Health funds pay policyholders $500 million less due to COVID-19

8 December 2020

Insurers have paid out $500 million less in hospital and extras benefits in 2019-20 compared to the previous year, the latest ACCC annual report into the private health insurance industry has found.

The reduced benefit payout was the result of government-imposed restrictions in response to the COVID-19 pandemic, which limited non-urgent elective surgery and non-urgent extras treatments (including most dental, optical and other health services).

At the same time, average premium increases have continued to be higher than inflation and wage growth despite the fact that most insurers postponed their scheduled April 2020 premium increases for at least six months in response to the pandemic. Some insurers, such as HBF and Teachers Union Health, cancelled this year’s premium increase altogether.

Health funds say they have returned substantial sums to policyholders since the pandemic began, including ongoing relief to those suffering financial hardship. Insurers have also indicated that they will use any remaining profits gained from the COVID-19 restrictions to discharge policyholders’ accumulated demand for non-urgent elective surgery.

“The ACCC expects insurers to act on public commitments to return any profits gained from COVID-19 to policyholders, including through hardship measures such as premium waivers and discounts, and through the timely management of any built-up demand for non-urgent elective surgery,” ACCC Deputy Chair Delia Rickard said

“In preparing the next report to the Senate, the ACCC will consider the actions taken by insurers in this regard.”

The report also noted that health insurance participation rates had continued to decline over the past year, as the proportion of the population holding ‘hospital only’ or combined cover fell from 44.3 per cent in June 2019 to 43.6 per cent in June 2020.

“The overall decline in the proportion of people with hospital policies in 2019-20 was possibly due in part to the economic slowdown associated with COVID-19. However, some have asserted that the pandemic also reminded Australians of the quality of Medicare and the Australian hospital system, leading them to question the value of continuing to pay for private health insurance,” Ms Rickard said.

“While it is difficult to determine the exact reason why there was a lower proportion of people with hospital cover in the year ending June 2020, there is little uncertainty about the continued downward trend, particularly among younger age groups.”


Each year, the ACCC is required by the Senate to produce a report on key competition and consumer developments and trends impacting on people’s health cover.

This report covers the 2019-20 period, and is the ACCC’s 22nd report to the Senate under this order.

The Minister for Health will consider the following matters when assessing each health fund’s application to change premiums from April 2021:

  • information on projected future benefit payments, including from claims deferred as a result of the COVID-19 pandemic, and
  • the reasonableness of the proposed treatment of any funding set aside for deferred medical procedures.

The Department of Health will continue to monitor these matters throughout 2021.

Notes to editors

In June 2020, following ACCC enforcement action, the Federal Court ordered Medibank , trading as ‘ahm Health Insurance’ to pay $5 million in penalties for making false representations to its policyholders about the benefits offered by their ahm health insurance policies, in breach of Australian Consumer Law.

On 17 September 2020, the ACCC granted private health insurers an exemption from the operation of the competition laws until 31 March 2021, in relation to conduct to coordinate the provision of financial relief to policyholders during the COVID-19 pandemic, and broadening insurance coverage to include COVID-19 treatment, tele-health and medical treatment provided at home. The exemption is conditional on details of proposed measures being provided to the ACCC in advance, and excludes agreements to increase premiums.

On 6 October 2020, the Australian government announced a range of initiatives aimed at making private health insurance simpler and more affordable.

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