Report finds health funds sitting on $2bn of Covid cash

Unspent cash accumulated by health insurance companies during the pandemic has surged to nearly $2bn, sparking calls for the government to investigate ‘profiteering’.

An Australian Prudential Regulation Authority report has found the amount of cash held by private health insurance funds as a result of Covid-19-related elective surgery and medical delays had reached $1.9bn.

Unspent cash accumulated by health insurance companies during the pandemic has surged to nearly $2bn, sparking calls for the government to investigate “profiteering” by funds.

A group of medical bodies – ­including the Australian Medical Association, the Australian Medical Technology Association of Australia, Catholic Health Australia and Private Hospitals ­Association – is urging the commonwealth to crack down on insurers and ensure companies use money for the benefit of their members.

The calls come after an Australian Prudential Regulation Authority report released on Wednesday found the amount of cash held by funds as a result of Covid-19-related elective surgery and medical delays had reached $1.9bn, despite promising to ­return funds to members.

The amount of unspent funds is now the highest level since the start of the pandemic, rising at an average of $514m year-on-year.

The Australian this week revealed spending by private health insurance companies on salaries, bonuses and management costs has also increased at three times the rate of expenditure on ­member benefits.

In a letter ­obtained by The Australian and sent to Financial Services Minister Stephen Jones and Health Minister Mark Butler, the Medical Technology Association of Australia urged Mr Jones to instruct regulators to undertake an ‘immediate investigation into the extent of fund “hoarding”.

The body is also pushing the government to investigate how unclaimed funds have been ­directed to management ­expenses rather than being used to reduce premiums.

“The revelations that since 2019, PHI have increased their ­expenditure on non-benefit ­categories – mostly management fees, overheads, dividends, and executive compensation – by triple the rate at which they have been paying benefits to Australian ­policyholders demonstrates an ­urgent need for redress if we are to keep private health insurance as a sustainable option for Australian families,” the letter says. “It is clear PHI’s promise not to profiteer from the pandemic and its need to hold additional capital in reserve are both demonstrably false.”

Pressure has been mounting for the government to act after ­opposition health spokeswoman Anne Ruston this week said ­analysis of recent APRA data ­deserved “urgent investigation” to ensure health insurance ­remained affordable for all Australians.

The Australian Medical Association called for a complete overhaul of the private health ­system, including the creation of an independent pricing authority to ensure patients receive value for money.

AMA president Steve Robson.

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

AMA president Steve Robson urged the government to create a private health system authority and ensure funds spend a minimum on healthcare for every premium dollar patients pay.

“The hard-earned money that patients pay in private health insurance premiums should come back to them in the form of healthcare ­delivery, not go ­towards increasing profits for insurers,” Dr Robson said.

Catholic Health Australia policy director Caitlin O’Dea ­accused insurance funds of sitting on a “mountain of cash”.

Peak insurance body Private Health Australia chief executive Rachel David said the sector had been engaged with the regulators since March 2020 to ensure all members were treated fairly ­during the pandemic. Dr David said health funds had “nothing to hide” and would fully comply with any future investigation.

Mr Butler said private health insurers needed to “ensure their members are getting value”. He added that his department, was the Australian Prudential Regulatory Agency, the Private Health Insurance Ombudsman and the Australian Competition and Consumer Commission were ­“actively monitoring the sector to ensure insurers do not profit from the pandemic”.