Private health insurance premium increases should go to hospitals

The increase to health insurance premiums should go towards supporting private hospitals, according to Australian Private Hospitals Association (APHA) CEO, Michael Roff.

Federal health minister Mark Butler has approved an average 3.03 percent increase in health insurance premiums from April 2024.

Mr Roff said private hospitals needed help.

"After suffering losses through COVID-19 enforced elective surgery restrictions, private hospital activity is not where we would expect, especially given there are now more than 850,000 additional Australians with hospital cover than prior to the pandemic," he said.

"On top of this, health insurance payments have not kept pace with unavoidable cost increases experienced by hospitals.

"Private hospitals have reported growing workforce costs, along with higher than six percent increases on those cost-of-living factors all Australians are familiar with – power, food and fuel.

"As a result, we have seen a rising number of private hospitals close, while others have stopped providing loss-making services like maternity care."

Mr Butler said the 3.03 percent increase was well below the annual rise in wages, social security payments and inflation, with wages rising by 4.2 percent and inflation increasing by 4.1 percent in 2023, and social security payments increasing in line with inflation.

"When costs rise, Australians want to know that higher premiums are contributing to system-wide improvements, like higher wages for nurses and other health workers and ensuring that affordable services are available," he said.

Mr Roff said data from the Australian Bureau of Statistics data showed only 30 percent of businesses in the private hospital sector reported a profit or just broke even in 2021-22.

That's down from 89 percent in 2019-20 and the situation has deteriorated further in the past 12 months.

In contrast, health insurers are experiencing record profitability. Last financial year, the private health insurance industry made a collective profit of more than $2 billion, up from a $1 billion profit the previous year.

"Unfortunately, we will continue to see private hospitals close or reduce services unless health insurance companies put sustainability of the private health sector before their own profits," Mr Roff said.

"Private hospital success is in everyone's interests.

"Without private hospitals, health insurance companies don't have a product to sell.Every time a private hospital closes, the burden on struggling public hospitals increases, as do waiting lists.

"This also throws more burden on taxpayers to fund health services."

Mr Roff added the private hospital sector was experiencing the most challenging period in living memory.

"If health insurance companies continue to refuse to meet cost increases experienced by hospitals it will ultimately be self-defeating," he said.

"As capacity in the sector continues to diminish, we are likely to see the emergence of waiting lists for treatment in private hospitals.

"Fast access to hospital care and avoiding waiting lists is one of the key selling points of private health insurance.

"If private health insurers want to have a product to sell, they need to up their game and pay for the services private hospitals provide."

A total of 14.7 million Australians hold private health insurance cover and accessed more than $23.5 billion in health and medical benefits paid by insurers in 2023.

All premium changes will apply from Monday 1 April 2024.

Each insurer's average change will be displayed on: www.health.gov.au

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