Private Health Insurers profit while costs of care increase

Australian Private Hospitals Association (APHA)

Private health insurance companies continue to make huge profits following the pandemic, while refusing to meet private hospitals halfway as the costs of providing essential health care soar, says Australian Private Hospitals Association (APHA) CEO Michael Roff. Mr Roff said the issues impacting Australian households in the cost-of-living crisis are also hitting private hospitals.

“This is one of the worst times the sector has experienced. Many of our hospital operators are calling it the worst in living memory. Australian Bureau of Statistics data from their most recent issues paper shows private hospitals reporting a profit or just breaking even has dropped from 89 percent in 2019-20 to 30 percent in 2021-22. We know from anecdotal feedback that figure is even lower today.

“This is due to rapidly rising operating costs that are out of the control of hospitals. The cost of food, power, medical supplies, and medical technology have increased by an estimated 10 to 15 percent in the last year. At the same time, health insurance companies are only offering hospitals increased payments in the order of 2 to 3 percent.

“In the meantime, private health insurers are still sitting on about $700 million in deferred claims liability – premiums that members paid during the COVID-19 pandemic when they couldn’t use their health insurance.

Mr Roff said it was unconscionable that the big health insurers put so much focus on increasing profits, when they should be investing in the private hospital care their members pay for.

The Australian Prudential Regulation Authority (APRA) data shows that in the last 12 months, the private health insurance sector more than doubled its profit to almost $2.2 billion.

Mr Roff said while a further increase of 70,000 people with private hospital cover between March and June is welcome, there may be fewer private hospitals available to meet insured Australian’s needs unless the financial viability issues are addressed.

“We have seen closures in Hobart, Orange Private Hospital going into administration and other hospitals closing ICU or maternity facilities. This is not isolated, the pressure is being felt across the entire sector.

Mr Roff called on private health insurers to put some of their record profits into meeting the rising costs of hospital care to ensure private hospitals survive.

“Health insurance companies have the capacity to ensure the viability of private hospitals without the need for massive premium increases. Earlier this year the insurers lobby group said they would work with private hospitals to address the increasing cost of operations, but these have proven to be just empty words.”

/Public Release.