Labor 'crack' makes no sense

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Private Healthcare Australia has slammed Labor over its latest "crack” at industry.

Shadow health minister Catherine King issued a statement in response to the data released by APRA showing private health insurers return to members 86 per cent of all premium revenue as benefits.

"This data is just more evidence of the need to act to make private health insurance fairer for Australians and shift the balance back to consumers," said Ms King.

Labor has proposed a controversial plan to cap annual premium increases at two per cent for two years while asking the Productivity Commission to review the private health insurance sector.

However, according to Private Healthcare Australia, the APRA data actually confirms the industry returns to consumers the highest percentage of premium of all insurance types.

“It makes no sense as it simply proves what we have been saying all along," said CEO Dr Rachel David in response to Catherine King's statement. "Health funds are consistently paying 86 cents in the dollar back to their members in the form of benefits (it has been above 85 cents for 15 years) and this compares with 64 cents for general insurance.

“The figures also verify that there is no pot of gold hidden in health funds. Health fund profit margins were 5.16% in the 12 months to December 2017 and health fund profits have remained stable over the last decade running between 4.5 and 6%, significantly below the returns made by private hospital groups and medical specialist practices.

“When a fund unexpectedly earns more than this, the surplus is paid back to members as seen recently with Medibank’s announcement of a $20 million loyalty bonus following the half year financial results.

“Industry regulator APRA has stated repeatedly there is no evidence of health funds over-earning or retaining inappropriate levels of member funds. Health funds paid a record $20 billion in benefits on behalf of their members in the 12 months to December 2017, which was an increase of 4.15% on the previous 12 months."

In a recent speech, APRA executive board member Geoff Summerhayes said the prudential regulator, "...does not consider industry profits or capital levels to be the primary drivers of rising premiums."

"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.

Ms King claimed the 14 per cent goes "towards the bottom line of insurers". However, it also includes management expenses related to the cost of administering benefits and even services like call centres and online support, health and wellness activities, and in-pharmacy preventive care such as free flu vaccines.

“Health funds are committed to providing these services for their members while keeping premiums affordable. There is only one reason premiums increase and that is because health funds are paying for more healthcare," said Dr David.

“The only pathway to lower premium increases is better management of input costs, ensuring fraud, waste, over-pricing of medical supplies and low-value care are eliminated from private healthcare.  This can only be achieved with the support of Australian governments and regulators.

“The introduction of a capped premium model as proposed by Labor will do nothing to address increasing utilisation of private and public health services.  It makes absolutely no economic sense and the longer-term impact of their policies on both our private and public health systems could be disastrous,” added Dr David.