The insurers’ peak body didn’t take kindly to the health minister’s ultimatum on hospital funding.
The peak body for private health insurers says funds will not be bailing out “mismanaged” or “inadequate” private hospital operators any time soon.
Private Healthcare Australia was responding to an ultimatum from federal health minister Mark Butler yesterday threatening them with regulatory action if they do not increase payments to private hospitals within three months.
“We will not agree to any measures that risk driving up the cost of health insurance for 15 million Australians investing in it during a cost-of-living crisis,” said PHA CEO Dr Rachel David.
“Australians with health insurance should not be asked to bailout private businesses that have been mismanaged or are delivering inadequate services.”
Dr David also disputed Mr Butler’s assertion that private fund members were “frustrated that they are getting less services for [their money]”.
“There is no evidence that health fund members are getting fewer services from their health insurance,” she said.
“The most recent data from the Australian Prudential Regulation Authority showed health fund payments to hospitals increased 8% in 2024 compared to the year before, and the average amount paid for hospital treatment per insured member rose 5% over the same period.
“The latest data shows that for every dollar spent on premiums last year, consumers received on average 85% back in payments for hospital services. This is the highest return of any type of insurance.”
Brett Heffernan, CEO of the Australian Private Hospitals Association, had a rebuttal, however.
“The Minister’s call mirrors our policy for 88 cents in the dollar on premiums be returned to healthcare providers,” he said.
“This has been the traditional split. In fact, in the past 90 cents had been achieved. But the health insurance industry has not hit the 88-cent benchmark since 2019-20.
“In fact, the shortfall in funding from insurers to healthcare providers has been $3 billion over the last three years.
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“With last year’s moderate average 3.03% premium increase, the Australian Prudential Regulation Authority exposed that the insurers banked $1.85 billion in profits.
“It was their second biggest cash bonanza ever, eclipsed only by 2023’s record $2.2 billion profit. On top of that, insurance ‘management fees’ also rose 18% over 2023-24 to reap another $3.5 billion a year from premiums.
“Last week, APRA found that in the last quarter alone (October-December 2024), the health insurance industry had netted a further $581 million in profits and that just 83 cents in the dollar was being provided to healthcare providers.”
Dr David said that the insurers were already doing their bit to help private hospital operators and were continuing to work “behind closed doors” and at the Private Health CEOs forum to do what they could to help.
“We are working through the challenges for the sector via the CEO Forum set up by the health minister and have proposed various policy solutions that require further consideration,” she said.
“Health funds have also been working closely with state and territory governments and other private hospital providers behind closed doors to offer one-off assistance packages following news of maternity unit closures to ensure people with health insurance have ongoing access to essential health services.
“Health funds will continue to engage in constructive discussion about possible short-term actions to assist hospitals in trouble via the CEO Forum.”