The Australian Medical Association (AMA) has released its 2023 Private Health Insurance Report Card showing the rebates for identical procedures still vary wildly between insurers, with a 6% variation identified for cataract surgery.
The peak body’s president Professor Steve Robson encouraged consumers to carefully consider which private health insurance option is best for them, with a focus on products that deliver treatment they are most likely to need in the future.
“Our report card highlights the importance for consumers to look closely at their options, as the benefits can vary dramatically between insurers for the exact same product,” he said.
“For the uncomplicated delivery of a baby, we uncovered a dramatic 30% variation of rebates between the highest and lowest paying insurers. That is a staggering $520 difference, which would understandably cause much frustration and confusion for patients when looking for insurance.”
An analysis of the most common procedures showed the benefits paid cataract surgery as of 1 November 2023 varied from $1,341 to $1,266. Although this represented a sample of health insurers, this was a 6% difference and among the lowest variation rates in the report.
“When there is a difference between the doctor’s fee and the insurance benefit, out-of-pocket costs can occur. It is a common misunderstanding that the doctor’s fee is the reason for an out-of-pocket cost, but the reality is that there can be a large difference in the amount an insurer will pay towards a medical service, and it varies from fund to fund and procedure to procedure,” the report stated.
“These differences contribute to differing out-of-pocket costs paid by patients and point to the importance of looking beyond the premium charged for different policy products to ensure you get value for money.”
Robson said the report card also showed the need for a Federal Government mandate that would require every insurer to return a minimum amount to patient care each year.
In 2022-23, the MA said gross insurer surplus from hospital insurance was about 18% of hospital premiums paid – an increase of $1.36 billion from the 2020-21 financial year.
However, the proportion of hospital insurance policy premiums returned to patients in the form of rebates and other benefits for hospital treatment fell to 81% in 2022-23 –down from 88% per cent in 2018–19.
“The reality is the value many consumers receive from their private health insurance is declining, relative to the big profits insurers are making,” Robson said
“As our private hospital system covers 40% of Australia’s hospitalisations and performs two out of three elective surgeries, it is crucial the private health insurance sector thrives, especially as more and more pressure is heaped on our public hospitals.
“However, there should be a mandated responsibility for all private health insurers to return a minimum amount of money that they receive back to their customers in the form of rebates and benefits.”
Why private health premiums on the rise
Acknowledging rising premiums in 2024, the CEO of Private Healthcare Australia – representing 21 health funds – Dr Rachel David said health funds had made this request to the government to due to inflation, record claims over the past year, and additional costs such as IT upgrades “to combat the ever-growing threat of cyber-attacks”.
“The cost of medical and hospital services increased 5.9% this year and there’s been a 9.6% surge in hospital admissions funded by insurers. This is putting pressure on premiums,” she said.
“Inflation is hitting the health sector hard. Hospitals are struggling with the rising costs of recruitment, power and food and this flows through to health funds. Every week, hospital groups are asking major health funds for additional funding beyond their agreed contracts to chase inflation.”
David said any approved premium rise for 2024 is likely to fall well short of other types of insurance, such as home and car insurance, which jumped 14% this year, and electricity, up 13%. She said health insurance continues to deliver high value for members, with 86 cents in every dollar spent on premiums going back to members in benefits paid for their healthcare – higher than any other form of insurance.
“Health funds are working closely with the Federal Government to keep health insurance premiums as low as possible in 2024. We know many Australians are doing it very tough right now,” she said.
“Many funds are still providing cash backs and deferred premiums for their members as part of their promise not to profit from lower claims during the pandemic. This month, the Australian Competition and Consumer Commission confirmed funds were on track to return $4.3 billion to their members – more than the permanent claims savings of $4.1 billion across the sector.”
David added that “the inflated price of generic medical devices in Australia due to the Government’s ‘Prescribed List’” is also driving up premiums.
Additional data PHA provided, from a 2022 report, shows the higher cost Australians can occasionally pay for intraocular lenses (IOLs). For one premium IOL, the Australian price was $934, while in South Africa it was $322, Germany $516, Sweden $765, Austria $960 and Italy $1,133.
“Australians are paying the highest prices in the world for medical devices due to an outdated price setting arrangement with multinational medtech companies. We are paying 30-100% more for common medical devices such as insulin pumps compared to people in New Zealand, the United Kingdom, France and South Africa,” she said.