Bupa Asia Pacific – Australia’s largest privately owned health insurer – saw its after-tax profits climb 26% in 2010, to USD249.4 million. The gains were partly the result of rising premium revenues.
These, in turn, are the product of a more favourable regulatory climate.
Australia’s health insurance industry is tightly regulated. Firms must inform the government of proposed premium hikes and obtain approval a full year before they go into effect.
Historically this has applied pressure to the industry’s profit margins – especially since it is also subject to tough capital requirements. Health insurance providers must have plenty of funds on hand to cover their obligations in the event of a large scale catastrophe.
As a whole, Australia’s private health insurance industry has seen premiums rise substantially in recent years. They were up an average 6% in 2009 alone.
Just last month, the government approved another of Bupa’s premium hikes. Nonetheless, the firm’s 5.14% projected premium increase is the lowest of Australia’s major private insurers.
Australians are not required to have private health insurance, but the industry has benefited substantially from tax incentives aimed at encouraging them to leave the public Medicare system (Australia’s aging patient population has saddled Medicare with a significant financial burden). Additionally, increasing numbers of Australians are switching to private insurance plans to have more choice over their physicians.