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Devices Industry Calls To Reject ‘Big 3’ Health Fund Increases Over 3%

The ‘Big 3’ corporate health funds have no reason to raise their prices more than 3 per cent next year, new evidence shows, with the Federal regulator APRA urged to reject any that do.

Analysis of official APRA data confirms the overall cost of medical devices to private health insurers has gone backwards over the past two premium years.

Medical Technology Association of Australia CEO Ian Burgess said this demonstrated the success of its landmark agreement with the Federal Government, which had delivered health funds price cuts to thousands of implants like heart pacemakers, knees, hips and eye lenses since 2016.

However, despite these hundreds of millions of dollars in savings, Mr Burgess said the ‘Big 3’ corporate health insurers – Medibank, Bupa and NIB – had all continued to raise their premiums at twice the rate of inflation over the same period, while recording profits of nearly $1 billion between them.

“Insurers have not paid one extra cent for medical device claims by their customers over the past two premium years,” Mr Burgess said.

“These findings prove the Federal Government’s agreement has successfully delivered more Australians more access to more medical devices at less cost to insurers – and premiums should be going down, not up.

“Any attempt by insurers to claim premiums should rise by over 3 per cent next year – twice the rate of inflation – is a sham and a scam.

“It’s in the public interest for APRA to ensure the ‘Big 3’ health insurers pass on every cent of these medical devices savings to their customers through lower premiums as promised – and throw every book available at them if they don’t.”

Mr Burgess said the APRA data also confirmed insurer criticisms about increases in the number of people claiming medical devices (volumes) were just a “deliberate distraction” from their planned premium hikes.

“Private health funds have run an orchestrated misinformation campaign misleading their customers, investors and government on medical device costs and casting doubt on the integrity of the dedicated healthcare professionals that use them,” Mr Burgess said.

“Unless APRA draws a line in the sand now, health insurers will be a given the green light to walk all over their customers, suppliers and taxpayers for another decade.”

APRA’s official data shows the total cost of medical devices paid by health insurers fell from $2,090,886,035 in the 2016 Premium Year (pre price cuts) to $2,077,873,733 in the 2018 Premium Year (post price cuts).

Even more significant is the fact growth in total medical device costs paid by insurers fell from 13% in the two premium years pre price cuts (2014-2016) to -1% in the two premium years post price cuts (2016-2018).

Today’s findings come after recent analysis in August 2019 revealed MTAA’s Agreement with the Government has already saved insurers $314 million and was on track to exceed the $1.1 billion in total expected savings.

An AlphaBeta report – also released in August 2019 – uncovered nearly $1 billion in additional savings in the health system outside of medical devices that, if passed on by insurers, could help reduce private health premium growth by up to 20 per cent by FY2022.

Federal legislation requires insurers to submit their premium increases in November each year for scrutiny by the Australian Prudential Regulation Authority (APRA).

The same legislation also gives the government power to reject private health insurer premium increases that are not in the “public interest”.

Table 1: Total Medical Device Costs to insurers pre and post medical device price cuts

 

 Total

Device Cost Growth To

Insurers

Insurer Premium

Growth

Pre Govt Device Price Cuts (Premium Years 2017 & 2018) 13% 10.40%
Post Govt Device Price Cuts (Premium Years 2017 & 2018) -1% 7.20%

 Source: APRA Operations of Private Health Insurers Annual Report 2018-19 Source: Department of Health (insurer premiums 2015 – 2019)

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