Why is my health insurance premium going up?

Bupa has announced an increase to the average health insurance premium, starting in April this year. Here, we’ll look at the reasons behind the rise, how our members may be affected, and what we’re doing to try to push prices back down.

From April 1st 2017, Bupa will be increasing the average health insurance premium by 4.9 per cent. That means our average health insurance customer may face an increase of around two dollars a week for single members and four dollars a week for families (before any rebate or discount), although it could vary according to policy and state. 

Cost increases to health insurance can put extra financial strain on Australian families. This is something Bupa recognises wholeheartedly, and something we’re working hard to try to prevent. 

So, why is this happening?

Managing Director of Bupa Health Insurance Dr Dwayne Crombie says there are three key things which are pushing up the price of health insurance premiums: the cost of new medical technology, the cost of living and an ageing population.
“The good news is that we’re all living a lot longer than we used to,” Dr Crombie said. “The down side is that we end up having do to many different things to give you a good quality of life. So, cataract operations, people with heart disease, diabetes, joint replacement, there are all sorts of things we can do for you nowadays. Unfortunately, it all comes at cost,” he says.
“There’s also all that wonderful new technology that our doctors and other clinicians have now,” he says. 
Other factors impacting premiums include: 
  • increasing use of services
  • rising consumer expectations about the tests and treatments members want to receive
  • the increasing costs of healthcare providers
  • a decrease in the Australian Government Private Health Insurance Rebate amount.
  • Australia’s ageing population which needs more medical and surgical care
  • new and more expensive medical technology and treatment options.
To put all that into perspective, in 2016, we paid out $5.5 billion in claims, six per cent higher than in 2015.

What’s Bupa doing about it?

In order to try to keep prices down, we’ve been working with governments, hospitals, doctors, and our networks, to tackle the rising healthcare costs. If we can successfully help drive down the cost of healthcare, we can pass the savings onto customers. 

One example is prostheses, a term used to describe an artificial body part used in some operations. The cost of these is determined by the Minister of Health.  
“If we take the most common type of hip joint operation, including rehabilitation, that’s a total cost of about 30 to 35 thousand dollars,” Dr Crombie says.
“Approximately 11 thousand dollars is the cost of the actual hip itself. We’re arguing that that tends to be a lot higher than in other parts of the world.”
This year for the first time the government has delivered on that commitment to make some initial changes to prosthesis costs. Bupa has guaranteed to pass on every cent of these price reductions to its customers. This year that equates to about $12 off the price of each policy, but those cuts can go deeper.
“Australians are still unjustifiably paying among the highest prices in the world for the medical prostheses, and we are asking the Government for further price reductions, that will also be passed on to our customers.”
Dr Crombie says while the costs of premiums are going up, private cover continues to give people peace of mind when it comes to their health.
“Private health insurance allows you to be treated in a private or public hospital as a private patient. This means that you may be able to choose the doctor that treats you, the hospital you are treated in and a time for treatment that suits you. Private health insurance also provides cover for services not covered by Medicare such as physio, dental, optometry and podiatry. Many people rely on private health insurance to access services they would otherwise be unable to afford.”

Is the cost increase just to satisfy shareholders?

We don’t actually have any shareholders. Bupa was formed in 1947, and our status as a company with no shareholders means we can make customers our focus. 

As Dr Crombie explains, the company reinvests profits into our healthcare for customers.

“Each year we do make a profit, but we re-invest all of that money into making the health insurance business better, or into other kinds of health services for people here in Australia, particularly into Aged Care. So that’s how we do good with what we earn. But the major part of the premium dollar that you pay us, goes to pay for your health care.”

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