After much pressure on the federal government to allow a 2016 price increase in private health insurance premiums of 5.9% because Health Funds were losing money three months later NIB comes clean with a 11pc increase in profit.
With annual inflation running at around 2% it looks like the other 3.9% of the premium increase is going straight into the bank accounts of health funds. This comment is justified by the fact that some health funds are telling their contracted dentists that they cannot raise fees to cover rising operational costs and inflation but even accept up to a 10% decrease in their fees while still providing a high quality service and business.
This leaves the some health funds with a 10% reduction in payment plus a 3.9% net increase in income = 13.9% improvement in profit.
If a cost containment and reduction in income is possible for dentists why is it not possible for health funds to also reduce their premium costs??
The below Article was taken from The Australian newspaper:
Nib stock soars 11pc on guidance
Source: THE AUSTRALIAN
Dated: APRIL 21, 2016 4:23P
by: Daniel Palmer
“Health insurer Nib has upgraded its guidance for the current financial year by up to 30 per cent owing to lower-than-forecast claims inflation.
The firm said consolidated underlying operating profit would fall in a range of $125 million to $135m, well above previous guidance for a range of $102m to $114m.
Nib had flagged earnings would come in at the upper end of the range at its half-year results in February, but the firm is now more confident of a stronger showing.
“As we highlighted at our half year results, claims inflation in the first half had moderated however it wasn’t clear whether the lower claims trajectory would continue in the second half of the year,” Nib managing director Mark Fitzgibbon said.
“So far we continue to see a lower claims trajectory with a much reduced risk equalisation estimate for quarter three, indicative of slowing claims growth across the entire sector.”
Mr Fitzgibbon added that if the trend continued it would ease pressure on future premium increases.
At the official market close, Nib stock surged 11.2 per cent to $4.28, against a benchmark rise of 1 per cent. Ahead of the midafternoon announcement the firm’s stock was just 2 per cent higher”.