Private Health

Specialist fees are a concern, but they are not the main reason for out-of-pocket costs being barriers to private healthcare.

The real issue lies in the design of private health insurance, which typically come with exclusions and restrictions. Many policies do not cover common procedures or only offer partial coverage, leading to high out-of-pocket costs.

While the number of people insured for hospital treatment has grown from 11.2 million in December 2019 to 12.5 million in March 2025, the number of people on exclusionary hospital policies has grown from 6.6 million to 8.6 million in the same period.

The percentage of hospital policies with exclusions by insurers has grown from 57.7% in December 2019 to 67.6% in March 2025.

High and growing insurance membership does not translate into high private hospital use due to inadequate coverage. The complexity and lack of transparency in insurance policies discourage patients from using private care.

To increase private hospital use and ease pressure on the public system, insurance products must be reformed to be more comprehensive, transparent and user-friendly.

Private hospital admissions have increased 3% over the last year (from 4.9 million to over 5.1 million), yet private hospitals face an existential crisis. Why? Clearly, it has little to do with volumes but payments.

As recorded by the Australian Prudential Regulation Authority (APRA) just last week, in the last quarter alone the payment ratio to private hospitals from insurers plummeted from 83% to just 80.7%. That's virtually 20% of the premiums mums and dads pay for health insurance being siphoned into insurance company coffers.

It's a far cry from the traditional 88% benchmark, which is an annual threshold the insurers have not met since 2019-20.

Health insurance companies are pocketing an average $2 billion a year in unprecedented profits from people's annual premiums, in addition to $3.5 billion a year in higher 'management fees', all while shortchanging private hospitals by over $1 billion a year.

In the last quarter alone, APRA reveals the insurers banked another $431 million in profits.

When the middlemen in healthcare are allowed to gouge their members at one end and short-change private hospitals at the other, the funding model is being abused to the point that it is broken.

More than two months ago Federal Health Minister Mark Butler publicly put the health insurance industry on notice, citing their higher profits, higher management fees, but that the ratio of benefits paid to hospitals have fallen. He gave them three months to correct it or he'd regulate them to fix it. That deadline has lapsed and nothing has changed.

Brett Heffernan, Chief Executive Officer, Australian Private Hospitals Association. Published by The Local Paper on 25 June 2025.