Health funds hit back after minister rejects 3.5 per cent premium hike

Mr Hunt has written to insurers demanding they resubmit applications for 2020, after being hit with requests for increases understood to be an average 3.5 per cent – more than double the rate of inflation and higher than this year’s 3.25 per cent hike.

Dr David said for-profit health funds were battling rising costs, with ageing members putting in more claims, hospital costs increasing and suppliers of medical devices using sales tactics to drive up expenditure.

She said the trend was “not sustainable” and government intervention was needed.

Health funds made an average net profit margin of 4.2 per cent in the three months to September – 19 per cent lower than the same period a year earlier, when the average net margin was 5.2 per cent – the latest data from the Australian Prudential Regulation Authority shows.

Mr Hunt said the government was “on the side of the consumer” and was working hard to deliver the lowest private health insurance premium changes in 19 years.

“Private health insurance is an essential and valuable part of the health system, and our government is committed to improving value and affordability,” he said.

Health regulations require the minister to approve insurers’ proposed premium increases unless satisfied they are “contrary to the public interest”.

Dr David said funds were not making “big profits”, with lower margins than other categories of insurance due to the fact they paid out 80 per cent of premium revenue in claims.

Mr Hunt said the government had implemented “the most comprehensive reforms to private health insurance in over a decade” with changes including new gold, silver and bronze policies, and discounts for young people, introduced this year, making it “simpler and more affordable”.

He is consulting on further changes to help lower insurer costs, including a review of how medical device manufacturers market and sell products such as surgical glues, sponges and prostheses in private hospitals, after insurers blamed their sales tactics for a failure to deliver $250 million in promised savings despite a 2017 agreement to lower prices.

The minister is also considering including allowing health funds to pay for medical services to be delivered outside of hospitals at a lower cost.

Dr David said these changes were not expected to be delivered in time to affect health funds’ costs for 2020, saying insurers had to base their premium increases on projections based on costs.

“We need that decision to be made now. The only thing we can factor in are the current levels of expenditure.”

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