If you thought private health insurance premiums were going up because the cost of your medical services has escalated, you'll need more than stitches to heal from this wound.
Data analysis by the Australian Medical Association (AMA) shows management expenses for private health insurance providers rose 32 per cent over the last four years to June 2023 - an increase of $716 million.
While patients' cover charges went up, health insurers' profits rose 50.2 per cent. Meanwhile, the amount insurers paid out in medical services went up by 3.6 per cent, and hospital treatment benefits 8.1 per cent.
The AMA has been calling on the federal government for many years to mandate private health insurers return a minimum 90 per cent, on average, of premium dollars paid each year back to the consumer in the form of rebates and benefits.
The AMA is also calling for more investment in out-of-hospital care models, which an AMA report last year found would save the system millions of dollars.
AMA president Professor Stephen Robson said private health is a major part of Australia's health system, and while the need for insurers to be profitable is understood, the data showed "something has gone very wrong and that significant reform is needed".
He said patients expect the money paid for premiums would mostly go towards the costs of benefits for treatment and hospital stays, but the data showed management expenses and insurance profits were key drivers of premium increases.
The AMA's 2023 Private Health Insurance Report Card showed the proportion of hospital insurance policy premiums returned to patients in the form of benefits for hospital treatment fell to 81.6 per cent in 2022-23 - down from 88.02 per cent in 2018-19.
Between 2018-22, private health insurance hospital policy premiums increased by 19.8 per cent while insurer rebates to patients to cover medical costs during hospital treatment increased by just 8.3 per cent.
"Years of inadequate indexation of insurer rebates and Medicare is pushing more costs onto patients. The private health sector is in serious need of reform to ensure private health insurance is delivering value to patients," Professor Robson said.
