Health funds continue to return profits

Health insurers have handed back to policyholders about $2.1 billion of the profits they gained from a reduction in claims between the start of the pandemic and 30 June 2022, the ACCC’s latest report into the private health insurance industry has found.

Figures submitted by insurers to the Department of Health and Aged Care show insurers’ estimated permanent savings due to claims not made during the pandemic were about $2.25 billion as at 30 June 2022. Some insurers have also reported additional measures they will take to return the remaining savings to policyholders this financial year.

“We welcome insurers’ efforts to return profits from COVID-19 restrictions to policyholders. We expect them to continue doing so until all financial benefits from claims permanently missed due to COVID-19 restrictions are returned,” ACCC Deputy Chair Delia Rickard said.

The report shows that most funds have been returned through premium relief (about $1.08 billion), especially deferral of premium increases. This is closely followed by direct payments to policyholders (about $847 million), and a smaller amount has been allocated to other measures such as hardship support and coverage extensions (about $160 million).

“Insurers must ensure that any funds allocated for measures such as hardship support or coverage extensions are used by policyholders. If not, those funds should be returned through direct approaches such as payments or premium relief,” Ms Rickard said.

Some insurers reported that they had returned all permanent savings as at 30 June 2022, but this does not necessarily mean they have fully met their commitments. For example, it may become clear to insurers that some claims accounted for in their ‘deferred claims liability’ will not materialise. The deferred claims liability refers to money that financial regulators directed insurers to set aside to ensure they have adequate capital to meet the cost of procedures that were deferred rather than cancelled during the pandemic.

The report shows that COVID-19 restrictions continued to limit policyholders’ access to non‑urgent elective surgery and non‑urgent extras treatments such as dental and optical services in 2021-22. This was particularly so in Victoria and New South Wales during the extended lockdowns in the second half of 2021, but also more broadly during the Omicron wave in early 2022.

This in turn led to significant declines in benefits paid out by insurers to policyholders. Insurers paid 4.5 per cent less on average in hospital benefits per policyholder in 2021-22 compared to the year before. The average amount paid out for extras benefits decreased by 5.4 per cent per policyholder.

The report also explains that insurers have continued to develop new schemes and build on existing programs to access, use and share consumers’ personal information. For example, wellbeing apps and reward schemes. The data insurers collect can be used for targeted marketing, and to create insights that can be shared and sold to third parties. The recent Medibank data breach highlights the risks when businesses collect large amounts of sensitive data.

“Businesses in the health sector should be alive to the dangers associated with collecting and using highly sensitive information, and they need to comply with all their obligations, including under the Australian Consumer Law,” Ms Rickard said.

“Insurers should weigh up the potential cybersecurity risks when considering new measures to collect consumer data, and they must have sufficiently robust measures in place to protect against cybersecurity threats.”