Health minister rejects insurers' bids for large premium increases

Mark Butler has rejected private health insurers’ initial bids for premium increases. (ABC News: Nick Haggarty)

Federal Health Minister Mark Butler has told private health insurers to “have another go” after rejecting their bid to lift premiums by up to 6 per cent.

Under federal law, health insurers can increase premiums once a year but must seek the minister’s approval.

The minister can withhold approval if satisfied the proposed increases are not in the public interest.

Mr Butler said this year’s proposals, which he received in November, were not justified or proportionate.

“I’ve written to every private health insurer, directing them to have another go and put forward a more reasonable figure that considers their years of record profits and the declining proportion of premiums they return to customers, particularly while household budgets are under pressure,” Mr Butler said.

The ministerial rejection power was last used by Greg Hunt in late 2019.

The insurers have until late January to resubmit.

Rachel David, chief executive of industry body Private Healthcare Australia, said the government was entitled to apply “detailed scrutiny” to insurance pricing and the industry would work with governments to keep premiums “as low as possible”.

Neither the government nor insurers would specifically confirm the 6 per cent figure, which was first reported in the Australian Financial Review, but Dr David said she expected the final approved figure would be “significantly lower” than that.

Dr David added insurers’ proposed increases had been motivated by inflation and record patient claims.

“The cost of medical and hospital services increased 5.9 per cent this year and there’s been a 9.6 per cent surge in hospital admissions funded by insurers,” she said.

“Inflation is hitting the health sector hard … Every week, hospital groups are asking major health funds for additional funding beyond their agreed contracts to chase inflation.”

Dr David said the government could reduce health sector costs by improving its pricing arrangements for the purchase of generic medical devices, which she called “outdated”.

“Australians are paying the highest prices in the world for medical devices,” she said.

“We are paying 30-100 per cent more for common medical devices such as insulin pumps compared to people in New Zealand, the UK, France and South Africa … Every dollar saved by pricing reform will be returned to health fund members in the form of lower premiums.”

Nearly 15 million Australians have private health insurance.

The cost is partly subsidised by taxpayers via the private health insurance rebate.

A tax penalty also applies to taxpayers above a certain age and income level if they do not take out an “appropriate” level of insurance.

Last week, the Australian Medical Association (AMA) accused the private health industry of “short-changing” patients.

Its annual report card found rebates and benefits paid out to patients had fallen sharply compared to pre-COVID levels, despite higher insurer profits.

“The reality is the value many consumers receive from their private health insurance is declining, relative to the big profits insurers are making,” AMA president professor Steve Robson said.

The Australian Competition and Consumer Commission found private health insurance profits more than doubled in 2022-23 compared to 2021-22.