Labor says it will work with industry on reducing costs

Latest News

"We will of course want to work with the private health insurance industry about how they actually get costs out of the system," said shadow health minister Catherine King yesterday.

Ms King was making the obvious point that, in a system where premium revenue is rising largely in line with benefit outlays, costs are ultimately where any discussion on affordability will need to focus.

It was a point made by APRA executive board member, Geoff Summerhayes, in a recent speech.

"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.

It remains unclear how Labor's two per cent cap on premiums for two years will actually operate given benefits paid by insurers are rising at double that. Reducing costs, as stated by Ms King, means cutting benefit outlays or payments to service providers.

The quarterly statistics released by APRA show premium revenue rose 4.2 per cent over the 12 months to December 2017 while benefit outlays rose 3.9 per cent.

The opposition has focused on a 7.3 per cent increase in the industry's profit before tax. To put that in context, net profits went from 7.69 per cent premium revenue to 7.89 per cent.

The increase in net profits, as cash, represented 0.06 per cent of benefit outlays. 

Hospital services, including accommodation, was by far the largest benefit category in the December quarter. Insurers paid over $2.7 billion in benefits for hospital services, representing 70 per cent of total hospital benefits, comfortably ahead of medical services and prostheses.