A former private health insurance regulator is calling on federal authorities to ensure private health insurers return windfall profits made during the coronavirus crisis to their members.

It comes as Australians attempt to negotiate reductions in premiums or free cover with their health insurers until they are able to visit their practitioners again.

Those with private health cover have continued to pay their insurance premiums, but claims for hospital or extras have been limited, particularly since the cancellation of non-urgent elective surgeries in late March.

Shaun Gath, a health sector consultant and former industry regulator, said even as some elective surgeries resume this week, the month-long freeze had enabled insurers to make huge profits.

“A month’s worth of premium revenue [for the entire sector] is worth about $2 billion, and you would be not too far off the mark to say [the sector] probably would have pocketed a billion of that that they otherwise wouldn’t have expected to have got,” Gath said.

“Clearly it should be returned to the contributors because people are paying for something and they are not getting the value for. So how can that be done?”

Industry regulator APRA is due to release its quarterly private health insurance statistics on May 19.

NIB managing director Mark Fitzgibbon admitted insurers would have extra funds for now, but said insurers did not yet know exactly how much and therefore talk of rebates was “premature”.

“We won’t really be in a position to calculate the extent of the savings, although we expect them, until a few months away,” he said.

“Once the dust has settled and the savings associated with COVID-19 are clearer, only then can we make those final judgments.

“It would be irresponsible and prudentially unsound for us to start compensating people with cash rebates, or any other form of financial remedy, until we are clearer about the financial impact on the business.”

Customers feeling ‘outraged, ripped off and short-changed’

Andrew Wynd, owner of Melbourne-based Balwyn Sports and Physiotherapy, said many of his clients had cancelled appointments in recent weeks but still had to pay their private health premiums, leaving many feeling “outraged … ripped off and short-changed”.

“Personally I think insurers should either refund the last month or at least offer a discount to members,” he said.

“The private health industry needs to do more if they want to maintain their members. Simply not increasing the premiums doesn’t go far enough.”

Wynd said business at his sports physio practice was down 60 per cent — a costly situation that has forced him to reconsider his own private health insurance cover.

“As soon as the business started suffering and we lost a dramatic amount of income so quickly, we started cancelling everything that we could that we deemed non-essential, and private health insurance, where previously I would look at as essential, we absolutely looked at dropping that,” he said.

Wynd’s business benefits from Australians having insurance — about 60 per cent of his clients have private health with extras cover.

However as he questions his own need for it, he is now taking an unusual step by encouraging his clients to do the same, despite admitting people cancelling their extras cover would be “a risk” to his business.

“I do wonder what impact that would have on the business, but all we can do is continue to offer value to our clients and I think we can continue to do that without the private health industry rebate.”

‘You have to fight and be persistent’

Brisbane mother Erin Siqueria relies on her health cover for remedial massage to treat a leg injury, however she has been unable to visit her practitioner since the outbreak of coronavirus.

She negotiated six weeks of free cover with her insurer, Bupa, after sending emails, spending countless hours on the phone and eventually leaving comments on the company’s Facebook page threatening to cancel her membership if Bupa did not respond.

“I was thrilled but I was exhausted to think that to get to that stage it took all of that,” she said.

“I guess it’s just frustrating that you have to fight and be persistent before you can get Bupa to offer you something that’s appropriate in these circumstances.”

In a statement, Bupa said it “did not seek to benefit from this unprecedented situation” and had set aside $50 million to be used for customers experiencing financial hardship.

The insurer said it had taken “longer than it would have liked” to respond to everyone needing help, given it had received more than 22,000 applications for assistance so far.

It said it was prioritising people who had lost their jobs.

Call for independent oversight

Gath wants the Federal Government or the Private Health Industry Ombudsman to oversee the return of any profits to customers, to ensure it actually happens and is done equitably.

“The industry is being a bit coy about disclosing what is going on with membership at the moment,” he said.

“The industry has said they will provide a rebate or payback of some kind, [but] it is all on the never-never at the moment so we don’t really know.”

“There should be some level of independent scrutiny.”

However NIB’s Mark Fitzgibbon does not see the need for such oversight.

“There is no need for regulatory intervention here. We will do the right thing by our consumers as any other company should do,” he said.

Gath said he expected the insurers to continue to make huge profits in the coming weeks and months.

“The Government has decided to reactivate elective procedures but at about 25 per cent of the normal flow, so for that period of time while we are ramping up [to normal service], the industry will continue to make a very substantial unexpected profit,” he said.

‘They should be returning that money’

Alan Kirkland, chief executive of consumer group Choice, echoed those concerns.

“The private health insurers were already very profitable businesses and they should not be using this time to make even more profits, they should be returning that money to consumers,” he said.

Kirkland acknowledged the industry delayed a 2.9 per cent premium price rise on April 1 for six months, but said it should be for longer.

“I think it is already early enough to say they don’t need that premium increase at all this year, but even more so we’re reaching the stage where they should be able to tell they can start giving money back,” he said.

“We don’t want to delay that for 12 months [because] consumers need that money in their pockets right now.”

Choice said the cancellation of non-urgent elective surgeries and the inability for many private health customers to make extras claims, like physiotherapy and dental, had helped prop up an industry that only months ago was being warned it could collapse if it did not reform.

In February the Australian Prudential Regulation Authority (APRA) warned the sector it was in a “death spiral” and that smaller private health funds would not survive if insurers did not rein in rising premium costs and provide better benefits.

“The industry’s current trajectory is unsustainable,” APRA executive board member Geoff Summerhayes warned on February 4.

Kirkland said coronavirus has extended a lifeline to the industry.

“[The coronavirus outbreak] has highlighted that there needs to be a much bigger review of private health insurance system,” he said.

“We can’t go back to normal after this, there needs to be a root-and-branch review of private health insurance to see whether we’re getting value for money as a community.”

– ABC / Tracy Bowden and Marty McCarthy