Private health insurance: families hit with $127 a year premium lift

Most Australians will pay at least an extra 3.2 per cent for private health insurance in 2021 under new increases allowed by the federal government.

Most Australians will pay at least an extra 3.2 per cent for private health insurance.

Private health insurers have got their Christmas wish, with Health Minister Greg Hunt granting premium price hikes that will cost Australian families an extra $127 a year on average.

From April 1 next year, health insurance premiums will rise by 2.74 per cent on average, in what Mr Hunt said was the lowest increase in 20 years.

But the government has measured its average across the number of insurers, not by people insured. Most Australians will pay at least an extra 3.2 per cent, with the two biggest funds — Medibank and Bupa, which control more than 51 per cent of the market — receiving approvals for premium increases of 3.25 and 3.21 per cent respectively.

Meanwhile, NIB members — who account for 8.1 per cent of Australians with private health insurance — will fork out an extra 4.36 per cent.

This compares with anaemic inflation of 0.7 per cent after COVID-19 plunged the country into one of its deepest recessions.

But health insurers have defended the increase, saying it won’t even keep pace with spiralling healthcare costs. In its submission to Mr Hunt, Bupa said it was expecting healthcare costs to rise 3.5-4 per cent in the next 12 months.

NIB — a former mutual company but now ASX-listed — used the government’s owned budget figures to justify its increase. According to the budget papers, healthcare spending is tipped to soar 7.6 per cent to $72.36bn next year, before a moderate increase of 2.46 per cent in 2022.

“Premium changes are never welcomed but the reality is that the cost of medical treatment continues to rise well above inflation and we’re increasingly seeing members access healthcare services with health insurance a critical funding tool enabling treatment and care,” NIB managing director Mark Fitzgibbon said.

“A perfect example is the concerning increase in members accessing member health services. In the 12 months to 30 September 2020 mental health benefits totalled $48.8m.

In the year to June 30, NIB’s premium revenue jumped 4.2 per cent to $2.44bn while claim payouts increased 6.9 per cent to $1.96bn

The increases also follow many health insurance customers being unable to use their policies for months, with the pandemic halting elective surgery earlier this year, while others shied away from using their extras cover — such as visiting the dentist or optometrist — to remain socially distanced.

Health insurers have been putting away cash to fund an expected backlog of surgery and extras claims, which are starting to trickle through. Across the industry, claims rose 1.5 per cent to $6.2bn in the September quarter, according to the health insurance regulator, the Australian Prudential Regulation Authority.

Mr Hunt’s approved premium increases start from April 1.

He said a family would pay $2.44 more a week on average, while a single person would pay an extra $1.14 per week.

“The 2.74 per cent average industry change from 1 April 2021 will be the lowest average change since 2001, and considerably lower than the average change of 3.25 per cent in 2019, and 2.92 per cent in 2020,” he said.

NIB managing director Mark Fitzgibbon justified the 4.36 per cent premium surge, citing increased health costs.

Bupa Health Insurance managing director Emily Amos said its approved 3.21 per cent hike was “less than the projected increase in healthcare costs for 2021”.

“We don’t want health insurance premiums to cost one dollar more than necessary, especially during these challenging economic times when access to healthcare is so critical,” Ms Amos said.

“The reality is we are operating within an environment where the price of health insurance premiums is driven by rising healthcare costs.’’

Medibank chief customer officer David Koczkar said: “Despite the fact that we continue to pay more for health costs, because as a community we are getting older and going to hospital more, Medibank is working hard to ensure that private health insurance remains affordable.”