Private insurance: Rising premiums and the truth behind it all

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What value is our health compared to the almighty dollar? (Image via

With the private health insurance sector seeing double-digit profits in a dormant economic climate, all their justifications for premium hikes are spurious, writes Arthur Marusevich.

THAT'S RIGHT. In 2017, due to an increase in insurance premiums and lower operational expenses and claim costs, the private insurance industry's profits rose by 25% to $4.8 billion. Yet, despite these whopping numbers, on 1 April this year, Australians yet again copped another premium rise. In dollar figures, this translates to approximately an additional $150 for the average family, or $73 for a single person each year.

According to Federal Health Minister Greg Hunt, this year’s increase of 3.95% average is the smallest increase since 2001 and is designed to take the pressure of Australian families. At a time when insurer profits are skyrocketing whilst Australia may be locked into a low inflation and essentially stagnant wage growth, in my opinion, Mr Hunt’s justification provides hardly any practical relief to consumers.

Do consumers really have a choice?

For over two decades now, the Government and the private health insurance industry have been propagating an illusion of health cover choices to such an extent that we have allowed our national health care system to be eroded right in front of our blinded eyes. The way the private health system was intertwined with Medicare, today one almost has no choice but to also have a private health insurance.

With the introduction of Medicare in 1984, flimsy evidence portrayed by the media that reliance on the public health system was putting unbearable pressure on public hospitals resulted in the resurrection of the private health insurance industry. This was despite concrete evidence that only the richer maintained private health covers, whilst the poorer still relied on the public health system. Both the Liberal and Labor governments championed a 30% subsidy policy for the private insurers, which over the years has cost taxpayers billions of dollars — money that perhaps could have been spent in refining the public health system instead. This was further accompanied by the Medicare levy surcharge for those over 30 and without private health cover. As a result, today, over 45% of Australia’s population have private health insurances.

Alarmingly, not all take out a private health cover with the intention to avail from a private health system because it is so effective. Many Australians are almost forced to have private health cover to avoid paying the Medicare levy surcharge. For example, research shows that the biggest users of private health insurance hospital covers are those between 60 to 70 years of age. Therefore, most people in their early 30s take out private cover to avoid paying the penalty — the Medicare levy surcharge on top of the Medicare levy.

The benefits of private health insurance.

Private health cover policies are altered so frequently that their benefits have become almost as good as a myth. Considering that most emergency treatments are in any case provided by public hospitals, the only incentive that one may think of would be elective surgery. However, after learning of their average waiting times, one is not so sure anymore. Of course, waiting times vary depending on the procedure. But it is concerning to learn that, in 2015-16, average waiting time for cardiothoracic surgery was 18 days for public patients and 16 days for private health patients and self-funded patients — that is, only two days difference in waiting time.

To top it all off, one of the country’s biggest insurers, Bupa, recently announced it will only provide cover for certain procedures with hospitals it is associated. This means that, in case of an emergency, if a Bupa policy holder wants to use their cover at a hospital that is not under contract with Bupa, they may be unable to make a claim. And it’s not just customers that are panicking about these changes.

The President of the Australian Orthopaedic Association, Lawrie Malisano, has summarised the effects of this poor decision in the best possible way:

When Australians suffer trauma, fracture and the consequences of injury, they can be assured that world-class care can be provided promptly and swiftly by orthopaedic surgeons participating in emergency surgery rosters.

Bupa’s unilateral and non-consultative decision regarding their Medical Gap Scheme threatens this system, especially in public hospitals. Bupa intends for injured patients and their treatment to be entirely the responsibility of the state. This change in policy effectively dissuades patients from exercising their right to be treated as private patients.

Patients who exercise a choice to use their private health insurance have been told Bupa will no longer participate in this scheme if they are admitted in an emergency to an Australian public hospital. This decision threatens the delivery of expert care to insured patients and the private contracted arrangement that may exist between a surgeon and a patient.

Who can fix the problem?

No doubt, a 25% increase in profits and rising premiums in the current economic climate is unequivocally unjust. However, just like all other private businesses, insurance companies are there for the specific reason of making as much profit as possible. And the reality is, they will continue to do so for as long they can.

Ultimately, however, it is the Government’s responsibility to ensure that services provided by private health insurers are of high quality and affordable for all Australians. Until they do so, private insurers will continue to quadruple their profits and increasingly reduce the quality of services they provide, just like Bupa.

Arthur Marusevich is a Canberra-based lawyer.

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