Administration costs hit to health fund fees

Private health funds are being accused of hiking up administration fees charged to consumers by nearly 30 per cent since 2017 | SEE YOUR FUND’S INCREASE

Soaring health management fees are costing fund members $413 per policy on average each year.

Private health funds are being ­accused of having increased the administration fees charged to consumers by nearly 30 per cent since 2017, with spiralling health management expenses driving up the cost of ­insurance premiums.

Soaring health management fees are costing fund members $413 per policy on average each year, with the money being spent on bureaucracy rather than benefits for hospitals or other services.

The allegations come as the cost of private health insurance rose by 3 per cent for more than 15 million policy holders on April 1, after Health Minister Mark Butler approved the rise – which was the largest annual increase in the past five years.

The peak medical device association is hitting back at attacks from major health insurers, warning soaring management fees are to blame for rising premiums rather than rising costs of medical devices used in surgeries and day hospitals.

According to analysis of the prudential regulator’s data by the Medical Technology Association of Australia, representing medical device manufacturers, private health insurance management fees are up 28 per cent since 2017.

MTAA says management expenses charged by private health insurers grew from $2.1bn to $3bn between 2016 and 2022. Over the same period, the cost of medical technology including syringes, wound dressings or implanted devices grew from $2.1bn to $2.3bn.

MTAA chief executive Ian Burgess said health insurers needed to ensure they were offering customers value for money at a time when “Australians are making tough decisions about how to balance their expenses”.

“With health insurers receiving $7bn in taxpayer subsidies and insurance products standardised in line with the gold, silver, bronze tiers, there is an onus of responsibility on insurers to control their management costs and offer better value,” Mr Burgess said.

Australian Medical Association president Steve Robson accused private health insurers of jacking up management fees, warning Australians were “being dudded by insurers who are taking their money for profit”.

Dr Robson called on the federal government to establish an independent, arms-length private authority to act as an umpire on the system and ensure Australians had access to the best value-for-money healthcare.

“There is a lot of financial wrangling between these groups including the insurers, hospitals and device manufacturers. It is opaque and extremely difficult to get to the bottom of what is happening,” Dr Robson told The Australian.

“It should be of huge concern to Australians who are using the health system and paying for premiums. This is a key reason why the AMA is calling for an independent, arms-length private health authority to oversee the system. There is no oversight of the system at the moment and it is costing Australians a huge amount of money.”

But Private Healthcare Australia chief executive Rachel David said health funds had been forced to spend more on administration fees in recent years, pointing to increased investment in ­cybersecurity, IT service upgrades to support electronic billing and claims, and paying call centre staff to provide product ­information to consumers.

Ms David, who represents major health funds including Bupa, HCF, Medibank, NIB and AIA, said management expenses for health insurers were about 10 per cent of expenditure, which was low compared to other forms of insurance.

She doubled down on claims premium increases were being driven by inflated medical device costs, saying Australians were paying up to 100 per cent more for generic devices compared to patients in the UK, New Zealand, France and Germany.

“Health funds are doing everything they can to deliver value and keep premiums affordable for members,” she said.

Consumer Health Forum CEO Elizabeth Deveny warned private health insurers must not take advantage of consumers who were doing it tough.

And opposition health spokeswoman Anne Ruston accused Labor of failing to help Australians with health costs despite promising to make it cheaper and easier to see a doctor.