The federal government is altering how private health insurance premiums are set in Australia, aiming to give private hospitals greater influence over the process. This change is intended to stop insurers from underestimating operational cost increases, but it could result in higher premiums for the 15 million Australians with private health cover.
At present, insurers submit cost projections and usage data to support proposed premium increases. However, this method has been criticised for failing to reflect actual hospital expenses, especially rising wages. For the first time since 1997, the government plans to include hospital financial data, such as revenue and profit figures, in the annual pricing review beginning this month.
This shift may bring more transparency to premium decisions, though not all hospitals may comply with data requests. Last year, less than 40% of hospitals responded to the government’s request for financial details. Some hospital executives warn that incomplete participation could lead to reliance on partial or flawed data. Despite this, the government believes that quarterly reviews of detailed financial information will better represent hospital operating conditions.
Both hospitals and insurers are under pressure. Insurers claim they already provided an extra $250 million to help hospitals stay operational. Hospitals are requesting further support to handle staff wage increases. Insurers are also facing another risk. The Fair Work Commission may approve wage rises of up to 35% for private nurses in October, which would likely be passed on to consumers through higher premiums in 2025.
There is growing discussion about adopting a fixed-price model, similar to the public system. This proposal, known as the National Efficient Price, would standardise payments and could replace the current system of complex negotiations between private hospitals and insurers. However, industry stakeholders are divided over whether centralising prices would benefit or disadvantage the sector in the long term.
