Finance Finance News Private health insurance – more profit, not more service

Private health insurance – more profit, not more service

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NIB boss Mark Fitzgibbon has urged the government to back compulsory private health insurance over Medicare. Photo: AAP
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Serendipity: On the same day private health insurer NIB reports an increased profit and gross margin, a decades-long, top-tier customer tells me coverage of the extra costs for superior, robotic prostate surgery is “discretionary”.

The customer, a friend of mine, is waiting to hear back from an NIB superviser whether his long membership might work in his favour for the extra thousand dollars or so for the robot’s use.

He is already going to be many thousands of dollars out of pocket for his surgeon’s “gap” fee.

Meanwhile, NIB happily reports it increased the gross margin on its Australian residents’ health insurance business from 17.5 per cent to 18.6 per cent.

That means 18.6 per cent of NIB’s $2,013 million of premium revenue – $374 million – did not go to hospitals, doctors, nurses, equipment or any kind of medicine.

The net profit margin increased to 7.3 per cent – $147 million. Dividends were increased by 18 per cent to 13 cents a share. Nice.

Another friend, a doctor, tells me some health funds have been resisting robot-assisted prostate surgery on the basis that the final outcome – curing the cancer – was about the same.

Not much the same is the considerable journey between diagnosis and that final outcome, a quicker recovery time from surgery being just one aspect.

A quick Google search finds plenty of medical evidence for why a bloke would prefer the robot, such things as “blood loss, transfusion rate and positive surgical margin rate were significantly lower … operation time was also shorter … rates of nerve-sparing, recovery of complete urinary continence and recovery of erectile function were significantly higher”.

But paying for the disposable bits required in robot-assisted surgery is “discretionary” for NIB.

NIB may be best known for its CEO’s desire to scrap Medicare and make private health insurance compulsory.

To repeat a phrase I’ve used before, private health insurance is the sheltered workshop of Australian capitalism, rolling in subsidies while the government also uses the tax system as a cattle prod to force customers to pay.

Despite that, most Australians don’t have the big-ticket private hospital insurance that makes up three-quarters of benefits paid.

The latest statistics show hospital treatment membership continued to fall in the year to June 30 not just as a proportion of the population (it’s down to 44.2 per cent), but also absolute numbers – down 31,694 to 11,227,569 – despite the population growing.

In an earlier version of this story, I wrote that the health insurance lobby would like to make private health insurance compulsory. The industry lobby, Private Healthcare Australia, says that is wrong.

PHA tweeted that private health insurance was all about choice, “choice of cover, choice of doctor, choice of the timing of your procedure”.

Well, we know the NIB CEO would like it to be compulsory. I suspect it’s a fair bet that the CEOs and shareholders of the other for-profit health funds wouldn’t really mind either.

Postscript: NIB has replied to soon-to-be-operated-on friend. The company is crediting him one month’s premium – $550 – towards the cost of the robot extras, but said they “didn’t want to set a precedent for other members”.

NIB’s gross margin of 18.6 per cent is higher than the industry average of 14 per cent. The difference between what the industry received from customers ($24.56 billion) and what it paid out in benefits ($20.89 billion) means $3.67 billion was not spent on health.

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