Impasse between health insurers, private hospitals deepens

Hospitals buckling under rising costs and lower revenue say a new Ombudsman report into private insurers bolsters their case for reform despite complaints falling on the previous year.

The Australian Private Hospitals Association — which has maintained for years that its members are at risk of closure from growing financial pressure — is at an impasse with big name insurers.

“Premiums keep going up, private hospitals are being shortchanged and insured patients are suffering due to massive exclusions in their insurance cover,” chief executive Brett Heffernan argued in commenting on the Ombudsman’s report on Thursday.

“The higher premiums Australians pay do not translate into meeting the higher costs for the treatment and care.

“Despite this being the justification for premium hikes, there is nothing compelling insurers to meet rising health costs.”

The Federal Government has urged the groups to sort it out between themselves. A more recent intervention, according to reports, has been mulling introducing a benchmark pricing model for procedures.

Meanwhile, Australians are feeling the pinch of higher premiums, with Federal Health Minister signing off on an above-inflation increase to private health insurance in February.

There were 3411 complaints to the Ombudsman about private health insurance arrangements in 2024-25 — a 20 per cent decrease on the year prior, according to its most recent report.

That came with a caveat that complaint volumes then had been “higher than usual” thanks to a major systems upgrade by Defence Health.

The Hospitals Association singled out Medibank, Bupa, NIB and HCF for undercutting on their benefits to contributions ratio, claiming they had all fallen below a pre-pandemic benefits balance of 90 per cent.

The group argued each percentage point under that threshold represented “more than $200 million underpayments to hospitals”.

Mr Heffernan argued the 90 per cent ratio should be legislated, and also pushed for a code of conduct to be introduced.

“The Federal Government must legislate to restore pre-Covid benefits of 90 per cent, as it said it would. If not, this year’s premium increases will, again, just line the pockets of insurers,” he said.

“Such a code, with an arbitration model and price transparency overseen by the ACCC, will shed light on, and put a stop to, the rogue behaviour of insurers that undermines the future of private healthcare.”

According to the Ombudsman, most of the complaints related to benefits, service and membership.

General treatment benefits, as well as unexpected exclusions from policies, and claim processing times emerged as common issues.