Insurers Seek Higher Premiums

The Age

Thursday December 18, 2008

LEO SHANAHAN, CANBERRA

PRIVATE health insurers have asked the Federal Government to approve big increases in premiums because of a profit slump in the past financial year.

Health funds are believed to have asked Health Minister Nicola Roxon for increases well above last year's 5 per cent, with some putting in bids for rises of almost 9 per cent.

The annual report into the operations of insurers found total profit was more than halved to $560 million, even though premiums grew 9.5 per cent to $12.1 billion.

Insurers have been the big losers in the sharemarket volatility. Australian funds have lost $11.5 million on investments in 2007-08, compared with a $648million gain a year earlier. They have also had a big rise in payouts, which jumped more than 10 per cent to $10.3 billion.

It is believed some smaller funds will seek premium increases as high as almost 9 per cent to compensate for growing costs associated with private health care.

Ms Roxon will make an announcement on the premium rises in March.

About nine months ago, the Government allowed private health funds to increase premiums by an average of 4.99 per cent.

Yesterday Ms Roxon said Australians would simply dump their private health insurance if funds continued to raise premiums. "The sad truth is the insurers will use any argument to try to increase their premiums. They know that the Government has a very strong view that everything should be done to keep any increase at a minimum," she said.

"I think now a lot of the insurers themselves do understand that the public will question the value of insurance if they can't see the basis and reasoning for why it needs to go up."

Ms Roxon said she accepted some increase would be necessary. "Health costs do go up; it is expensive to provide high-tech, high-quality care."

Chief executive of Australian Health Insurance Association Michael Armitage said the rise in premiums could be higher this year, because there had been an increase of 10.4 per cent in payouts by health funds in the last year.

"Everybody knows that if you're paying out an increase of 10.4 per cent on behalf of your members, you can't expect to have the same premium input as you did last year," he said.

Dr Armitage would not speculate on what average premiums rises would be next year. He said the health services index - a health-care cost indicator used by the minister when allowing price increases - was at 6.5 per cent.

Although the private health insurance industry has warned that premiums will rise as a result of recent changes to the Medicare levy surcharge threshold, Dr Armitage said it was too early to say whether it would contribute to premium rises early next year.

© 2008 The Age

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