Australia's private health insurers paid $20.5 billion in benefits in 2017-18, according to the latest annual report from the prudential regulator.
The Australian Prudential Regulation Authority (APRA) has released the annual Operations of Private Health Insurance Annual Report 2017-18.
The report confirms a 3.4 per cent increase in benefit outlays. Benefits paid by Australia's 37 private health funds rose by almost $700 million - putting total benefit outlays above $20 billion for the first time.
Premium revenue rose 3.6 per cent - closely in line with benefit outlays.
“Health funds are paying more for healthcare services and continue to consistently pay 86 cents in the premium dollar back to members to fund their healthcare. Health funds pay the highest percentage back to customers of all insurance types – it has been above 85% for 16 years,” said Private Healthcare Australia CEO Dr Rachel David.
“Also, the proportion of in-hospital treatment medical services with no gap increased to 88.1% in 2017/18 compared to 86.6% in 2016/17."
The decline in the proportion of people facing a gap payment for in-hospital treatment comes as health minister Greg Hunt prepares to consider a report on out-of-pocket costs from the cross-stakeholder committee led by chief medical officer Professor Brendan Murphy.
The APRA report also shows a small increase in the number of policies and Australians covered by private health insurance.
In 2017-18, 13.54 million Australian were covered under 6.63 million policies, compared to 13.51 million under 6.59 million policies in 2016-17.
“The APRA report shows that health funds continue to operate efficiently with a focus on delivering benefits to members," said Dr David.
“Net profit margins for the PHI industry continue to remain low at 5.3%, a modest return when compared with other forms of insurance and below the returns made by private hospital groups and medical specialist practices. Health fund profit margins have remained stable over the last decade running between 4.5 and 6%, as have Management Expense Ratios at 8.9%.
“APRA’s report dispels the myth that health funds are hiding a pot of gold. Health funds, whether run as a for-profit or a not-for-profit, must operate as successful businesses to be able to keep premiums affordable for their members and to ensure members’ care can be funded if and when it is needed.
“PHI is a critical part of Australia’s health system. It benefits all Australians by keeping pressure off the public hospital system.”