Private hospitals warn of ‘insurer power grab’ as buying group faces ACCC scrutiny

Private hospitals have launched a fierce challenge to an application by Honeysuckle Health, a wholly owned subsidiary of nib health insurer, urging the competition watchdog to reject a proposal that would allow an extension of a current authorisation to negotiate hospital contracts on behalf of multiple health insurers from October 2026.

In its submission to the Australian Competition and Consumer Commission’s (ACCC) consultation, the Australian Private Hospitals Association (APHA) argues the proposal would dramatically expand nib’s market influence, handing the insurer group unprecedented bargaining power while further weakening financially distressed private hospitals and threatening patients’ access to high-quality care.

APHA CEO Brett Heffernan said the proposal represented a fundamental shift in the balance of power between insurers and hospitals.

“This is an attempt by nib to gain market dominance through a buyer bloc, with nib (through Honeysuckle) collectively negotiating hospital contracts for itself and other insurers,” APHA CEO Brett Heffernan said. “This would further skew an already unequal playing field. If insurers are given even greater collective bargaining power, the people who will ultimately pay the price are patients.”

The application bears little resemblance to the ACCC authorisation granted in 2021. Since then, Honeysuckle Health has become wholly owned by nib, meaning one of Australia’s largest private health insurers would effectively be negotiating contracts not only for itself but also on behalf of competing insurers.

“This fundamentally changes the competitive landscape and raises major concerns about market concentration, conflicts of interest and the use of commercially sensitive data,” Heffernan added. “It would give nib line-of-sight across sensitive data like rival costs, product performance and hospital contract terms, as well as hospital reliance on particular funds, casemix economics and viability thresholds. nib would have an unmatched negotiating advantage.”

In seeking an extension of legal protection for the insurer-owned buying group, nib is required to demonstrate a clear public benefit.

In its application Honeysuckle Health and nib health fund acknowledge that “…the development of the HH Buying Group …has been slower than originally anticipated,” and “…certain of the public benefits identified by the ACCC in granting the Existing Authorisation have not been fully realised”.

The buying group model imposes additional administrative and compliance burdens on hospitals by inserting another intermediary between insurers and providers. Any efficiencies generated through standardisation are achieved, in part, by shifting costs onto hospitals rather than creating genuine system-wide savings. Those savings ultimately become profits for participating insurers unless they are passed on to consumers through lower premiums or improved products.

The application seeks authority for Honeysuckle Health to provide contracting services for medical specialists, general practitioners, allied health professionals and other general treatment providers on behalf of nib and other participating healthcare payers.

The APHA argues that an insurer-owned contracting group, particularly one linked to insurer-owned delivery assets, is structurally incentivised to prioritise the cheapest compliant care rather than the most appropriate and clinically required treatment.

Heffernan said granting the application would further entrench insurer power at a time when the private hospital sector was already facing acute financial pressure.

“Significantly increasing insurer bargaining dominance when Australia’s private hospitals are already under severe financial strain, would only benefit insurance companies. The Australian Bureau of Statistics recently confirmed that private hospitals recorded a $756 million operating loss last financial year, while insurers reaped $2.7 billion in profits,” asserted Heffernan.

The proposed arrangement could fundamentally reshape the private health insurance market by accelerating the consolidation of purchasing power among major insurers. Cross-subsidised competition between buying group participants risks undermining AHSA and ARHG, potentially weakening the independence of smaller funds in contract negotiations and driving the market towards the very concentration of insurer bargaining power the ACCC sought to prevent through the conditions imposed in 2021.

Allowing an insurer-controlled entity to operate a contracting collective on behalf of competing insurers would also establish a significant precedent. The model could encourage larger insurers to pursue similar arrangements, normalising coordinated bargaining across Australia’s private health system and further shifting negotiating power away from hospitals.

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