AMA and CHA blast private health insurers: Patients shortchanged as insurers splurge on management expenses

MedTech & Diagnostics News: Amidst escalating costs for patients with private health insurance, insurers reveal a jaw-dropping 50.2% profit surge from 2019 to 2023.

“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,” Australian Medical Association (AMA) President Professor Stephen Robson said.

Recent analysis from the AMA unveiled a 32% increase in management expenses for private health insurers, reaching a $716 million between June 2019 to June 2023. During this same period, payouts for medical services and hospital treatments only rose by 3.6% and 8.1%, respectively, indicating a notable disparity in expenditure allocation.

“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%, on average, of premium dollars paid each year back to the consumer in the form of rebates and benefits,” Professor Robson stated.

At the same time Catholic Health Australia, the peak body representing more than 80 public and not-for-profit hospitals, is calling for increased access to hospital-in-the-home care requiring private health insurers to cover it.

“Treatments like chemotherapy, dialysis, wound care, palliative care and post-surgical rehab can be conducted safely at home with better outcomes – but millions of patients are missing out,” said Catholic Health Australia CEO Jason Kara.

“Care at home can lead to lower readmission rates, shorter stays and increased patient satisfaction, as well as reduce pressure on the straining hospital system – but private hospitals are unable to provide it without funding agreements,” Mr Kara added.

By 2025, the UK will be treating 20% of its patients at home and the US 13% while Australia languishes on five per cent.

“To stop Australia falling further behind international peers, and ensure patients receive the care they want, the government must apply a default benefit to hospital-in-the-home care,” said Mr Kara.

CHA-commissioned modelling found a default benefit of $330 per day of treatment would incentivise investment and contracting to cover a range of conditions across CHA’s not-for-profit member hospitals.

Echoing the AMA sentiments, Mr Kara criticised insurers for falling short of the widely acknowledged benchmark of returning 90% of premiums to their members “while spending big on salaries, bonuses, advertising and sponsorships”.

The AMA, serious about private health reform, convened a workshop last October to gather sector leaders, aiming to restore affordability and value for patients by curbing the trend of decreasing premium returns while management expenses escalate.

“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,” asserted Professor Robson.

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