Health premium hike hits decade low as affordability hurts insurers

Health insurers will lift annual premiums by an average of 4.84pc this year, the lowest increase in a decade.

NIB chief executive and managing director Mark Fitzgibbon (left) and Chairman Steve Crane. (AAP Image/Dean Lewins)

Health insurers will hike annual premiums this year by an average of 4.84 per cent, the lowest increase in a decade, with insurers struggling to recruit new customers as affordability continues to bite.

Federal Health Minister Greg Hunt, in his first major move since taking on the portfolio after Sussan Ley resigned last month because of a travel expense scandal, signed off on annual premium increases that equate to around $200 extra each year for some policies.

Health insurance giant Medibank said its average increase would be 4.6 per cent, which it said was its lowest increase in 15 years.

The annual increase comes as insurers continue to fight for further reform of the Prostheses List, which sets the price funds must pay for medical devices. Insurers argue transparent and competitive pricing for devices used in the private system would drive premiums lower. The government has already committed to some reform of the list, identifying $86 million in savings, but the industry has demanded further cuts.

Medibank (MPL) chief executive Craig Drummond said the insurer had worked hard to reduce waste and inefficiency in the health system.

“An example of this is our commitment to return 100 per cent of the Government’s prostheses reform to customers,” he said.

“In 2017, this means that Medibank customers are expected to benefit from an estimated $24m in annual savings. What we know is that there is potential for further adjustments to the prostheses list, which would benefit customers.”

Mr Drummond said Medibank’s average premium increase this year was 24 basis points under the industry average, even as health costs continued to grow at a faster rate than wage growth.

HCF, Australia’s leading not-for-profit private health fund, increased its premium by an average of 3.65 per cent, its lowest increase in more than a decade and the lowest among the major insurers.

Nib’s (NHF) average increase is 4.48 per cent, which chief executive Mark Fitzgibbon said meant it was the third consecutive year that the insurer had delivered an increase lower than the previous year.

“People often compare health insurance premium increases to the consumer price index but that measures only the cost of medical treatments,” Mr Fitzgibbon said.

“Most of the growth is actually a result of people overall having more treatment.”

Mr Fitzgibbon said there were “very real” opportunities to improve efficiency in Australia’s healthcare system. He highlighted that there remained widespread evidence of unwarranted surgery and hospitalisation and overcharging customers.

“The ridiculous prices we are paying on behalf of consumers for many medical devices is screaming out for attention,” he said.

Bupa announced today an average premium increase of 4.9 per cent. The insurer said while it may vary according to policy and state, on average, Bupa health insurance premiums would increase by around $2 per week for single members and $4 per week for families before any rebate or discount.

Managing director of Bupa Health Insurance, Dwayne Crombie, said the company understood that increasing health insurance costs created difficulties for many Australians.

“While we believe that in many ways Australia has a world-class health system, there are several areas of waste and inefficiency which flows through to consumers and ultimately increases the cost of their insurance premiums,” he said.

Dr Crombie said premium increases were driven by many “complex” factors including an ageing population, increasing use of services, increasing costs of healthcare providers and new and more expensive medical technology and treatment options.

“Most of these costs are outside the control of health insurers, and they explain why average premium increases run above the rate of general inflation,” he said.

“Some costs, for example for prostheses items, are set by government. Late last year the government announced it would reduce the price of some prostheses items. We have guaranteed to pass on every cent of these price reductions to our customers. This year that equates to about $12 off the price of each policy, but those cuts can go deeper.

“Australians are still unjustifiably paying amongst the highest prices in the world for the medical prostheses and we are asking the government for further price reductions that will also be passed on to our customers.”