Australia’s major private hospital bodies have renewed calls for a legislated minimum benefit‑payout ratio of 90% as premium increases, profit growth, and shifting member behaviour focus attention on how private health insurance dollars are allocated.
The Australian Private Hospitals Association (APHA) and Catholic Health Australia (CHA) have released a joint position statement urging the Commonwealth to “guarantee and legislate” a requirement that at least 90% of premium revenue be returned to members as benefits. The proposal reflects an Australian Medical Association (AMA) position first set out in 2020 and restated in its latest Private Health Insurance Report Card. The intervention comes ahead of an average 4.41% premium rise from April 1, in a context where hospital operators, insurers, and policymakers are debating the distribution of funding within the mixed public-private system.
APHA and CHA describe the 90% floor as a system‑wide setting for Australia’s public-private hospital network. They point to an estimated $3.4 billion reduction in revenue to the private hospital sector over the past three years since the COVID‑19 pandemic and say the benefit‑payout ratio, on their figures, declined to 83% in FY23 and has remained about 85% in FY24 and FY25. Over that period, they note insurer profits in the multi‑billion‑dollar range alongside a reported $34 million operating loss for the private hospital sector in FY24. The groups say restoring the pre‑COVID ratio of 90% would equate to about a 5% increase in benefit payments and add approximately $1.2 billion a year to hospitals and related health services.
APHA chief executive Brett Heffernan said the measures were intended to change financial settings between insurers, hospitals, and government. “These are sensible, pragmatic measures that will make a massive difference to the viability of private hospitals, while costing the government very little and holding insurers to account,” Heffernan said. He also referred to earlier statements by federal Health Minister Mark Butler on insurer benefit ratios and the potential for intervention. “The minister noted that ‘the insurers need to do more to get it (benefits ratio) back up to the average of about 90% of their revenue.’ It’s been a year, and the insurers are still coming up short as their profits soar. It’s time to make good on his ultimatum,” he said. APHA and CHA are additionally seeking a Mandatory Code of Conduct for insurer-hospital contracting, overseen by the Australian Competition and Consumer Commission (ACCC), which they say would provide more consistent contracting arrangements.
The joint position statement also addresses upcoming wage pressures in the private hospital workforce. APHA and CHA are asking the Commonwealth to fund half of a proposed support package for nurse wage increases from July 1, 2026, estimated at $445 million over four years. Heffernan said private hospitals support higher remuneration for nurses but face constraints in funding wage rises “in the order of 35%” for about 60,000 nurses in the context of existing financial pressures. He said: “Private hospitals accept nurses should be paid fairly. Private hospitals have long been employers of choice, paying over award rates and providing greater workplace flexibility. However, with pay rises sought in the order of 35% across some 60,000 nurses in private hospitals, on top of the entrenched viability issues the sector faces, the question has always been where is the money coming from? The government has a role to play and 50% isn’t a huge ask.”
Dr. Katharine Bassett, director of health policy at CHA, linked private hospital capacity to the wider health system. “Hospital sustainability is not a private sector issue, but rather a national health system issue. If private hospitals weaken, public hospitals feel it immediately. Waiting lists grow, access tightens, and communities lose services. At the centre of this debate are patients. These reforms are about ensuring Australians can access timely surgery and quality care, regardless of whether they enter the system through a public or private hospital, Nurses deserve fair wages, and hospitals must remain viable employers. But wage decisions made in one part of the system ripple across the entire sector. A transitional Commonwealth contribution recognises that reality and protects both workforce stability and patient access,” Bassett said. She added that “a legislated 90% benefit payout ratio combined with a Mandatory Code of Conduct, as well as targeted wage support, would stabilise funding settings, improve transparency, and protect patient access to timely care.”
The AMA’s December 2025 Private Health Insurance Report Card sets out longer‑term trends underpinning current policy debates. According to the report, from 2008 to 2024 private health insurance premiums more than doubled, while indexation of the Medicare Benefits Schedule increased by less than 20% over the same period. The AMA reports that premium growth has exceeded inflation, health cost inflation, and average wages each year since 2008. Over the six years to June 2025, benefits paid by insurers for in‑hospital medical treatment rose by 18.1%, while sector profits increased by nearly 50%.
In 2024-25, the AMA estimates that insurers returned 84.2% of premium income as benefits, down from 88% in 2019. The association argues that a 90% minimum would change the allocation of premium revenue between retained earnings and claims. AMA president Dr. Danielle McMullen has coupled the 90% benchmark with a proposal for an independent Private Health System Authority to consolidate regulatory roles and lead long‑term reform. “Of course, private health insurers must make a surplus to be sustainable, but it is clear they are holding out on Australians while recording significant profits each year. These insurers have ample capacity to increase the benefits paid to patients,” McMullen said. The AMA also notes a decline of 360,000 gold‑tier policies since March 2020, despite overall policy growth, and the closure of at least 14 private maternity units over five years, as indicators of pressure within parts of the private system.
These developments outline potential shifts in regulatory settings, benefit flows, and cost structures that could affect product design, pricing, and hospital contracting strategies. Proposals for a mandated 90% payout ratio, a code of conduct, wage co‑funding, and a new system authority signal areas where government intervention and stakeholder expectations may change capital allocation and risk management across the private health portfolio. Understanding the data on premium growth, benefits paid, hospital finances, and policy lapses helps insurers, brokers, and advisers assess sustainability, anticipate policyholder behaviour, and prepare for possible adjustments to contracts and benefit schedules in the Australian market.
