Health funds ‘squeezed by costs’, plead for premiums hike

Private health insurers say they are struggling to keep premium rises low for the coming year.

Private Healthcare Australia chief executive Rachel David. Picture: Kym Smith

Private health insurers say they are struggling to keep premium rises as low as possible for the coming year, blaming a backlog of elective ­surgery, the cost of medical ­devices and rising salaries for ­putting ­“upward pressure” on premiums.

Health funds have put their submissions to the government for the premium rises they hope to institute, but the suggestion that there is upward pressure on premiums has provoked a furious response from the medical ­technology industry.

It cites record profits and money set aside from premium collection while claims were low due to Covid-19 as reasons that premium rises should be kept low in 2022.

Private Healthcare Australia chief executive Rachel David said: “Several things will have been factored in by the health funds. One is the catch-up that they’re expecting in elective ­surgery now that the lockdowns are ended.

“The second is that we’re ­expecting a big workforce shortage of nurses and other hospital staff. And the amount that we’re seeing in claims for medical ­devices and some of the consumables is growing about 2½ times ­inflation.

“There’s quite a lot of upward pressure on premiums. We’re trying to keep costs down but all of those things will need to be ­factored in.”

Dr David also hit out at what she said were delays in progressing reforms of prostheses pricing, saying the medical device industry and other stakeholders were opposing key aspects of the ­reforms at every turn.

The federal government committed $22m in this year’s budget to improve the prostheses list to bring the cost of medical devices in the private system in line with public system prices, together with other reforms.

Doctors and medical device companies have complained that doctor choice on which medical devices to use for a patient would be undermined by the reforms.

“The reform process is going ahead but … very slowly,” Dr David said. “Every tiny decision we make is being ­opposed, essentially by vested interests.”

Private health insurers say the amount of benefits paid out for medical devices has risen by $2bn over the past five years, with more items including glues and other consumables being claimed per episode of care.

But the Medical Technology Association of Australia points to the fact that medical devices have dropped in cost over recent years, and disputes the idea that ­prostheses claims should have a large bearing on insurance ­premiums.

“Insurers are doing a very good job at blaming everyone else for premium increases,” said MTAA chief executive Ian ­Burgess.

Mr Burgess said a key reason there were more prostheses being claimed by hospitals was due to the ageing population and greater incidence of chronic disease.

Mr Burgess said insurers should be putting the $1.2bn that has been set aside by insurers ­following elective surgery cancellations during the pandemic ­towards paying for the increasing cost of elective surgery as the backlog is cleared.

“Last year to September insurers accrued their highest profit ever – $1.8bn,” Mr Burgess said. “There is no reason for ­premium increases given that level of profitability. Insurers are extremely cashed-up right at the moment.”

Mr Burgess disputed that the prostheses list reform process had been delayed by the medical technology industry. “We’re not aware of anything that is going to delay that ­implementation timeline in terms of the key part of that reform,” Mr Burgess said.

“There have been some delays by the department around the consultation process, but that’s not delays by stakeholders. The reform process is proceeding.”

Health Minister Greg Hunt is set to decide on what premium ­increases insurers will be allowed to levy in coming days.