Medibank extends extra limits, taking ‘Covid support’ to $500m

Australia’s biggest health insurer will give its members another year to use unclaimed extras, extending its ‘Covid support’ to almost $500m.

Medibank group executive customer portfolios Milosh Milisavljevic says giving customers another year to use their unclaimed extras will add about $14m to group’s ‘Covid support’ package.

Australia’s biggest health insurer Medibank is giving its customers another year to use unclaimed extras in a move it says will extend its Covid support to almost $500m.

Stop-start lockdowns over the past Two-and-a-half years have limited those with private health insurance to claim extras such as dental, physiotherapy and psychology.

But Medibank group executive customer portfolios Milosh Milisavljevic said extras claims were beginning to return to pre-pandemic levels as restrictions ease. He said the rollover would “give back” about $14m to Medibank AHM members, taking the group’s “Covid support” to $477m.

It comes as the Australian Competition and Consumer Commission has put health insurers on notice about calculating “Covid savings”, saying they must include skipped extra services such as a dental scale and clean as well as delayed surgeries.

“We said right from the start that we would not profit from Covid,” Mr Milisavljevic said.

“We remain committed to return all permanent net claims savings due to Covid to our Medibank and AHM customers, and this latest wave of support for AHM customers is designed to do exactly that.”

The entire health insurance sector generated a $1.8bn profit last year, reversing a pre-pandemic trend of Australians — particularly the young and healthy — withdrawing from private health.

Medibank, which is listed on the ASX, returned to growth in the first half of last financial year, signing 49,000 new policyholders — the first time it had recorded an increase during a six-month period since 2013. It has continued this trend, announcing in February that policyholders had grown 3.3 per cent in the past 12 months.

The flight to private health comes as public hospital waiting lists have increased dramatically. But elective surgery restrictions as well as lockdowns over the past year have limited claims growth, prompting private health insurers to return so-called Covid savings in several ways, including rollovers, premium rise deferrals and rebates.

Mr Milisavljevic said the extra’s rollover will be applied automatically to eligible customers’ remaining annual limits for services such as dental, physiotherapy and psychology. It excludes optical, which has a separate annual limit, pre and post-natal services and joint fluid replacement injections with rolling year limits, as well as orthodontics and laser eye surgery with lifetime limits and hearing aids, the limits of which reset every three financial years.

“It’s been tough for customers, the health sector and some of our providers and so we do want to make sure that our customers get the most out of their extras,” Mr Milisavljevic said

“It is a critical part in prevention and proactive care. And so with a lot of people being impacted through some of the lockdowns and restrictions around not being able to access some of the providers, this gives them an extra year to effectively do that.”

The Australian Prudential Regulation Authority has also told insurers not to bank Covid savings and that they must set aside enough money to fund a backlog of treatment. It is not known when claims will return to normal, but Mr Milisavljevic said it was “pretty close” to recovering to pre-pandemic levels.

“We haven’t communicated any specifics but it’s pretty close,” he said.

“The restrictions late last year, early this year have impacted utilisation, so we did see our customers less likely to go out and use their extras. But it has recovered in the last couple of months.”

At the same time, several big hospital funding contracts are up for renewal, including Medibank’s agreement with Australia’s second biggest private hospital operator Healthscope. Meanwhile, Ramsay has issued Bupa a termination notice after the pair failed to reach a new agreement in the wake of hospital costs rising up to 7 per cent.

The health fund lobby, Private Healthcare Australia, warned of “double-digit” premium increases if Bupa caved to Ramsay’s “demands”. But Mr Milisavljevic said there is “a lot” that funds and providers can do to make private healthcare more affordable.

“A big part of that is having the lowest premium increase in the last 21 years and then also delaying that for six months.

“We’ve also taken almost $100m of costs out of our business in the past five years, which allows us to keep premiums low and so we’re doing our part in terms of ensuring affordability of private health.

“And then we have been working with our partners, as well as through some of our investments to create new care models and make options more available to customers that deliver more value, choice and contract. That’s initiatives like prevention, telehealth, short stay and no gap procedures and also home care options.”