Why do health insurance premiums always feel like they are increasing?
There are three main factors which can influence the cost of health insurance premiums.
- The cost of medical and hospitals
- The increase reliance on health care services
- The changes to the Australian Government Rebate (AGR)
1. The rise in healthcare and hospital costs
Health funds pay benefits towards the various health services that their members use with the income they receive from premiums. In recent times, the costs involved in the treatment and care of those going through the Australian healthcare system has been rising sharply, at a rate higher than the rate of inflation.
New medical technologies are making great inroads into the treatment of some conditions, but it seems innovation comes with a price tag as these technologies are often expensive to implement and contribute to higher overall costs in the health sector.
The consequence of higher payments being made by health funds is that premiums have also been rising year-on-year.
2. Increasing reliance and use of health care services
The good news is that Australians are living longer. But as the average lifespan increase, the more healthcare services people are likely to require in their older years. Chronic conditions like diabetes, heart disease and osteoarthritis are more common amongst the aging population, with lengthy stays in hospital and a higher rate of readmissions adding pressure to the healthcare system.
With more numbers going through a more expensive system more often, health insurers have had to adjust their prices accordingly to try and balance the scales.
3. Decreasing government rebate
Another factor that impacts how much you pay as your premium each year is the change to the Australian Government Rebate (AGR) on private health insurance. The AGR was put in place to make private health cover more affordable for residents by subsidising premiums.
However, in recent years the percentage rebate from the government has been steadily decreasing even in the face of premiums being forced up by higher costs for treatments. The impact of the declining AGR is felt by health insurance members who stand to pay a higher percentage of their premium themselves.
Watch the video below to understand more about why health costs change every year.
What is Medibank doing to address increasing health costs and affordability issues?
As an industry leader, Medibank is tackling the issue of ever-increasing healthcare costs in a number of ways.
Medibank works closely with doctors and hospitals to find ways to reduce waste and inefficiency in the health system, encouraging the redistribution of funds towards initiatives that actually deliver good health outcomes for the community.
Another important focus is on establishing primary care programs, like CareComplete, for people with chronic conditions to help them stay out of hospital. You can read more about CareComplete here.
Medibank also works closely with the government on policy reform that reduce costs in healthcare. The government’s prostheses reform reduced the cost of thousands of medical devices (like pacemakers, pins and plates), relieving some of the pressure that was forcing health cover premiums to rise.
The fact that Medibank has been able to deliver an average premium increase that is lower than the average across the industry in 2017 reflects their commitment to pass benefits of this work on to customers.