Catholic Health Australia (CHA) has today released new analysis that exposes private health insurers' soaring profits while many private hospitals struggle to remain viable.
The analysis, published in a position paper, uses publicly available data from the Australian Bureau of Statistics (ABS) and Australian Prudential Regulatory Authority (APRA).
"This analysis demonstrates a troubling disconnect between insurers' rising profits and the decreasing share being returned to patients and struggling hospitals over the past six years," said Dr Katharine Bassett, Director of Health Policy at Catholic Health Australia.
"The private health sector is at a crossroads."
In 2016–17, operating profits in the private hospital sector were split relatively evenly between insurers and hospitals. But by 2022–23, the insurers were taking 90 per cent of the profit compared to 10 per cent for private hospitals, the analysis shows.
Over the same time, insurers' hospital premium income has grown at double the rate of funding they paid to hospitals for patient services, at 3.1 per cent compared to 1.6 per cent.
"The stark and growing disparity between the financial health of insurers and hospitals helps explain why more than 70 private hospital services have closed in the past five years," Dr Bassett said.
"For too long, health insurers have prioritised profits over patients. It's time to reset the balance and ensure that funding supports access to high-quality care in our hospitals."
Health insurers made a record net profit of $2.2 billion in the 2022–23 financial year, doubling from the previous year. But they returned less than 83 per cent of premium revenue to patients — a far cry from the industry's gold standard of 90 per cent.
To help redress this imbalance, CHA is calling for reform of the annual health insurance premium round process, including:
- entrusting the process to an independent body such as the Independent Health and Aged Care Pricing Authority, with a formalised approach to incorporating hospital cost data
- linking premium increases with the level of benefits paid in order to incentivise insurers to give back more to patients
- implementing a national private price, which would align price growth with the real costs of delivering care — similar to what occurs in the public sector.
"The annual private health insurance premium round is a crucial opportunity to bring accountability back to the sector, ensure the sustainability of private hospitals, and protect patient access to services," Dr Bassett said.
"Our proposed reforms will not only improve patient care but also help relieve pressure on our struggling public hospital system."
The position paper can be
