APRA: Benefit growth outstrips premium revenue

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Growth in benefit outlays outstripped premium revenue in the past year, with private health insurers also suffering a small decline in profitability, according to the latest report from the prudential regulator.

The Australian Prudential Regulation Authority (APRA) has issued its Quarterly Private Health Insurance Statistics update for the first three months of 2019.

It has revealed insurers paid out $20.7 billion in benefits over the twelve months to the end of March 2019, compared to $20.1 billion for the previous twelve months to the end of March 2018, an increase of 3.2 per cent.

Premium revenue covering the same period rose by less than benefit outlays - by 2.7 per cent - rising from $23.7 billion to $24.4 billion.

The sector's profitability before tax fell 1.4 per cent - from $1.82 billion to $1.8 billion.

“This reinforces the value of the Government’s PHI reforms and need for healthcare stakeholders to continue to work together to keep PHI affordable for Australians," said Private Healthcare Australia chief executive, Dr Rachel David.

"Today’s statistics are significant in that they demonstrate what can be achieved without capping premiums. However, there is no room for complacency as we must remain focussed on keeping premiums down.”

The number of Australians covered by a private health insurer hospital treatment cover fell by 0.1 per cent in the first three months of 2019 - however, this translated into a 14,471 increase in the number of insured people.

Family policies increased by 4,686 and single policies by 3,052 during the quarter, according to APRA.

The number of hospital episodes covered by private health insurance increased by 1.2 per cent over the twelve months to the end of March 2019, from 4.634 million to 4.693 million, while the number of insured ancillary services rose 2.8 per cent.

Benefits for hospital episodes rose 3.2 per cent to $15.4 billion and 4.2 per cent to $5.3 billion for ancillary services. 

The Australian Private Hospitals Association said the report shows how people value the private system.

“The ability to choose when and where you have your surgery, choose which doctor performs the procedure and have access to a private room makes private hospital care a priority for many,” said CEO Michael Roff.

Mr Roff said the re-elected Morrison government should prioritise addressing the number of privately insured patients being treated in public hospitals.

“The first priority for the next Health Minister is to finalise a Heads of Agreement with the states. Hopefully, the two recalcitrant states that have not yet signed the Heads of Agreement, New South Wales and Victoria, will now come to the party so the process can move forward.

“The Heads of Agreement includes a framework for addressing the issue of public hospitals ‘harvesting’ private patients, particularly in emergency departments,” said Mr Roff.

Average out-of-pocket costs remained largely flat over the past year - at $316 for hospital episodes and $47 for ancillary treatments.

During the first three months of 2019, private health insurers paid $725 million in benefits for dental, $258 million for optical, $116 million for physiotherapy $116 million and $83 million for chiropractic.

Average benefits per person for ancillary services increased from $412 to $430 over the twelve months to March 2019. The largest component of ancillary benefits is dental, for which $227 was paid per insured.

Insurers paid $3.7 billion in hospital treatment benefits, comprised of $2.645 billion for hospital services such as accommodation and nursing, $562 million for medical services and $496 million for prostheses items.

"Average hospital benefits per person increased from $1,318 for the year ending March 2018 to $1,368 for the year ending March 2019," said APRA.

Total benefits paid for prostheses decreased by 7.2 per cent in the March quarter 2019 compared to the December quarter 2018. The prosthetic group for which the greatest amount of benefits were paid was cardiac, comprising 16.4 per cent of all prosthetic benefits and totalling $81 million.

“The PHI industry is keen to engage as soon as possible with the Morrison Government to continue the positive work carried out during the last term of Government to control rising healthcare costs and reduce waste in the sector," said Dr David.

"PHA will continue to advocate for the restoration of the PHI rebate to 30 per cent for low and middle-income earners, as a means of arresting the decline in the proportion of the population with PHI. Financial incentives, including the means-tested rebate, are a proven way to promote participation and keep private cover more affordable for all Australians.

“Other key measures which need further work and will keep premiums down and improve the value of PHI include further reform of the medical device sector, putting an end to practice of public hospital administration staff trawling for private patients when they present to emergency departments, and improved transparency to address the issue of unexpected out-of-pocket (gap fees) medical costs."