For immediate release
Information verified correct on February 24th, 2017
Surge in premiums leaves Australians asking: is private health insurance really necessary?
- Fewer Australians taking up private health insurance
- Health insurance revenue jumps to $20.03 BILLION
- Time to compare options as premiums set to rise on1 April, 2015
March 30, 2015, Sydney, Australia – Fewer Australians are signing up to private health insurance, with a rise in premiums to blame, following new research by one of Australia’s biggest comparison websites finder.com.au.
Meanwhile, health insurance providers have seen three-times the total growth of revenue compared to the number of people insured last year. While total premium revenue grew by 7.52 percent year-on-year to $20.03 billion last year, the number of insured Australians as at December 2014 (for general and/or hospital) has risen by just 2.33 percent to 13,133,045, according to Private Health Insurance Administration Council (PHIAC) data analysed by finder.com.au.
Michelle Hutchison, Money Expert at finder.com.au, said the higher costs in health cover could be discouraging more Australians from joining.
The number of policies also increased by a small 2.5 percent to 6.35 million (as at December 2014 compared to December 2013).
“The 13 million Australians with private health cover paid an average of $1,525.46 each last year, which was an increase of $73.63 compared to 2013. Per month it cost $127.12 on average, up by $6.14.
“That cost is even greater for families, with the average policy worth $236.04 per month last year – that's $3,156.48 for the year according to finder.com.au. Each policy increased by $147.27 on average last year compared to 2013, or $12.27 per month.
“Private health insurance premiums will rise by a weighted industry average of 6.18 percent from April 1, 2015, and will add about $200 annually to the cost of the average family policy.
“We think there would be a lot of people out there questioning whether they really need the expense of private health insurance.”
Premium revenue growth was higher YoY in 2014 than 2013 (7.52 percent) compared to how much it grew in 2013 from 2012 (7.38 percent).
Compared to the number of people with private health cover, the growth rate has slowed – from 2.78 percent YoY in 2013, to 2.33 percent in 2014.
The growth in the number of policies YoY in 2013 (2.99 percent) was also higher than YoY in 2014 (2.50 percent).
Did Australians benefit from private health cover in 2014?
Analysis of PHIAC data also shows that insurers increased their premiums more than necessary as the increasing cost of health services and utilisation rates were more than offset by higher premiums, resulting in bigger profits by insurers.
The industry as a whole made collectively over $1.08 billion in profit, with a net margin of 4.38 percent in 2014 – up by 3.76 percent in 2013.
Out of the total $20.03 billion of premium revenue that health insurers collected in 2014, they paid $17.28 billion in fund benefits. Of this, $12.81 billion was hospital treatment benefits (including hospital substitute treatment), $47 million was for chronic disease management programs and $4.43 billion was for general treatment.
Australians paid $278.99 per out-of-pocket expense (gap) on average for each hospital episode in the December 2014 quarter. Of the 11.2 million people with hospital cover as at December 2014, insurers paid hospital benefits arising from 4.16 million hospital episodes in 2014.
“Health insurance is just like any other insurance, where you pay to be covered in case something unexpected happens,” said Mrs Hutchison.
“The benefit of private health insurance is that policies with 'extras' means you can use health-related services and have part of the cost paid back to you.
“A disincentive with not having health insurance is the lifetime health cover loading which is a fee added to your insurance if you don't have cover from the year you turn 31, as well as the medicare levy surcharge which is a tax charged to those who earn over a certain amount and don't have cover.
“With premiums increasing this week, it’s a good time for Australians to compare health insurance options and learn about how you can save money on your policy. Check out this private health cover guide (www.finder.com.au/health-insurance) to learn more,” said Mrs Hutchison.
For further information
The information in this release is accurate as of the date published, but rates, fees and other product features may have changed. Please see updated product information on finder.com.au's review pages for the current correct values.
finder.com.au is one of Australia’s biggest comparison websites and has helped over 4.8 million Australians find better credit cards, home loans, life insurance, shopping deals and more since 2006. finder.com.au compares 250 credit and debit cards from 31 providers, over 300 home loan products, and information from 13 life insurance providers as well as online shopping promo codes, mobile phone plans, travel insurance and more. One Australian every five minutes is using finder.com.au or creditcardfinder.com.au to find better (Source: Google Analytics).