Reform stalls as tensions rise over premium increase


The private health sector is debating reform, premiums and the return of the deferred claims liability as health minister Greg Hunt considers requests for annual increases.

Private health insurers have pushed back on Minister Hunt's written request that a large number of insurers reconsider their requested annual premium increase.

"On 9 December 2021, Private Healthcare Australia (PHA) received written notification from your office that our member funds would be required to resubmit their premium applications for next year by December 14," said Private Healthcare Australia CEO Dr Rachel David in a letter to Minister Hunt.

"While PHA as an industry association does not have direct line of sight into individual submissions, in the absence of any material savings delivered through policy reform to the Protheses List, the funds will be constrained by their fiduciary duties to their members. As yet the industry has not been guaranteed sufficient adjustments to the over-charging and over-claiming of medical devices that would warrant or justify re-submissions for the current premium round calculations.

"We continue to share the concern of the Australian Prudential Regulation Authority (APRA) and others about the ongoing financial viability of a number of private health insurers, particularly smaller regional funds that cannot continue to balance government-mandated claims inflation of 2.5 times CPI for medical devices, let alone manage these price impacts during the turbulence of the global pandemic and the ongoing impacts on the health care sector."

Dr David's frustration is clear in the letter. She tells Minister Hunt that the "constant dialogue" on reform is not progressing fast enough.

"Health funds have been explicitly prohibited from placing proper controls on this, and as a result Australians are now paying at least 30-100% more for the same generic medical devices, than comparable economies."

Dr David added, "In this year’s Federal Budget, the Morrison Government promised a solution, and $22 million was allocated to addressing this critical issue.

"Unfortunately, we have now been advised these reforms are being delayed and watered down, reducing the benefit to consumers for the next calendar year and maintaining high prices for medical devices.

"We are again requesting a document outlining the timing and likely quantum of savings from the reforms so this can be accounted for in next year’s premium pricing. Even if the funds manage to shave off a small amount in response to your letter, it will not be sustainable and could have been much greater had these reforms been promptly implemented.

"Australia’s health funds cannot be expected to keep the lid on premiums while the government is forcing them into wasteful expenditure that is pushing up costs with no demonstrable benefits to members."

While insurers debate their annual premium increase with Minister Hunt, the medical device sector has restated its call for the return of the entire deferred claims liability.

In the early period of the pandemic, the prudential regulator instructed insurers to set aside funds for claims deferred as a result of the temporary halt on most elective surgery and other health services.

Insurers have started the process of returning their deferred claims liability in the form of support for policyholders, benefits, cash payments and premium adjustments.

In its annual report to the Senate, the ACCC said its return had been delayed by extended pandemic restrictions on some elective surgery. The regulator also questioned how insurers were calculating their profitability during the pandemic.

“Australians should not have to pay one extra cent for their insurance until the funds have handed back 100% of their mega COVID profits and addressed rising management costs,” said Ian Burgess, CEO of the Medical Technology Association of Australia.

“We know what a boon COVID has been to the insurance industry. The recent September data from the Australian Prudential Regulation Authority (APRA), shows that insurers bagged their highest ever profits of $1.8 billion, a whopping 212% increase on their previous years’ profits.“

He continued, "According to APRA, between 2014-15 and 2020-21, corporate insurers increased their ‘management expenses’ from $1.7 billion to $2.5 billion – a staggering increase of over $800 million.”

Mr Burgess added, "We welcome the calls from ACCC deputy chair Delia Rickard for insurers to return all benefits from procedures that were not performed and are not expected to be performed later, in particular for extras treatment and geographic areas that were subject to extended lockdowns.

“We also call on the insurers to address their rising management costs before asking the government, Australian consumers and the Australian taxpayer to subsidise yet another premium increase.”