Private hospitals bearing the brunt of bad decisions

DESPITE the series of scandals engulfing private health insurance the Albanese Government has seemingly washed its hands of holding the industry to account. Meanwhile, patients, private hospitals and their employees, and the healthcare system, are plunged into chaos.

The last three years saw average premiums rise by 3 percent or less – historically very low increases. Yet, the insurance companies pocketed $5 billion in record profits. How? Data from the Australian Prudential Regulatory Authority (APRA) shows that the insurance companies short-changed private hospitals on patient payments by more than $3 billion over the same period.

The funding shortfall in 2022 was $660 million. Seemingly, the Federal Government's failure to intervene emboldened the insurers, who then withheld $1.135 billion in 2023 and, last year, a whopping $1.254 billion.

The insurers' catch cry is they cannot afford to pay the rising costs of healthcare. Their $5 billion profit belies that claim. It gets worse. In 2023-24 insurance companies upped their 'management fees' by 18% in just one year, to reap another $3.5 billion a year from premiums.

You'd think that they are making money hand over fist while the hospitals they are supposed to fund are closing or shutting down services might stir ministerial action? Alas not.

Then last year the Commonwealth Ombudsman lifted the lid on phoenix policies. This loophole-exploiting practice sees health insurers scrap existing products, replace them with near-identical services and sell them at a higher price.

The Federal Health Minister's response was to hold a press conference where he essentially asked if the insurers would please stop it.

No inquiry into how widespread the practice is, how many people have been ripped-off or by how much, nor any mention of recompence for the unwitting victims.

At the very least, the Australian Consumer and Competition Commission (ACCC) might be asked to cast an eye over it regarding potential unconscionable conduct?

Insurers are diddling both ends of the market – gouging members at one end and short-changing hospitals at the other.
But wait. There's more.

Media reports have exposed that, during the contract dispute between BUPA and Healthscope, BUPA was offering doctors up to $500 per patient to take their business to non-Healthscope hospitals. This provides a glimpse into the lengths insurance companies go to in exerting market dominance over hospitals.

Isn't there a question here as to potential unconscionable conduct or anti-competitive behaviour? In any case, surely it warrants more than a shoulder-shrug from the Federal Government?

With last year's average 3.03% premium hike, the insurers pocketed their second biggest profit-ever of $1.85 billion. This was only eclipsed by 2023's record $2.2 billion. Remember, the underpayment for hospital treatments for those years was a staggering $1.135 billion and $1.254 billion, respectively.

It's not hard to bank unprecedented profits when you're flogging dodgy policies and not paying your bills in full. On recent form, this year's average 3.73% premium hike would set a new profit record for insurers.

The Federal Government has a duty to ensure that, as a result of its premium decisions, consumers are not ripped-off and hospitals are properly paid for the treatments they provide.

The consequences of inaction are stark. In recent years almost 20 private hospitals have closed their doors entirely, more than 70 services in other private hospitals, including maternity and mental health, have been permanently cancelled, consumer choice and access has eroded, investment in quality compromised and public hospital waiting lists are longer.

Despite two years of recognising the deepening crisis on its watch, the Federal Government has done nothing to address it. That's not a figurative nothing... it's actually nothing.

It begs the question. Why? The 15 million Aussies with private health insurance deserve an answer.

Brett Heffernan is chief executive for the Australian Private Hospitals Association. Published in the Daily Telegraph on 15 March 2025.

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