PHI payout ratio falls short despite 15 months of govt warnings

IF you're waiting for health insurers to do the right thing, even at Federal Government insistence, the latest Australian Prudential Regulation Authority data tells you don't hold your breath.

The payout ratio from insurers continues to fall short at just 83.4% for the March quarter despite the Albanese Government's verbal and written direction that insurers return to the pre-Covid level of 90%. If risk equalisation and state ambulance levies are included in benefits, it distorts to 85.0%.

Regardless of how you cut it, the health insurance industry continues to fail its obligations to insured patients and the private hospitals that treat them. The prevailing 'do nothing' approach sees the middlemen in healthcare banking unprecedented profits, while patients get less cover and private hospital costs go unmet.

"The government must step-up and step-in to honour its March 2025 pledge to guarantee a minimum 90% payout ratio through legislation if insurers did not comply. This guarantee must accompany a Mandatory Code of Conduct for contracting between hospitals and insurers, with price transparency under an arbitration model, to make insurers accountable, ensure fair payments and establish consistent good practice terms to iron out entrenched abuses.

"At a woeful payout ratio of 83.4% for the March quarter, the insurers are a long way short of the Albanese Government's call for 90%," APHA CEO Brett Heffernan said. "This latest quarterly result takes the year-to-date ratio to just 85.5%, or 86.5% if including the artificially-inflated impact of state levies and risk equalisation, neither of which go to hospitals.

"Health insurers continue to ignore the Albanese Government's direction. The health insurance industry has had more than enough time and rope for the government to now compel insurers through legislation to meet their obligations to patients and hospitals.

"Their conduct is a major slap-in-the-face to government and 12.8 million Aussie families forking out more than ever for hospital insurance despite the government approving year-on-year premium hikes. This year alone, gold policies soared by an average 13%, rising by as much as 25% at the upper end.

"Families with hospital insurance are paying more than ever, but getting less for it. Exclusions in their policies continue to rise to the highest levels ever. A staggering 71.5% of policyholders now have these exclusions, so, if they get sick or injured, for most their insurance won't cover their needs.

"Insurer claims they care about their customers facing gaps from medical professionals is contemptible. They support transparency in pricing, but not if it applies to them. In reality, by far the biggest out-of-pocket cost patients pay is because insurance policies leave them high and dry.

"For four years the health insurers have been allowed to short-change private hospitals, on average, by over $1 billion each year. That means insured patients get less choice, less access, and quality and innovation in their healthcare options are compromised.

"At the same time health insurers are banking the biggest profits ever, averaging over $2 billion each year for the last three years in after-tax returns. They are also reaping $3.4 billion a year in so-called 'management expenses', the highest ever. All from the premiums policyholders pay.

"It is entirely reasonable that mandating the benefits ratio and a code of conduct – two measures that cost government and patients nothing – be established as a sensible solution to clear market failure and systemic abuses."

-ENDS-

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