Posted by http://www.smh.com.au/news/0103/29/national/national5.html on July 9, 2001 at 21:09:34:
Health funds too rich to get a top-up, says
ratings agency
By Judith Whelan, Health Writer
Private health funds have "an embarrassment of riches" largely because of
Federal Government policies to get people to join them, an international
ratings agency has found.
Even though the massive profits of the funds were likely to fall next year as
more new members started claiming for treatment, the funds could not justify
increasing their premiums, at least in the short term, the agency said.
"It would be extremely difficult for the industry to raise prices at the moment,
given their profit," said Mr Ian Thompson, managing director of Asia-Pacific
financial services for Standard and Poor's.
At the same time, the Federal Minister for Health, Dr Wooldridge, said he
had knocked back one fund which had recently applied to increase its
premiums.
And the NSW Minister for Health, Mr Knowles, attacked the health funds as
he defended public hospitals for persuading patients to use their private
insurance by offering to carry any costs not covered by patients' policies.
The practice was revealed in yesterday's Herald.
Mr Knowles rejected claims by the Australian Private Hospitals' Association
that such practices were anti-competitive. He said the Federal Government's
incentives to join private insurance were given ostensibly to help public
hospitals.
It was in the interest of these hospitals to get as much money from the funds as
possible.
"The private funds should get their snouts out of the trough for a little while,"
Mr Knowles said.
Standard and Poor's, in its annual review of the health insurance industry,
found that the funds had made a profit in the last financial year of $344
million, up from $126 million the previous year and a massive and rapid
turnaround from the $11 million loss made in 1998.
That profit came from the enormous surge in people joining funds last year.
The Federal Government spent more than $300 million to reduce hospital
premiums and introduced a series of tax measures to woo people back into
private health insurance.
As a result, the percentage of people with private health insurance grew from
about 30 per cent in 1998 to more than 45 per cent this year.
"It's almost an embarrassment of riches for the funds," Mr Thompson said.
"But this year is as good as it gets."
As waiting periods expired, new members would start to claim on their
policies and no-one knew yet what sort of "claiming profile" many of the
younger members who had taken out insurance for the first time would have.
Now that the funds could no longer cry poor, it was likely private hospitals
"will now be looking at this splendid result and be more than happy to
alleviate the funds of some of that profit", he said.
"It would be extremely difficult for the industry to raise prices at the moment
given their profitability."
In rejecting an application to increase premiums by HBF, Western Australia's
largest health fund, Dr Wooldridge said any premium rises at this stage had
"the potential to jeopardise" stability in the industry.
"A rise by HBF might well ... fuel public apprehension that premiums would
rise industry wide ...We'd be heading right back to where we started," he
said.