Big health fund seeks overflow price rise
Sydney Morning Herald
By Mark Metherell
Australia's largest health fund has asked the Federal Government for a 13 per cent increase in its premiums - a move that would hit members lured to join by the Government's own health insurance changes.
Medibank Private, which is owned by the Government, has sought the increase after claiming a 60 per cent jump in payouts last year generated by the influx of one million new members and their families.
The move will revive fears of a return to the big premium rises of the 1990s which led to a hemorrhage in fund memberships and prompted the Government's changes.
These included a 30 per cent tax rebate on private fund premiums and penalties for people who joined a fund over the age of 30. The changes, however, do not preclude people from switching funds.
The Government can refuse a request for a premium increase if it finds that the amount is more than what is required on prudential grounds.
But Medibank Private, which could not be reached for comment yesterday, is expected to argue that it needs the big rise to ensure its financial stability and avoid any risk of an HIH-style collapse.
Medibank's managing director, Mark Burrowes, said that when the fund released its annual results last November the trading results had dipped because of a much higher than expected increase in claims.
Mr Burrowes said that at the time contributions were not matching the "spiralling claims". He indicated that the fund would look to reduce its costs to achieve greater sustainability.
Medibank Private's critics, however, say it is seeking to consolidate its dominant position after attracting members by undercutting competitors.
The 13.08 per cent rise sought would add more than $2 a week to the cost of the fund's average policy, after accounting for the 30 per cent tax rebate.
It would also add tens of millions of dollars to the $2 billion-plus annual cost of the rebate to taxpayers, another reason why the Government is likely to be reluctant to allow such a rise.
Medibank Private, easily the most successful performer under the Government's Lifetime Health Cover changes introduced in July 2000, offered very competitive rates to exploit the surge in member numbers.
Sources say that several other big funds, including MBF, HCF and AXA, are seeking increases but that these are more likely to be between 5 and 8 per cent.
A spokesman for MBF, David Jones, said yesterday that his fund, the country's second-largest, was seeking a "modest" rise, the first across-the-board increase for three years.
The chief executive of the Australian Health Insurance Industry Association, Russell Schneider, said he could not comment on any individual fund's claims for increases.
"Health funds acknowledge the Government is going to look very carefully at any rises," he said. "I don't think any fund would seek a rise that is not totally justified."
The applications for premium increases are being considered by the Health Department and the Private Health Administration Council.
The Health Minister, Senator Kay Patterson, is expected to announce the Government's decision next month.