Australian private health insurers and hospitals will need to cut more costs to protect profit margins after the federal government on Monday approved the lowest increases to insurance premiums in 20 years.
Medibank shares closed 3.75 per cent higher on the news at $3.04 - the highest they have traded since June - while the ASX-listed Nib's jumped 3.2 per cent to an 11-month high of $5.80, after the premium rises came in slightly ahead of market expectations.
The growing gulf between costs and revenue, and an exodus of younger members, has raised questions about the private health sector's sustainability and prompted a suite of federal government reforms designed to make it more affordable and attractive to members.While the premium jumps drove a rally in the listed insurers' shares on Monday, Macquarie analyst Andrew Buncombe said the government-approved rises did not translate to bigger margins.
Medibank chief customer officer David Koczkar said his fund had done what it could to keep its premium rise to the lowest in 20 years.
Why any hike at all? It's purely a subsidized hike.