Media release

Patients cop the brunt of private health’s soaring ‘management expenses’

Patients are being hit with rising private health insurance bills as their providers funnel significantly more money into “management expenses”, dwarfing any spending increase on rebates and benefits.

Hand of patient lying in a hospital bed

New analysis by the Australian Medical Association shows management expenses for private health insurance providers skyrocketed 32 per cent over the last four years to June 2023 — an increase of $716 million.

While patients pay more for cover, the same AMA analysis shows that health insurers have recorded a 50.2 per cent increase in profits over the same four years to June 2023.

By contrast, over the same period, the amount insurers paid out in medical services and hospital treatment benefits increased by just 3.6 per cent and 8.1 per cent respectively.

“When patients pay their insurance premiums, they expect that money is going mostly towards the costs of benefits for treatment and hospital stays, but what this graph shows is that management expenses and  insurance profits are key drivers of premium increases,” AMA President Professor Stephen Robson said.

“Private health is a major part of Australia’s world-leading health system, and we understand the need for insurers to be profitable, but these numbers show something has gone very wrong and that significant reform is needed.

“That is why, for many years, the AMA has been calling on the federal government to mandate private health insurers return a minimum 90 per cent, on average, of premium dollars paid each year back to the consumer in the form of rebates and benefits.”

The AMA is also calling for more investment in out-of-hospital care models, which an AMA report last year found would save the system millions of dollars.

In the AMA’s 2023 Private Health Insurance Report Card, it was revealed the proportion of hospital insurance policy premiums returned to patients in the form of benefits for hospital treatment fell to 81.6 per cent in 2022–23 — down from 88.02 per cent in 2018–19.

Between 2018–22, private health insurance hospital policy premiums increased by 19.8 per cent while insurer rebates to patients to cover medical costs during hospital treatment increased by just 8.3 per cent.

“Years of inadequate indexation of insurer rebates and Medicare is pushing more costs onto patients. The private health sector is in serious need of reform to ensure private health insurance is delivering value to patients,” Professor Robson said.

“The AMA is serious about achieving reform in private health, which is why we took the initiative of holding a private health sector workshop last October, bringing together leaders from across the sector.

“We want to drive these discussions forward and restore private health to a point where it is genuinely affordable and offers real value for money for patients — because this trend of reducing the proportion of policy premiums paid back to patients in benefits while the companies spend more and more on ‘management expenses’ simply cannot continue.”

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