Major insurers under fire over 'dud' price hikes: ‘They're making a fortune'
Australia's major health insurers Medibank, Bupa and nib are under fire for hiking premiums for customers, while earning a combined profit of $1.7 billion last year. Health insurance premiums will increase on April 1 by 3.73 per cent on average, but some insurers are hitting customers with higher hikes.
Medibank, the country's biggest health insurer, recorded a pre-tax profit of $785 million last year, the latest data from the Australian Prudential Regulation Authority found. It will increase premiums by 3.99 per cent from next month.
Bupa made $607 million and will put up premiums by 5.10 per cent, while nib made $289 million and will increase premiums by 5.79 per cent.
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Australia Institute senior research fellow David Richardson has accused health insurers of 'raking it in' while Aussies 'struggle through a cost-of-living crisis'.
'How much profit is enough? Medibank made three-quarters of a billion dollars yet is still putting premiums up by more than most,' Richardson said.
'When they're making a fortune, there is no justification for increasing premiums above the rate of inflation.
'Do they even live in the real world? This is a dud industry which is milking profit from customers' pain.'Australia Institute analysis found Medibank's profit represented a 45 per cent return on equity, Bupa 34 per cent and nib 40 per cent. This is profit as a percentage of the amount the shareholders have invested in the company.
Recent Finder research found 16 per cent of Aussies were planning on cancelling their health insurance policy this year as premiums continue to rise.
Medibank said it was committed to keeping premiums as low as possible, while acknowledging the rising cost of healthcare was outpacing general inflation.
'We know that cost of living remains a real issue for many people, and our focus has been to balance rising health costs with the need to keep premiums affordable for our customers,' Medibank chief customer officer Milosh Milisavljevic said.
Bupa said it was operating in an 'inflationary environment due to rising wages in healthcare, increasing medical device prices, and escalating hospital costs'.
'The new premium reflects these factors, and the significant uncertainty in the private health sector, along with projected claims growth from increased demand for medical care, driven by Australia's ageing population and the rise in chronic illnesses,' Bupa health insurance acting managing director Kate Williams said.
nib said the premium increase reflected higher healthcare costs and increased use of services.
'Medical costs remain high, especially hospital costs, wages, and medical supplies, which drive premiums up,' nib managing director and CEO Ed Close said.
'nib has also renewed major contracts with Australia's private hospital sector in recent months, which is also reflected in our premium increase.'
The health insurance premium increase follows ongoing negotiations with federal Health Minister Mark Butler, who was required to approve the changes.
Butler said he asked insurers to resubmit their claims three times and took the insurers 'years of record profits' into consideration.
Compare the Market economic director David Koch said the hikes "may seem like a cash grab" but there were a range of factors that were considered when increasing premiums, including rising treatment and service costs, and rising wages.
"At some point, this cost is going to be passed onto everyday Australians," he said.
Koch said there was a "pretty strenuous process" all insurers needed to go through to get premiums approved.
'There have been cases in the past where these submissions are knocked back and health funds are forced to resubmit a more appropriate plan, so Australians should rest assured knowing there's a process in place to ensure any price hike is fair and justifiable," he said.Sign in to access your portfolio
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