The Medical Technology Association of Australia (MTAA) has urged the federal government to "force" all private health insurers to quickly return the 'deferred claims liability' that was accrued in the early period of the pandemic during the halt on elective surgery.
The Australian Prudential Regulatory Authority (APRA) advised private health insurers to retain a reserve during the halt on elective surgery on the presumption procedures were being deferred but not cancelled.
This Deferred Claims Liability (DCL) sat at $1.75 billion in March 2021 with some health insurers already starting the process of returning it to members. It currently sits at around $1.4 billion.
In its latest release for the three months to the end of June, APRA said the impact of the pandemic on future claims remains uncertain given ongoing lockdowns and that this "makes it more challenging for the industry to assess the near-term direction of the DCL."
"Industry’s commitment not to profit from COVID-19 has seen some PHIs announce their intention to return surplus funds to their policyholders while others are continuing to monitor experience and exploring options. APRA endorses the position that insurers should not profit from COVID-19 and notes that the method and timing of the return of any COVID-19 related profits is a matter for an insurer’s Board and senior management to determine," said the prudential regulator.
However, the MTAA is calling for immediate action given the quarterly release shows a significant boost in the profits reported by private health insurers.
"Between June 2020 and June 2021 insurers’ net investment income rose a staggering 313.2% ($146.2 million to $603.9 million) and their net profits are up 93.7% ($754.0 million to $1.5 billion)," said the MTAA.
“There is no doubt that insurers profited from the pauses put on elective surgery in 2020 to the tune of $1.4 billion in deferred claims which they are still hoarding,” said CEO Ian Burgess.
“MTAA does not believe that insurers should profit from this difficult but necessary decision, which delayed access to needed surgery for thousands of their members.
“Over the past four years insurers will have benefitted from an estimated $1.2 billion in savings due to device price reductions delivered by the medical technology community as part of MTAA’s 2017 Agreement with the Federal Government.
“Unfortunately, there is no evidence that insurers have honoured their commitment to pass these savings onto their members.
“MTAA welcomes the clear statement from APRA that insurers should not gain financially from COVID-19. But based on past experience we fear this COVID windfall will disappear into the corporate coffers of insurers and never be returned to members.
“That’s why we’re calling on the Government to explore all legislative and regulatory options to ensure the COVID windfall insurers’ have pocketed are returned to members and not used to increase management bonuses and shareholder profits,” added Mr Burgess.