September then October and now November.

Mr Koczkar said The one-month deferral of premium increases will be applied automatically to about two million policies for Medibank and ahm customers who hold an active resident hospital and/or extras policy at any time during the 1-month period.

Overall, premium revenue jumped 5.6 per cent to $26.6bn in the year to March 31 across the entire health insurance sector, while claims paid eased 2.8 per cent to $21.6bn.

“Premium revenue grew … from a combination of membership growth and premium rate increases,” APRA said, which early in the pandemic ordered funds to set aside enough capital to fund an expected backlog of surgeries known as the deferred claims liability.

“Claims costs fell 2.8 per cent over the year due to various Covid-19 imposed restrictions, particularly in the March 2022 quarter and by movements in insurers’ Deferred Claims Liabilities. These factors increased both gross and net margins compared to the previous year to 18.8 per cent and 9.2 per cent respectively.

“A proportion of the reported insurance profit is expected to be offset over the coming months through insurer commitments not to profit from Covid-19, such as via premium increase deferrals or other giveback means.”

Medibank’s blockbuster “giveback” comes after rival Bupa announced last week it would return $155m to customers as part of its second round of distributing Covid-19 savings.

About 3.4 million Bupa customers will receive payments between $16 and $118, depending on their policies, from October, taking the total amount Bupa has returned to customers to $618m since the pandemic began.

Bupa health insurance managing director Chris Carroll said: “Australians are facing increasing cost of living pressures, so we know every dollar makes a difference to household budgets”.

“This is not just about doing what we said we’d do but doing it in a way that’s best for customers. We’re determined to keep health insurance affordable and that’s why we’re returning Covid-19 related savings where we can.”

ASX-listed NIB, meanwhile, has returned almost $100m to its members via various initiatives, including deferring its 2.66 premium increase by seven months.

NIB CEO Mark Fitzgibbon said while some healthcare treatment had been cancelled during the pandemic in many cases it had been deferred.

“While NIB’s claims experience throughout the pandemic has been lower than what would otherwise have been the case, inevitably there will be a catch up. This likelihood is reflected in nib’s balance sheet provision for deferred claims,” Mr Fitzgibbon said late last month.

“We’ll continue to monitor our position and as we have done throughout the pandemic, consider if any further support is warranted.”