Major health insurance funds fail to return required premiums to members

Many of Australia’s biggest health insurance companies are failing to provide good value for customers, keeping too much of their premium revenue for themselves instead of paying it out to patients.

Analysis of APRA data by Catholic Health Australia finds all of the major health funds including NIB, HCI, NHBA, RBHS and CDH are failing to meet the widely recognised gold standard of returning 90% of premiums to their members.

In 2022, the industry as a whole only returned 83% of its $26.6 billion premium revenue to members, meaning a total of $4 billion went to management expenses and profits instead of patients. Premium revenues went up 3.5% from 2021 but fund benefits only increased 0.6%.

NIB provided the worst value, returning a measly 75% of premiums to members. Back in 2005, NIB claimed it was one of the best funds because it returned 90 per cent of premiums in benefits. Among the other major funds, BUPA returned only 82% of premiums to members and Medibank was only slightly better on 84%.

Unsurprisingly, the big non-for-profit funds were among those which provided the best value. HCF returned 87% while HBF returned 88% of revenue to members. CBHS also returned 88% and several smaller funds including CBHSCH and Police and also did relatively well, returning 87% of premiums.

It comes after CHA analysis revealed insurers have increased their management expenses by 18% since 2019 and are sitting on a $2 billion mountain of cash due to reduced claims during Covid-19 lockdowns.

CHA Health Policy Director Caitlin O’Dea said it was pleasing that some insurers were nearing the 90% mark but insisted others should be trying harder to give members good value for money.

“The insurers themselves have said 90 cents out of every $1 in premiums should go back to policyholders – but they are failing to meet that target,” she said.

“The viability of the private hospital system depends on insurers providing good value to their customers. “If insurers don’t provide good value, more people will simply go without insurance, which would heap extra pressure on public hospitals further lengthening hospital waiting times. With our costs surging and funding failing to keep up, we’re simply not sure how long we can remain sustainable.”

In a 2018 senate submission the Members Health Fund Alliance, which represents 26 health insurers, admitted that insurers should ‘return on average around 90% of all premiums paid, back to policyholders, as benefits’. This year insurer Teachers Health Group said it aimed to achieve this target by keeping management expenses low.

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