NIB CEO Mark Fitzgibbon warns government faces tough call on public healthcare

The outgoing boss of one of the country’s top health insurers warns that a shrinking pool of working taxpayers and an ageing population will leave a future government with a tough call.

Extreme pressures on the public health system is sending more people to take up insurance with NIB Holdings. Picture: AAP

Extreme pressure on the public health system is driving more people to take up private health insurance, NIB Holdings says, after the insurer’s profit growth came in less than expected.

The group’s outgoing chief executive Mark Fitzgibbon told The Australian that the public health system was buckling under the weight of a shrinking pool of taxpayers and a rapidly rising number of retirees requiring care.

The number of people who have taken out private health insurance with NIB’s flagship Australian Residents Health Insurance (arhi) business has now increased 15 quarters in a row.

Mr Fitzgibbon said growing waiting lists in public hospitals was increasing demand in the private system as more Australians also became aware of the risks to their health and need for protection following Covid-19.

“People are also see companies like us actually investing in a future where we’re more than just insurers,” he said. “We facilitate 170,000 telehealth consultations, oversee 130,000 scripts and facilitate 14,000 symptom checks using an AI.

“This kind of platform offers a strong value proposition and makes us more attractive in the marketplace, particularly the younger people who don’t necessarily see themselves at risk of having to go to hospital.”

Mr Fitzgibbon warned that the public health system was beginning to buckle under the weight and was at risk of no longer being fit for purpose amid a shrinking pool of working taxpayers and the rising cost of delivering health care.

“The truth is we’re simply running out of taxpayers to fund an ageing society,” he said.

“We have a growing dependency ratio of older people, people like me, to younger taxpayers and that is causing a lot of strain.”

NIB CEO Mark Fitzgibbon will exit his role at the end of 2024.

He noted that when Medibank was launched in the 1970s to provide affordable health care there were 11 working taxpayers for one retiree, but was now five and would decline to three working taxpayers by 2040.

“We’re simply running out of sufficient taxpayers to fund the public healthcare system, especially its backdrop of rising NDIS cost, aged-care cost generally,” Mr Fitzgibbon said.

“At some stage not too far down the track the government will have to say that public healthcare is reserved for those that will be left behind, while everyone else will have to pay their way.”

Increased appetite for private health insurance delivered the highest sales on record in the 12 months to June for arhi business, with strong performance attracting higher value, combined hospital and extras policies.

But the ASX-listed group had its overall underlying profit come in at $257.5m – 5 per cent less than market expectations, while group revenue rose 9.3 per cent to $3.3bn.

Analysts are also concerned that claims inflation was 6 per cent at NIB, significantly more than 2.7 per cent reported by Medibank.

As a result, shares in NIB tumbled 17.7 per cent to $5.98.

NIB expected claims to grow from the artificially low base created by Covid-19 and demands from hospitals across Australia and New Zealand for price increases to repair their finances and meet growing labour costs.

Mr Fitzgibbon said demand was rising off artificially low levels that were seen during the pandemic which was driving up costs.

The company was looking to manage this through margin compression as it had inflated margins during the pandemic.

“We told investors that, but inflation has certainly been exacerbated, not just by activity returning to a new normal, but by the hospitals trying to repair their balance sheets very quickly, and other pressures like wage pressures for nurses in the public system,” he said.

Mr Fitzgibbon announced last month that was his intention to retire and provide notice of his retirement some time from September 1, and exit the business by the end of the year.

He will be replaced by arhi executive Ed Close.

A stoush with private hospital group St Vincent’s came to an end last week after both parties agreed to a new funding agreement that will spare patients huge price hikes.

However, it fails to resolve issues within the sector around soaring costs.

The company declared a second-half dividend of 14c per share fully franked, taking the full-year payout to 29c, up from 28c in the previous period.