Ombudsman bells cat on health insurer failures

THE Commonwealth Ombudsman's latest State of the Health Funds report is a damning indictment on how health insurers operate and a federal government that has allowed these tactics to fly under the radar for almost four years.

The Report confirms what the Australian Private Hospitals Association has been saying for years. The private health system is broken and being abused by insurance companies.

"The equation for health insurers is simple," APHA CEO Brett Heffernan explained. "Premiums keep going up, private hospitals are being shortchanged and insured patients are suffering due to massive exclusions in their insurance cover, meaning they are paying more but getting less for it.

"With this situation festering for four long years, is it any wonder the insurers are banking record after-tax profits of over $2 billion a year? It's made more obscene by the 18% hike in so-called 'management expenses', with these murky provisions reaping insurers another $3.4 billion a year.

"The higher premiums Australians pay do not translate into meeting the higher costs for the treatment and care. Despite this being the justification for premium hikes, there is nothing compelling insurers to meet rising health costs. And the data proves they don't.

"The pre-Covid benefits ratio paid to private hospitals was 90%. The Ombudsman exposes that Medibank is at just 85.6%, Bupa 82.4%, NIB 82% and HCF 87.8%. This comes at a time when private hospital utilisation is above pre-Covid levels.

"These four insurers account for three-quarters of insured Australians. None are within cooee of the federal government's stated expectation of 90%, with each percentage point under the 90% average representing more than $200 million in underpayments to hospitals.

"It is now over a year since the Federal Health Minister issued an ultimatum to insurers to lift their payments to the appropriate target. The threat of legislation for force the insurers to comply has clearly been ignored.

"The management expenses applied by insurers is equally galling. While Medibank comes in at 7.6%, Bupa's 11.3%, NIB's 10.7% and HCF's 12.4% show insured people are not getting value, with some of the biggest insurers being among the least efficient.

"Compounding this is that a massive 70% of people with hospital insurance have exclusions in their cover. These are often hidden costs because people just don't know what they're getting or, more to the point, not getting in their health insurance.

"It's deliberately confusing, jargon-laden and designed to entrap. Most out-of-pocket costs are due to insurance policies that are not transparent and do not cover patients adequately.

"The fix is simple. The federal government must legislate to restore pre-Covid benefits of 90%, as it said it would. If not, this year's premium increases will, again, just line the pockets of insurers.

"It is imperative that a Mandatory Code of Conduct for contracting between hospitals and insurers accompany the 90% benefit ratio guarantee. Such a Code, with an arbitration model and price transparency overseen by the ACCC, will shed light on, and put a stop to, the rogue behaviour of insurers that undermines the future of private healthcare.

"If health insurers stand by their contracting tactics, they should have no issue with being accountable to the ACCC for their conduct."

-ENDS-

Previous Media Centre:
10/3/2026 Government scraps eye injection change amid warnings patients worse off