Medical device sector calls for immediate return of deferred claims revenue

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The Medical Technology Association of Australia says the latest data from the Australian Prudential Regulation Authority (APRA) highlights the need for private health insurance companies to return funds set aside during the pandemic.

In the early period of the pandemic, APRA directed insurers to set aside funds for claims deferred due to the temporary halt on most elective surgery.

That 'deferred claims liability' (DCL) peaked at $1.7 billion earlier this year. Private insurers are in the process of returning the DCL through pandemic support, benefits related to claims, cash payments and premium changes.

However, the MTAA says the time has come for insurers to immediately return these funds to members.

“We now have proof that last year’s health service shutdown delivered insurers record profits by enabling them to collect contributions from members for services they could not access,” said CEO Ian Burgess.

“These profits are in stark contrast to the financial difficulties experienced by many of their members during this period. If insurers are serious about lowering the cost of insurance, they should immediately put 100% of their COVID bonuses into premium reductions.

“MTAA does not support members’ hard-earned premiums being used to deliver increased profits for insurers’ big shareholders. “We believe that these profits belong to their members and should be handed back,” he said.

Mr Burgess continued, “MTAA is disappointed to see that insurers have actually increased their spending on ‘management expenses’, despite the significant drop in claims over the last year.

“Management expenses are now an average of 9.5% across the sector, with one insurer reporting using a staggering 23.5% of its revenue for management expenses.

“Unless insurers are forced to return their COVID windfall to members, MTAA is concerned that these shareholder payouts and management fees will continue to grow.

“We are also disappointed that the corporate insurers continue to blame prostheses for their premium increases. Prostheses are the only part of our health system that have not been steadily increasing in price over the past two decades.

“In fact, since 2005, on average, benefits for prostheses have decreased. For example, the price for Australia’s most commonly used hip prostheses has fallen 29.5 per cent since 2015.

“Given that prostheses costs comprise only around 10% of total benefit payments by private health insurance funds, the insurers need to look elsewhere if they want to reduce premiums for their members. Reducing their rising management expenses would be a great place to start.

“MTAA understands that the pause in elective surgery last year was necessary but we don’t think that insurers should profit from this difficult decision. The APRA data clearly shows that insurers have means to return their profits to members and we are calling on the government to ensure they do so,” added Mr Burgess.