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Tuesday, 01 November 2022 22:17

Worrying trend in health insurers' extravagance while spending on Policy Holders' languishes 

Private health insurance firms have dramatically increased their spending on management expenses while pulling the handbrake on paying benefits to their members over the past four years, sparking calls from Catholic Health Australia for greater oversight of the industry.

In the 2022 financial year, the funds collectively poured an extra $389 million into management expenses compared with 2019 ─ an increase of 17.43 per cent, according to an analysis of APRA data. 
Meanwhile, insurer spending on benefits for members increased by only 4.64 per cent, meaning health insurers’ management expenses increased at well over 3.5 times the rate of benefits to members.  
Peak advocacy body for 75 not-for-profit hospitals, Catholic Health Australia, said increasing management expenses at a faster rate than member benefits is unacceptable. 
CHA’s Health Policy Director Caitlin O’Dea said in the current environment where health insurers are advocating for the removal of consumer protections via mandatory default benefits and won’t commit to continue to fund critical medical devices used in surgery, it is appropriate there is closer oversight of the amount of consumer dollars insurers are spending on themselves.
“When insurers receive $26 billion a year from everyday Australians, including $7 billion in government subsidies, there should be some oversight on how that money is spent,” she said.
“It is totally indefensible that during Covid the money spent on executive salaries, plush offices and perks by some funds is growing at a faster rate than the money they are spending on treatment and care for their members. This is a very worrying trend.”
Ms O’Dea said greater funding from insurers for their members’ care was essential to assist hospitals in their treatment of patients amid soaring costs due to inflation.
“Hospitals are facing extraordinary inflation pressures ─ with costs for PPE rising at a staggering 600 per cent ─ and yet health funds are able to ratchet up their management expenses while simultaneously pulling back on hospital treatment,” she said.
CHA is also concerned that insurers have built up excessive reserves of cash due to a reduction in claims during COVID-19. There is currently over $1.8 billion in unclaimed funds sitting on the health insurers’ balance sheets. 
The organisation wants insurers to be more transparent with their members about how they calculated these figures and the circumstances and timeline by which they plan to pay it back. 
“Insurers are sitting on a mountain of cash from deferred claims with a promise to pay it back in the never never,” Ms O’Dea said.
“Australians need to have the confidence that their health fund will pay for their treatment when they need it, not when it suits the insurer.”
Patients would face higher out-of-pocket costs and reduced care choice if default benefits are abolished, Catholic Health Australia has warned.
In its submission to the federal government’s review of default benefits, CHA said patients would typically pay at least $437 a day more for a hospital surgery if the benefits are scrapped or weakened.
The organisation, which represents 75 not-for-profit hospitals, is warning patient choice would be severely curtailed because minimum benefits allow patients to have treatment in any hospital, regardless of whether it has a contract with their insurance provider.
Abolishing minimum benefits would also have serious knock-on effects for the private hospital system, making some hospitals unviable and reducing investment and innovation.
Rather than scrapping default benefits, CHA is calling on the government to extend them to cover at-home care, a move that would ease pressure on hospitals and expand patient choice.  
In the long term, CHA believes private sector health funding arrangements need to be overhauled and replaced with a national efficient price, a model used effectively in the public system.
Caitlin O’Dea, CHA Director of Health Policy, said scrapping default benefits would be a big mistake that would adversely impact patients.
“When patients need care, they should always have the right to choose where to go and which doctor to see,” she said.
“If default benefits are abolished then private health insurers would be able to dictate where patients have to go if they want their benefits paid.
“These choices should only be made by patients and their clinicians. Default benefits are a crucial safety net allowing patient choice.” 
Ms O’Dea also warned that patients would have to pay substantially more for care if default benefits are scrapped or weakened.
“Out of pocket costs would increase because the current default benefit would be charged to patients instead of being reimbursed by private health insurance,” she said. 
“The average default benefit for a surgical hospital stay under two weeks is $437 per day. This is the minimum amount out of pockets could be expected to increase.
“Hospital quality would also be affected because hospitals would lose the security ensured by default benefits to invest in new services and equipment,” she added.
“Worse than that, some hospitals - which are already facing higher inflation and Covid pressures - would simply become unviable and be forced to close their doors, putting greater pressure on the public system.”