PHIAC | Circulars and Publications

		Search

Publications

Topics in this section

PHIAC Charters

PHIAC Corporate Plan

Industry Risk Management

Private Patients' Hospital Charter

Insure? Not Sure? (pdf format)

PHIAC Annual Report

Operations Of The Private Health Insurers Annual Report

Financial and Statistical tables of past Operations Annual Reports

Industry Statistics

Presentations

Discussion Papers

Publications

Operations Of The Private Health Insurers Annual Report 2006-07

Part B

Operations Review

Industry overview

At 30 June 2007, there were 38 private health insurers operating in Australia, all of which conducted a health benefits fund(1). Twenty-six of the funds were available to the general public (open membership) and 12 were restricted access funds.

Five funds operated on a for-profit basis while the remaining were not-for-profit (2). Insurers operating on a for-profit basis may make distributions by way of dividends, provided they maintain sufficient capital to satisfy the requirements of the Solvency and Capital Adequacy Standards. Dividend payments totalling $56.7 million were provided for, or paid, during 2006–07 ($37.5 million in 2005–06).

During 2006–07, there were some changes to the number and status of health funds operating in Australia. The registration of Federation Health Ltd was cancelled by PHIAC on 18 October 2006 (3). PHIAC granted the application for registration by National Health Benefits Australia Pty Ltd on 29 March 2007 and the fund commenced operations on 18 June 2007. Lysaght Peoplecare Ltd became an open fund on 1 December 2006. The United Ancient Order of Druids Friendly Society changed its registered name to Druids Friendly Society on 29 May 2007 and CBHS Friendly Society Ltd changed its name to CBHS Health Fund Ltd on 1 December 2006.

There is a significant range in the size of insurers, from insurers with 28.6% of the market to 0.001% of the market, measured in terms of the number of current policies. The industry is dominated by the six largest insurers, which share 77.3% of the market. Twenty-three insurers each have less than 1.0% of market share which when combined comprise 6.0% of the market.

Not all private health funds are active in all states. Smaller and restricted access funds are more likely to focus on a particular market niche through which their viability is maintained. Many smaller and medium-sized funds share outsourced IT systems and contracting arrangements that enable them to remain competitive in the industry.

Membership of insurers increased steadily during the year, with increases in both family and single policies. At 30 June 2007 there were 9.145 million persons with hospital treatment cover, or 43.5% of the population. This compares to 8.846 million at 30 June 2006, covering 42.7%.

The average age of those covered with hospital insurance at 30 June 2007 was 39.9 years (30 June 2006: 39.8). The average age of the industry’s customer base is increasing at a rate similar to that of the Australian population. Increased service utilisation and benefits outlays are associated with older age cohorts. Persons aged 65 and above comprise 13.3% of the insured population, compared with 13.1% at 30 June 2006, and draw 44.9% of benefit outlays. The increasing age of the insured population is a trend of some importance to the industry and its ability to contain benefits growth.

In last year’s report, PHIAC noted the appointment of an inspector to investigate allegations that Railway & Transport Health Fund Limited had contravened provisions of the National Health Act 1953 in relation to certain financial and governance matters. Following the inspection, a number of directors were required to step down. Since then, the reconstituted board of the fund has managed all issues of concern. Consequently, PHIAC is satisfied that the issues regarding financial and governance matters have been addressed.

(1) National Health Benefits Funds Pty Ltd commenced operations in June 2007.

(2) PHIAC has given approval for NIB Health Funds Ltd to convert to for-profit status with an effective date of 1 October 2007.

(3) The fund conducted by Federation Health Ltd was merged with Latrobe Health Services Inc on 4 July 2005.

Top of Page

Go to next page

Go back to start of Part B

Go back to start