Private health insurers have pointed to statements from the prudential regulator to repudiate claims the sector is 'continuing to rake in bumper profits' at the expense of consumers.
The Australian Prudential Regulation Authority has announced a review of capital standards for private health insurers.
In a speech to the Private Healthcare Australia conference today, APRA's Peter Kohlhagen said, "The fundamental driver of premiums is changes in the claims costs experienced by insurers, in turn driven by changes in the costs and utilisation of health care."
Private Healthcare Australia’s chief executive Dr Rachel David said the review is designed to ensure health funds retain sufficient capital to protect their members.
“Health funds are required by law to retain sufficient capital to ensure they can pay for members’ healthcare if and when they need it," said Dr David.
"According to the latest APRA data health funds are paying out record benefits ($20.4b in the year to Sept 2018) on behalf of 13.5 million members and have consistently returned 86c in the premium dollar back to members in healthcare payments.
“In the September quarter, total benefits paid increased by 3.62% while premium revenue increased by 3.31%. Net margin has decreased from 5.52% to 5.18% and net profit for the year to September 2018 was $1.41 billion, down 1.4% compared to same time in the previous year."
Shadow health minister Catherine King has accused the sector of "raking in the profits" and said its proposed 2 per cent 2-year cap on premiums is "needed".
The sector has argued the cap proposal will simply delay premium increases, undermine the sector's ability to meet to its capital requirements, and ultimately harm consumers.
APRA has publicly argued that costs rather than industry profits or capital levels are the primary drivers of rising premiums
APRA executive board member, Geoff Summerhayes, said in a speech earlier this year that the debate over the affordability of private health insurance needs to be "informed and correctly focused".
"The underlying cost of Australia’s health system is the ailment; rising insurance premiums are just a symptom. Specifically, the fundamental forces pushing premiums up are higher claims costs experienced by insurers, through such factors as a greater uptake of medical services among policyholders and the rising cost of treatments and procedures," he said.
Dr David said, put simply, this means premiums have increased because health funds are paying for more healthcare.
She added that this supports the industry’s position and dispels the myth that health funds are “continuing to rake in bumper profits.” (Catherine King 15/11/18).
“More than half of the Australian population has private health insurance and the industry is committed to keeping premiums affordable and maintaining the value of health cover for its members.
“APRA’s review aims to ensure health funds will be able to continue to fund the healthcare needs of their members into the future. Keeping private health insurance sustainable is crucial for Australia’s mixed public private healthcare system as PHI reduces pressure on public hospitals,” said Dr David.