Why do premiums go up?

The health insurance industry usually only raise premium rates on existing products once a year on April 1. It is important to note that this happens across the whole industry, not just at Police Health.

Factors leading to cost increases include rising health related expenses, such as wages for hospital staff, doctor charges, the cost of medical equipment and technology, as well as other factors such as increases in claims frequency.

Police Health has reserves to cover unexpected increases in benefit costs, but if this is ongoing, we must increase our premium contributions to stay financially viable. In other words, we must have funds to ensure that we can payout your claims.

Who authorises an increase in premiums?

The Board of Police Health Limited considers and applies for proposed changes to premiums. Under the Private Health Insurance Act 2007, private health insurers must obtain approval from the Commonwealth Minister for Health and Ageing before applying a rate increase.

If the private health insurer does not provide sufficient information to the Minister to demonstrate that an increase is necessary, then approval is not given. Likewise the Minister has the power to increase premiums beyond what is requested if it is believed that the private health insurer does not have enough funds in reserve to pay the required amount of member benefits.

In the submissions to the Minister, private health insurers must provide detailed financial information and cost and benefit projections to justify any increases they seek.

The proposed increases are examined by the Department of Health and Ageing and by the Australian Prudential Regulation Authority (APRA).

What does Police Health do to keep its premiums down?

An important part of keeping your premiums as low as possible is maintaining low management expenses. Police Health continues to have one of the lowest management expense ratios of all health insurers at just 6.2% compared to the industry average of 9.1% in 2010/11.

Other ways we keep costs down is having just one office, which is located in South Australia. This reduces operating costs significantly while allowing Police Health to continue delivering its quality service nationally without the increased expense of state offices.

Police Health also enlists the services of AHSA to negotiate hospital contracts around Australia, which in turn assists in controlling costs, maximises cover and keeps premiums down.

Police Health operates on a not-for–profit basis to ensure that surpluses from our member's premiums are retained for the benefit of members and not for paying shareholders.

Why do couples pay the same premium as families?

There are some covers on the market that have a lower premium for couples than for families, but they are generally policies with a lower level of cover or exclusions.

The reality is that a large portion of couples are in the older age bracket where they generally have greater health needs. It is likely that if Police Health made a quality couple's cover available, it could actually cost more than the family cover.

Shouldn't large families pay higher premiums?

The Private Health Insurance Act 2007 provides that all families be treated the same. So whether there is just one child or ten, health funds cannot treat them differently.

Also, children are an important part of a balanced health insurance system. Without a younger generation coming through and into private health insurance, we would simply have a membership that is aging and the cost of premiums would rise rapidly. It is likely larger families from the past help keep premiums down today, as will today's large families do so for the future.