Radio interview with Minister Butler and Nadia Mitsopoulos, ABC Radio Perth – 5 March 2024

NADIA MITSOPOULOS, HOST: The Federal Health Minister has finally signed off on the annual increase in health insurance premiums. And this year they'll go up by about 3%. Now that's half what the health funds actually wanted, and it is below inflation. But still the biggest increase that we've seen in the last five years. Now that's an industry average, so, some funds will increase their premiums by a little bit more. Others a little bit less.
 
So, some examples: HBF, for instance, which is WA’s biggest insurer, your premiums will go up by 3.95%, which is about half a per cent less than last year. The other big insurers, Bupa 3.61%, HIF 3.87%, Medibank Private 3.31% and NIB 4.1%. So, what I want to know from you this morning is how much you're paying now, and can you still afford private health cover? While you get in touch with me, have a listen to the Federal Health Minister, Mark Butler. Good morning.
 
MINISTER FOR HEALTH AND AGED CARE, MARK BUTLER: Good morning, Nadia.
 
MITSOPOULOS: How did you land on this figure?
 
BUTLER: This is quite a detailed process that's been in place for many years. Essentially, the health minister of the day receives an application from the funds about the increase they want to put in place, and then we receive independent advice. So, we get advice from the Prudential Regulation Authority about the sustainability of the funds, we also get detailed advice about what's called the payout ratio: what percentage of their income are funds paying out in actual claims and what are they retaining, if you like, for management expenses, administration and profits, all those sorts of things.
 
So, it's quite a detailed process, and for many of the funds it's a bit of back and forth, they put their claims in the latter part of last year, I went back to almost all of them, certainly the vast bulk of them and pushed them on sharpening their pencils. Some of them I went back to a couple of times and then received some further advice from the department. Obviously, we've got to make sure that the funds are not going to fall over, that they're sustainable. But every health minister, and certainly in a cost of living environment that the people of WA and right across the country, and right across the world are facing right now, I was very keen to make sure that I got the best possible result for consumers.
 
We have got a result this year that is below wages growth, below pensions growth. Every increase in costs for households I know is a real burden for them right now, but we've worked really hard to keep this as low as it possibly could be.
 
MITSOPOULOS: And the health funds actually wanted a 6% increase. Were you very quick to say no to that?
 
BUTLER: Yeah, we were. The first response was pretty quick. To their credit, the funds always participated in this process in an open and transparent way, they’ve got to, they recognise that. So, we’ve had constructive engagement with all of the funds and as I think your opening suggested, we've arrived at an average growth rate of 3.03%. But that's a bit different depending on what fund you're with. Of the big five, 2.8% is the lowest and 4.1% is the highest. Some of the not-for-profit funds are a fair bit below 3%.
 
We always encourage people to really analyse what they're paying and what they're getting from their product. There’s good independent material on privatehealth.gov.au which is a website that the Private Health Insurance Ombudsman runs. It’s good independent, government funded advice that people should check from time to make sure they're getting the best possible deal from the fund they're with.
 
MITSOPOULOS: Okay. And because this is an industry average that you sign off on, the funds have that wriggle room? I guess that's what consumers get a little confused about when they hear you say: “okay, it's going to be a 3% increase.” But then HBF, for instance, says: “well, we're going to increase ours by 3.95%.” And that's where people get a little confused.
 
BUTLER: As the Health Minister I go through the process with every single fund. Different funds have a different member profile, some of them might have slightly older members, so they are paying out more than other funds might. The industry average, which is a weighted average, reflects the size of particular funds. The industry average does mask the fact that there's quite a variety in, first of all, the premiums that different funds charge, but then also the yearly increase. This is why I come back to that point, particularly at a time of real cost of living pressure and when people are really checking everything they're spending their money on, and they should do that with private health insurance as well.
 
I might also make the point though, Nadia, that insurance products generally have been going up quite a lot. Last year other insurance products, house insurance, car insurance, those sorts of things, went up by 17% across the board. Again, holding private health insurance, which is such a big part of many household budgets, down to 3%, while every other insurance product has been climbing by double digits is something that we've been very conscious of as well.
 
MITSOPOULOS: Yeah. And it's something that comes up quite a bit on this program. And that's the concern, I guess, is those cost of living pressures, and as you mentioned, juggling those other high insurance costs. Is there a concern that there will be people who say: “I just can't cover private health insurance anymore.” Which is what you don't want, because you obviously need to keep your public hospitals running. Are you concerned that there will be people who give it up?
 
BUTLER: That’s why I really encourage people to shop around. Around 15 million Australians are covered by private health insurance. They've either got products themselves or kids that are covered by them. Funds have actually been growing their membership a fair bit over the last few years as well. There was growth during COVID and that growth has continued. I think you're talking to Rachel David from the industry, she'll be able to talk more about that.
 
So, I'm also conscious that funds are recording a bit of membership growth, which has not always been the case over the last 20 years. But from this government - we're very conscious of the cost of living pressures that people are focused on. I'm on the Budget Committee of the Cabinet as well. Whether it’s this, whether it’s the tax cuts that will be delivered on the 1st of July, other measures we're putting in place for cheaper medicines and things in health, cost of living pressures is the most important issue for government and that's been right at the front of my mind in approving these private health insurance increases as well.
 
MITSOPOULOS: And just on that point, is there ever an option to say no increase?
 
BUTLER: If the information that I talked about earlier on reflected a position where no increase was justified, of course the health minister of the day would do that. The cost of providing health care, which is ultimately funded by private health insurance – health care in the hospitals - that is going up, like the cost of everything is going up with the global inflation shock we've seen over the last couple of years. We are in a period where private hospitals and other deliverers of health care are seeing their costs go up, which ultimately is funded by private health insurance. If costs were flat, then there might be a case for a year without any increase to private health insurance premiums. But we know across the economy, costs aren't flat, costs are going up of just running a private hospital or running a private surgery. And that is reflected in these numbers today.
 
MITSOPOULOS: Previous governments had announced this figure in December. Why did it take you so long to announce it?
 
BUTLER: Greg Hunt announced these increases in December and January for a few years. But if you look over the last 20 years, the Howard Government always announced these increases either in the last week of February or in the first two weeks of March. That was the case when we were last in government under Kevin Rudd and Julia Gillard. Sussan Ley when she was the Health Minister a few years ago, she announced in the first week of March. You’re right to say that Greg Hunt generally announced these earlier. But in the last week of Feb or the first week or two of March is generally what's happened over the last 20 years.
 
The point I make, though, is that rather than some particularly random date, the most important thing is for the Health Minister to make sure this is not a tick and flick exercise. To put the funds to proof on any increase that they are seeking, to make sure that consumers get the best possible outcome. And we've been working on that now for the last few months since late last year with those funds. And if you look at the date of announcement over the last 20 years, with the exception of Greg Hunt's time, where he – for reasons I'm not quite sure of – decided to announce these things in December or January. Broadly over the course of those 20 years, going back to John Howard, the last week of February or the first week or two of March has been the standard announcement time.
 
MITSOPOULOS: I'll leave it there. Appreciate your time. Thank you.
 
BUTLER: Thanks, Nadia.