The private health insurance sector has repeated its claim that health funds are not profiting from a reduction of eyecare and other health services enforced during the initial peak of the COVID-19 pandemic.
Dr Rachel David, CEO of peak industry body Private Healthcare Australia (PHA), says the sector is “not hiding a pot of gold”, following reports that insurers initially saved $515 million on extras services such as optical and $500 million on cancelled elective surgery during the six-week lockdown between March and May.
David said so far more than half a billion dollars of pandemic-related savings have already been returned to customers, with the remaining funds needed for catch-up procedures among other costs.
Health funds, she said, are governed by strict regulatory and capital requirements and the Australian Prudential Regulation Authority (APRA) has made it clear the sector must retain enough capital to fund an elective surgery backlog and additional private healthcare.
“Health funds made some savings over the six-week period in which elective surgeries were cancelled and some allied health providers were closed,” David said.
“Health funds have repeatedly and publicly said they will not profit from the COVID-19 restrictions. Elective surgeries were not cancelled, they were postponed. Members who needed joint replacements, cataracts and endometriosis surgery still do post-COVID. Dental and allied health appointments have now returned to normal levels.”
In July, Insight reported that thousands of people dropped their private health cover in the first quarter of 2020 as they were unable to access services they were paying for. PHA says optical services resumed back to normal levels by the end of June, but the latest figures from the June quarter show that thousands of additional customers have dropped their cover.
The June data also revealed the net margin of Australia’s health funds fell to a low of 2.8%. This compares with 4.9% in the twelve months to June 2019 and represents a 42% decline in profitability. David said this puts to bed suggestions health funds made “windfall gains”.
According to David, the $500 million returned to members came in the form of postponing the April 1 premium increase for six months; financial hardship provisions for people who were unemployed or under- employed due to COVID-19; and funding of telehealth services for psychology, physiotherapy and more.
“Some funds have also provided members with cash backs, rollover of services to the next calendar year and cancelled the October 1 premium increase. If the independent regulator’s claims data … shows more savings need to be returned to members, health funds will do so,” David said.
She added that the COVID-19 situation had not stopped health inflation rising at levels above general inflation and although health funds did not want to increase premiums, it would be necessary to ensure they remain financially viable and meet statutory prudential requirements.
‘Cancel the price hike’
Australian consumer group CHOICE says all private health funds should cancel their upcoming October price rises.
“Reports that private health funds have made mega profits out of COVID-19 show they must provide some relief to Australians,” CHOICE health campaigner Mr Dean Price said.
“Funds are charging full price while not delivering the full range of healthcare services. They can’t get away with doing the bare minimum while raking in these profits. The October price rises must be scrapped for the good of the community.”
Price said the June quarter APRA figures show a dramatic drop in the number of surgeries and treatments being covered by private health insurance during COVID-19.
“Privately insured hospital services have gone down 19% compared to the same quarter last year and extras have gone down 30% compared to the same quarter last year. Private health insurers are making massive savings this year as fewer people claim on insurance. That’s why private health insurers can’t justify putting people’s premiums up on 1 October 2020.”