APRA report confirms benefit rise

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Health insurers paid a record $19.83 billion in benefits during 2016-17, up 4.5 per cent on the previous year, according to APRA's Private Health Insurance Annual Report.

The report, which also reveals Bupa has become Australia's largest private health insurer based on the number of policies, confirms premium revenue rose largely in line with benefit outlays, at 4.6 per cent.

Of the $19.83 billion in benefits, $14.75 billion went to hospital treatment, while $4.87 billion was paid for general.

According to the chief executive of Private Healthcare Australia, Dr Rachel David, health funds are paying out the highest percentage of premium back to customers of all insurance types – an average of 86 cents in the dollar. This compares with 67 cents for property insurance and 62 cents for general insurance.

“The APRA Report demonstrates that health funds are operating successfully and efficiently and the industry is in good shape. Whether run as a for-profit or a not-for-profit, health funds must operate as successful businesses to be able to deliver benefits for their members. The worst outcome for consumers is a badly operated fund that falls over," said Dr David.

“Health fund profit margins have remained stable over the last decade running between 4.5 and 6%.  This is a modest return when compared with other forms of insurance.  It is also significantly below the returns made by private hospital groups and medical specialist practices. Net investment income increased from $290 million in 2015-16 to $544 million in 2016-17 and health funds net margin (profit margin) has gone down - 0.27% from 5.45% in 2015-16 to 5.18% in 2016-17. 

“There is no pot of gold hidden in health funds, and the majority of premium income is passed back to members.  Health funds are committed to keeping private health insurance premiums affordable for members and recognise the importance of working with hospitals, specialist health professionals and medical suppliers to establish premiums at a level which ensures members’ care can be funded if and when it is needed.

“PHA market research shows that while more than 84% of people are satisfied with their private health insurance and want to keep it, premium affordability is a major issue for health fund members. This is due to input costs, utilisation and health inflation.

“Private health insurance is embedded in Australian culture and is an indispensable part of our health system. PHI pays for close to two thirds of non-emergency surgery; 90% of day admissions for mental health care and 50% of all mental health admissions; 70% of joint replacements, 60% of chemotherapy, and 88% of retinal procedures take place in the private health sector. In addition, under Extras cover, health funds pay out more than $2.59 billion for dental care per year, which is more than dental care expenditure by the Federal Government. Keeping health insurance sustainable benefits all Australians by keeping the pressure off the public hospital system,” added Dr David.