Health insurers want to raise prices. How far will Labor let them go?

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Health insurers want to raise prices. How far will Labor let them go?

By Natassia Chrysanthos

Federal Health Minister Mark Butler is sending health insurers’ plans to increase premiums for about 15 million Australians back to the drawing board, as the Albanese government fights industry requests for up to 6 per cent price rises ahead of a federal election.

Butler said on Wednesday that he was “not inclined” to approve any of the proposed price increases that had been submitted to the Health Department as part of insurers’ annual negotiations with the government over lifting consumer payments for health cover.

Health Minister Mark Butler wants insurers to lower their proposed premium rises.

Health Minister Mark Butler wants insurers to lower their proposed premium rises.Credit: Alex Ellinghausen

While government and insurers go back and forth over premium rises each year, this year’s outcome will be politically sensitive because Labor is preparing to woo voters on health policy in a federal election campaign fought on cost-of-living issues.

Premium rises are passed on to consumers in April and the federal election is due by May.

Butler said on Wednesday that he wanted any private health premium increase to be “justified and proportionate”.

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“In December, I wrote to every single one of the 29 insurers asking that they sharpen their pencils and provide us with an increase that was more in the interests of their members,” he said.

“Based on the resubmissions the Department of Health received, I am not inclined to currently approve their proposed premium increases. I’ve written to a number of private health insurers and asked them to resubmit a more reasonable figure that is in the best interest of Australian consumers.”

Insurers had wanted to increase premiums by 6 per cent last year, but Butler knocked them back. They eventually agreed to lift fees by an average 3.03 per cent across the board – less than wage growth (4.2 per cent) and inflation (4.1 per cent).

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Inflation for the year to last September was 2.8 per cent, and wage growth for the year to September was 3.5 per cent.

Health insurers have renewed their pitch to lift premiums by between 5 and 6 per cent this year, but that would be unpalatable to the government because it would be the sharpest increase since 2016.

The average annual cost of hospital and extras cover for a single person under 36 is $3,261, and for someone over 60 the figure is $4,249, according to financial comparison website Canstar.

With a 6 per cent rise, many consumers would face increases of about $200 or more.

Ben Harris, policy director of peak body Private Health Australia, said private health funds wanted to work with the government to keep premiums as low as possible in a tough environment for consumers.

Harris said several circumstances were prompting them to push up premiums. “Health inflation has been running at about 5 or 6 per cent in the last 12 months,” he said.

“Costs have been increasing, and health funds have paid out rebates about 8 to 10 per cent higher than the year before, after a premium increase of about 3 per cent. We know hospital costs are increasing, and doctors have been increasing their fees as well.”

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But he said insurers also had a vested interest in keeping premiums low while people struggled with cost-of-living pressures, because companies did not want to lose customers.

Health insurance uptake has remained strong in Australia despite cost of living pressures, with membership growing in every quarter since 2020.

The government encourages Australians to take up private cover by charging people without health insurance a levy on their income once they earn more than $97,000.

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