Health insurers must refund gouged members’ profits: APHA CEO urges Health Minister to take firm action

Millions of Australians are facing soaring private health insurance premiums, with health insurers accused of using questionable tactics to hike prices, according to a scathing new report from the Commonwealth Ombudsman. Brett Heffernan, CEO of the Australian Private Hospitals Association (APHA), argues that the federal government must do much more than just “ask” insurers to stop such practices.

The report highlights a widespread tactic known as “product phoenixing,” which allows insurers to inflate costs by over 30% under the guise of introducing new policies.

Federal Health Minister Mark Butler MP said “The advice that I’ve received is that this practice is not strictly against the law. But I do reiterate again, it is clearly against the spirit of the law. It’s an underhanded, largely secret way of health insurers raising their prices outside of the usual approval process.”

He added, “I’ve asked the Commonwealth Ombudsman to continue to monitor this practice, particularly as we move through the next premium round and if there has not been a really substantial change to the behaviour of insurers… then I will reserve the right to consider legislative options to outlaw the practice into the future.”

Brett Heffernan, CEO, Australian Private Hospitals Association (APHA), told Health Industry Hub, “The Minister needs to do more than ask the health insurers to stop it. If insurance companies are indeed unscrupulously profiting by gouging their members, they need to pay their ill-gotten gains back to their members.”

Private Healthcare Australia responded in a statement that health funds are committed to working with the government to “thoroughly examine” issues with gold policies.

The next round of premium increases is set for April 1, 2025, with insurers requesting hikes of 5% to 6% – double the 3.03 percent average increase from this year. Minister Butler has urged insurers to “sharpen their pencils” and present more modest increases for the upcoming period, following advice from his department and the Australian Prudential Regulation Authority (APRA).

Heffernan further asserted, “Is anyone surprised insurance companies are gouging their members like they gouge hospitals? The health insurers have raked in $5 billion in record profit in just three years. Over the same time, they have shortchanged hospitals to the tune of $3 billion. That’s the gap between what it costs to provide care, versus what the insurers cough up. Enough is enough.”

He warned, “The Australian hospital system is in crisis. Public hospital waiting lists are getting longer and deeper, while private hospitals are closing their doors entirely or shutting down services because insurance companies are breaking their pact with their members to fully fund their care.

“These issues cannot be put off until after next year’s federal election. They have already festered too long. It’s time the Federal Health Minister engaged in the hospital crisis, which is burning around him.”

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