Private health funds tipped to secure record increase in premiums
22 January 2015
Year after year, just after Christmas, private health insurers enter into negotiations with the Australian Government for increases in premiums for health cover.
Let's examine the facts:
Table 1: Consumer Price Index, Health Consumer Price Index and average private health insurance premium increases 2010-2014
| Year |
CPI (%) |
Health CPI (%) |
Private Health Insurance
premium increases (%) |
| 2010 |
2.70 |
5.0 |
5.78 |
| 2011 |
3.50 |
3.60 |
5.57 |
| 2012 |
2.20 |
7.70 |
5.06 |
| 2013 |
2.70 |
4.40 |
5.60 |
| 2014 |
2.30 |
4.70 |
6.20 |
| 5 year average |
2.68 |
5.08 |
5.64 |
Sources: Previous media releases from Health Ministers, for example the Hon. Peter Dutton, 'Stability for families with private health insurance', 23 December 2013; and Australian Bureau of Statistics CPI reports such as 6401.0 Consumer Price Index, Australia Sept 2014.
The trend here is that private health insurance premiums have increased far beyond the other increases to cost of living and health services in general.
Let's have a look at what impact these increases have had on returns to members of funds and to the funds themselves.
Table 2: Financial outcomes for private health insurance hospital treatment policies 2008/09 to 2012/13 (Source: Private Health Insurance Administration Council (PHIAC)'s Reports on the Operations of Health Funds)
| Year |
Hospital Treatment Fund
Premium Revenue |
Hospital Treatment Fund
Benefits paid out |
Surplus |
Percentage (%) |
| 2008/09 |
$9,367,897,000 |
$8,316,804,000 |
$1,051,093,000 |
12.64 |
| 2009/10 |
$10,157,881,000 |
$8,989,906,000 |
$1,167,975,000 |
11.50 |
| 2010/11 |
$11,095,135,000 |
$9,769,293,000 |
$1,325,842,000 |
11.95 |
| 2011/12 |
$12,031,185,000 |
$10,618,227,000 |
$1,412,958,000 |
11.74 |
| 2012/13 |
$12,937,722,000 |
$11,504,346,000 |
$1,433,376,000 |
11.08 |
| Total |
|
|
$6,391,244,000 |
|
| 5 year average |
$11,117,964,000 |
$9,839,715,200 |
$1,278,248,800 |
11.78 |
General treatment policies, which cover ancillary treatment (or are otherwise known as 'extras') continue to generate large surpluses for shareholders.
Table 3: Financial outcomes for private health insurance general treatment policies 2008/09 to 2012/13 (Source: PHIAC's Reports on the Operations of Health Funds)
| Year |
General Treatment
Fund Premium
Revenue |
General Treatment
Fund Benefits
paid out |
Surplus |
Percentage (%) |
| 2008/09 |
$3,696,018,000 |
$2,869,540,000 |
$826,478,000 |
22.36 |
| 2009/10 |
$3,996,818,000 |
$3,052,757,000 |
$944,061,000 |
23.62 |
| 2010/11 |
$4,309,168,000 |
$3,209,104,000 |
$1,100,064,000 |
25.53 |
| 2011/12 |
$4,675,200,000 |
$3,536,925,000 |
$1,138,275,000 |
24.35 |
| 2012/13 |
$5,017,523,000 |
$3,908,684,000 |
$1,108,839,000 |
22.10 |
| Total |
|
|
$5,117,717,000 |
|
| 5 Year Average |
$4,338,945,400 |
$3,315,402,000 |
$1,023,543,400 |
23.59 |
After hearing of the call by insurers for yet another increase in premiums, Federal President of the Australian Dental Association, Dr Rick Olive AM RFD, said, "Dental fees over the last five years have increased by an average 2.2% per year. With private health insurance rebates for dental services remaining stagnant year after year and in no way matching the annual increase in premiums, the Australian Government must call insurers to account and ask why these annual increases in premiums are not being matched by increased rebates to members. What is happening is not insurance but exploitation of private health insurance contributors."