Insurer profits soar as dodgy tactics persist

PRIVATE hospitals applaud the Albanese Government's crackdown on health insurers in a bid to restore fair pricing for customers and hospitals, alike. Health Minister Mark Butler's insistence that insurers return to a sustainable payout ratio for private hospitals, while also flagging legislation to ban 'phoenix' policies, echoes APHA calls.

"It's pleasing to see movement on these important issues," APHA CEO Brett Heffernan said. "While families struggle with the cost-of-living crisis the health insurance industry has cleaned up with its second highest after-tax profit of $2.13 billion. Adding insult to injury, the insurers also reaped $3.4 billion in higher 'management fees'.

"That's $5.53 billion, in just one year, from the premiums Aussies pay. According to APRA, in 2024-25 the health insurance industry kept 16% of customer premiums for themselves. That's a massive clip. They only paid out 84% for healthcare.

"Meanwhile private hospitals have been going backwards at the hands of insurers with annual funding shortfalls of over $1 billion a year for three straight years (see graph right). This funding gap is the difference between what it costs hospitals to provide healthcare and what health insurance companies actually pay.

Data sources: Consumer Price Index, Australia, ABS (2025); Quarterly Private Health Insurance Statistics, APRA (2025), (released 29 August 2025) (Due to hospital treatment benefits being measured per episode, prosthesis benefits are not included as they are not reported per episode. Excluded: medical benefits to medical practitioners; benefits for nursing home type patients, hospital substitutes, prostheses and public hospital treatment).

"For example, Medibank's share of this growing gouge as Australia's biggest health insurer saw its operating profit soar to $741.5 million (2024-25), up 7.1% from the previous year. Medibank's management fees shot up by $40 million in just 12 months to $654.9 million.

"Yet, Medibank's benefits payout ratio over the year was only 82.9%, even below the industry's appallingly low 84% average. The traditional benchmark has been 88%, but the health insurers haven't hit that annual mark since 2019-20.

"At the same time, Aussie families are copping it in the neck. While some may be aware that the average premium increase awarded to insurers this year was 3.73%, what they probably don't know is that the average increases for the big end of town were much higher at 3.99% for Medibank, 4.95% for HCF, 5.1% for BUPA, and 5.79% for NIB.

"It gets worse. Those are just the average increases for the big four insurers. Many of the policies they offer rose by 8-9%. Given these four insurers capture about 75% of the market, most families are paying way over the odds.

"In December the Commonwealth Ombudsman lifted the lid on 'phoenix' policies. A loophole-exploiting practice that sees health insurers scrap existing products, replace them with near-identical services and sell them at much higher premiums.

"Minister Butler responded that, while not illegal, "it is clearly against the spirit of the law. It's an underhanded, largely secret way of health insurers raising their prices outside of the usual approval process". The Minister warned if insurers didn't stop it or he would legislate to stop them.

"Flying in the face of that warning, a CHOICE investigation found that just two months later HCF closed its Premium Gold policy to new members and released the almost identical policy Optimal Gold, with a 34.6% price hike.

"The CHOICE report shows that over the past four years, despite average premiums rising by an approved 11.9%, health insurer 'phoenixing' jacked up the average price of Gold cover by 45%.

"It's high time the health insurance cowboys were reined in."

-ENDS-

See Federal Health Minister Mark Butler's Statement of Expectations letter to the insurers.

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