Higher utilisation drives increased benefit outlays

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The latest update from the Australian Prudential Regulation Authority has confirmed private insurance benefit outlays increased largely in-line with premium increases in the past year.

APRA's quarterly private health insurance statistics, covering the year to 30 June 2018, confirmed benefit outlays increased by 3.4 per cent to $20.288 billion.

At the same time, the industry's total premium revenue increased 3.6 per cent to $23.9 billion.

The update confirms the direct relationship between premium revenue and benefit outlays. It suggests Labor's policy to apply a two-year 2 per cent cap on premium increases will impact benefit outlays.

The sector's financial performance remained static over the year with the aggregate net profit after tax falling from $1.4 billion to $1.37 billion.

The number of Australians with hospital cover fell by 57,000. or 0.4 per cent, during the three months to 30 June. Just over 45 per cent of the population have hospital cover while 54.3 per cent have some form of general treatment cover.

The breakdown of benefit outlays also confirmed the impact of price cuts to medical devices.

During the June quarter, insurers paid $3.893 billion in hospital treatment benefits, an increase of 8.8 per cent on the March quarter. The vast majority of the increase was driven by increased utilisation.

However, while benefits for accommodation and nursing rose, outlays per episode for prostheses fell 3.5 per cent. Benefits per episode for cardiac prostheses fell 6.5 per cent, hips fell 1.7 per cent and knee 2.5 per cent.

“Our industry delivered cuts of $1.1 billion from the cost of life-saving and life-changing medical devices," said CEO of the Medical Technology Association of Australia, Ian Burgess.

"Those cuts lowered the cost of private health insurance for Australian consumers and delivered the lowest premium increase in 17 years.

“Recent APRA quarterly figures showed that private health insurance benefits paid for prostheses decreased by 13 per cent, saving the private health insurance industry $72 million in the March quarter alone. 

“But we know that as Australians remain active and live longer the demand for prosthesis will increase utilisation.

“At the end of the day we believe access to a full range of medical technology is the most valuable component of a private health insurance policy and we’re committed to doing what we do best – assist patients lead healthier and more productive lives.”