‘Dud industry’: Private health insurers accused of profiting from their customers pain
The Australia Institute has accused private health funds of profiting from their customers’ pain after its latest fee hike, branding it “a dud industry”.
The federal government this week signed off on an average industry premium increase of 3.73 per cent.
It is an increase on previous years but less than the 6 per cent jump some private health insurers had hoped for.
New analysis from The Australia Institute has found that private health insurers are making massive profits but have managed to convince the government to let them make even more.
According to the latest data from the Australian Prudential Regulation Authority (APRA), the industry’s biggest insurer, Medibank, recorded a pre-tax profit of $785 million in 2024.
Medibank’s profit represents a 45 per cent return on equity, which means – in one year – it made almost half the overall amount the company’s shareholders have invested in the company, The Australia Institute said.
Already some have announced their increases will be higher.
The Australia Institute said BUPA made $607 million in 2024 and is putting premiums up by 5.10 per cent, while NIB made $289 million and will hike premiums by 5.79 per cent.
“While Australians struggle through a cost-of-living crisis, health insurers are raking it in,” David Richardson, senior research fellow at The Australia Institute said.
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“How much profit is enough? Medibank made three-quarters of a billion dollars yet is still putting premiums up by more than most,” he added.
“They know their customers are struggling. But they obviously care more about profits.”
Private Healthcare Australia chief executive Rachel David said on Wednesday that insurers needed to raise premiums to keep up with inflation.
“The increase of 3.73 per cent, agreed with federal regulators, is as low as the health funds can go without seriously squeezing private hospitals and other providers,” she said.
Health Minister Mark Butler said he had written to 29 insurers in December asking them to resubmit claims for an increase.
“Based on the resubmissions, I was not prepared to tick and flick their asks and instead asked them to resubmit again,” he said.
The multiple submissions and resubmissions had however ensured a better deal for 15 million people with private health insurance, he added.
Insurance comparison site iSelect said increasing premiums could prompt many to drop or change their cover, with 28 per cent of a November survey’s 1545 respondents saying any increase would prompt them shop around.
Richardson said that when insurers are already “making a fortune”, there is no justification for increasing premiums above the rate of inflation.
“Do they even live in the real world? This is a dud industry which is milking profit from customers’ pain,” he said.
Health insurance expert Tim Bennett said there are many reasons for the huge premium increases, but the primary driver is the ageing population and fewer young people taking out health cover.
“The cost of providing health insurance has gone up more than inflation,” Bennett explained.
“Broadly speaking, [the ageing population and fewer younger policy holders are] the reason that health insurance has increased out of step with inflation over the past 20 years.’’
– with AAP
