Posted: March 04, 2005

Private health heist - Part 2

Ten days ago I wrote a blog titled The Great Private Health Heist. It looked at the continuing rise in private health insurance premiums and argued that the $2.5 billion that the Government spends each year on subsidies to private insurers would be better spent (on efficiency and equity grounds) on direct funding to public hospitals. "But wait" cried the Federal Health Minister, Tony Abbott, "there's more".

Yesterday Abbott announced a further 8 per cent rise in private health insurance premiums from April 1. On the 7.30 Report last night, the CEO of the Health Insurance Association, Russell Schneider, justified the increase in these terms: "Well, unfortunately, health care costs go up all the time and from year to year there just has to be adjustments made to premiums to make sure that the money coming in is equal to the money that has to go out". So let's take a look at the numbers...

The Private Health Insurance Administration Council (PHIAC) is the government body charged with monitoring and regulating the private health insurance industry. Two of its stated objectives are to (1) protect the interests of consumers; and (2) minimise the level of health insurance premiums. Hmmmmm. In it's 2003-04 Annual Report, PHIAC reports on the Financial Operations of Registered Health Benefits Organisations. The tables (click on Table C once you have opened the PHIAC page) show that in 2003-04 the equity of these registered organisations grew by $420 million and the difference between total contribution income and total cost on benefits (including state levies), which Russell was so worried about, was $1 billion. Some of the individual funds registered huge increases in equity including MBF ($109 million), HBF ($61 million), the manipulative (see earlier blog) Medibank Private ($45 million) and HCF ($33 million).

So where are the health insurance funds whittling away the premium rises. Yep, on "management expenses" which in 2003-04 accounted for 10 per cent of contribution income across the industry, with five of the funds spending more than 15 per cent of contribution income. The PHIAC Commissioner, Garry Richardson, expressed concern in his report that: "Management expenses per contributor have increased from $178 in 2002–03 to $183 in 2003–04. PHIAC remains focussed on the higher than average expenses of some funds and believes further improvement is possible over the next year".

The message from those who contribute to private health funds to the corporates should be to do something about their costs, their sponsorship of tennis tournaments and advertising (see 7.30 Report transcript) rather than shifting these costs to the consumer in the form of higher premiums. That the Government, through its 30 per cent private health insurance rebate, subsidies this greedy industry at a cost of $2.5 billion per annum, and approves the premium rises, is even more disgraceful.

Blog entry posted by Sally