{"id":43156,"date":"2023-08-27T02:19:10","date_gmt":"2023-08-27T02:19:10","guid":{"rendered":"https:\/\/histarmar.net\/?p=43156"},"modified":"2023-08-27T02:19:10","modified_gmt":"2023-08-27T02:19:10","slug":"private-health-insurers-clash-on-need-for-big-premium-hikes","status":"publish","type":"post","link":"https:\/\/histarmar.net\/world-news\/private-health-insurers-clash-on-need-for-big-premium-hikes\/","title":{"rendered":"Private health insurers clash on need for big premium hikes"},"content":{"rendered":"

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Private health insurers are split on the need for a big hike in premiums this year to keep pace with rising health costs, as low claims and soaring policyholders reflect a sector in rude good health.<\/p>\n

Two of Australia\u2019s largest private health insurers, Medibank and Nib, delivered full-year results last week that show Australia\u2019s private health insurance industry had a great year, buoyed by a post-pandemic environment where customers prioritise their health.<\/p>\n

<\/p>\n

Younger, health-conscious customers are helping private health insurers keep claims under control. <\/span>Credit: <\/span>iStock<\/cite><\/p>\n

Nib\u2019s earnings soared as it grew policyholder numbers by 4.7 per cent for the year ending June 30, 2023 \u2013 nearly doubling the private health insurance sector\u2019s growth for the year. And the worst hacking event in corporate history failed to stop Medibank, our largest private health provider, from adding new customers in the June quarter \u2013 barely six months after the attack.<\/p>\n

The growing base of young customers, combined with a pandemic-induced dip in customer claims for health expenses, increased the gross profit margin for the industry by 17.6 per cent last year, according to data released last week by the Australian Prudential Regulation Authority.<\/p>\n

The regulator said claims costs increased just 2.4 per cent last year compared to premium growth for the sector of 3.3 per cent driven by membership growth.<\/p>\n

Nib chief executive Mark Fitzgibbon has clearly flagged to investors and analysts that the sub-3 per cent premium rises of recent years will no longer be possible in a health environment where inflation is starting to bite. He will need to convince the federal health minister Mark Butler, to approve any premium increase.<\/p>\n

Conversely, Medibank\u2019s David Koczkar is not convinced claims growth is recovering from its COVID-induced malaise just yet. \u201cI can\u2019t speak for others, but when I look at our underlying claims, growth of 2.6 per cent expectation for FY24, that will be the basis upon which we review our premium increases,\u201d he said.<\/p>\n

\u201cUnless there\u2019s a significant change in that, I expect the premium increases will remain relatively lower than where they were, as an industry, four or five years ago, which was about five or six per cent.\u201d<\/p>\n

Medibank\u2019s customers topped four million for the first time after its policy numbers grew in the June quarter \u2013 the first growth since last year\u2019s hacking attack which exposed sensitive customer data.<\/p>\n

The health insurer reported a 30 per cent rise in net profit to $511 million for the year ending June 30, 2023.<\/p>\n

\u201cThe cost-of-living pressures are real in the community, but people are prioritising their health and wellbeing. And we\u2019ve seen 12 consecutive quarters of growth in the industry and actually the highest growth in customers with hospital cover under 30 (years of age) in a decade,\u201d Koczkar said.<\/p>\n

Nib is now forecasting a claims environment moving back to pre-COVID levels, which equates to a 4 to 6 per cent rise. And Fitzgibbon says providers will need to price rationally.<\/p>\n

\u201cI don\u2019t want to pre-empt the minister\u2019s discretion on this (but) we\u2019ve just had two periods of extraordinarily low increases, 2.7 per cent or thereabouts for two years. Now, that was appropriate. It reflected a lower claims environment,\u201d Fitzgibbon said.<\/p>\n

\u201cNo question, healthcare spending will return to some new normal. My best guess is that it will be somewhere between 4 per cent and 5 per cent. We know the hospitals in particular are under economic pressure, and will be looking for greater compensation,\u201d he said.<\/p>\n

Analysts are backing Medibank\u2019s line.<\/p>\n

\u201cOverall, we anticipate strong earnings growth again in fiscal 2024 on policyholder growth and subdued claims inflation,\u201d Morningstar analyst Nathan Zaia said.<\/p>\n

But some are keeping an eye out for signs of rising costs.<\/p>\n

\u201cThere is a risk that claims inflation, particularly relating to hospital, start rising given broader economic inflationary pressures,\u201d said JP Morgan\u2019s Siddharth Parameswaran after Nib\u2019s result last week.<\/p>\n

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