Government caps health insurance premiums to bolster affordability amid rising costs

Government caps health insurance premiums to bolster affordability amid rising costs | Insurance Business Australia

Life & Health

Government caps health insurance premiums to bolster affordability amid rising costs

Insurers offer insights on government’s move

Life & Health

By
Roxanne Libatique

The Albanese government has introduced measures to ensure the affordability of private health insurance in Australia, capping the year’s average premium increase at 3.03%.

This move is part of a broader initiative to ensure that the cost of health insurance premiums does not outpace the growth in wages, pension adjustments, and inflation.

With this initiative, the government said it aims to balance the scales between insurance providers and consumers, particularly notable as it marks the continuation of a trend where health insurance premium growth is slower than the national wage price index for the second year. This development contrasts sharply with the broader insurance sector, where premiums have seen an average increase of approximately 17% over the past year.

The government’s latest decision is the outcome of a detailed review of the financial practices and profit margins of private health insurers. In response to these findings, the government has pledged $7.3 billion in rebates to individuals holding private health insurance policies.

Currently, 14.7 million Australians benefit from private health insurance, with insurers paying out more than $23.5 billion in health and medical benefits in 2023. The premium adjustments, slated for April 1, will be detailed on the health.gov.au website, with the responsibility placed on insurers to clearly communicate these changes to their policyholders.

Acknowledging the economic challenges facing many Australians, Health Minister Mark Butler highlighted the government’s strategy of mitigating premium increases through tax cuts and wage growth, aiming to lessen the financial impact on households.

“While we know that any increase will be hard to bear during a global cost-of-living crunch, the Albanese government has ensured that health insurance premiums will fall relative to Australians’ wages and Labor’s tax cuts mean all Australian taxpayers will get a tax cut on 1 July, so Australians earn more and keep more of what they earn,” he said. “Private health insurers must ensure their members are getting value for money. When costs rise, Australians want to know that higher premiums are contributing to system-wide improvements, like higher wages for nurses and other health workers and ensuring that affordable services are available.”

Private health insurers welcome government’s announcement

The industry has responded positively to the government’s announcement, with the Members Health Fund Alliance – representing 24 not-for-profit and member-owned Australian health insurers – expressing its support.

“Against the backdrop of rising cost-of-living pressures, this is a win for Aussies with private health insurance” he said. “Healthcare is not immune from inflation. It is remarkable that health insurers have been able to deliver an annual increase below CPI, while paying out over $23.5 billion in hospital and general claims over 12 months to December 2023.”

To support continued moderate premium increases, Koce has called for ongoing government reform efforts, particularly regarding medical device costs, to ensure premiums remain affordable and benefits from cost savings are directly passed on to consumers.