“Challenging”: Medibank Shares Sink On Claims Blowout

By Glenn Dyer | More Articles by Glenn Dyer

Oops, where did that come from?

Medibank Private shares fell sharply yesterday after the private health insurer revealed claims were $21 million more than expected in 2018-19 and that this trend will continue into 2020.

The reason – higher private hospital payments and prosthesis costs – news that unnerved the market and saw the shares lose 8.5% to close at $3.11.

The private health insurer says its under-provisioning indicates underlying claims growth per policy unit was 2.4% for the 12 months to June 30, rather than the 2.0% reported at its full-year results in August.

“This, when combined with our October claims payments indicates a trend, and we now expect the increase of claims per policy unit in the second half of FY19 to continue throughout FY20,” Medibank said in a statement to the ASX on Wednesday.

“While the industry claims environment remains challenging, we continue to focus on the elements of our business that we can control, including growing our policyholder numbers,” the company said.

Medibank said it would continue a cost-cutting drive, and called for “further government reform” to help health insurers manage the challenge of rising healthcare costs and increasing insurance premiums that were driving people out of the system.

The company claimed its claims experience highlighted the need for further government reform as private health insurers struggle to improve affordability against rising costs.

Health insurers are increasingly feeling the pinch as the rising numbers of mostly younger Australians abandon private hospital cover due to the cost.

APRA’s 2018-19 annual report on private health insurers this week showed the number of Australians with private hospital cover fell by a net 30,000, with Medibank’s hospital cover customers dropping by 16,000 to 2.81 million over the financial year.

Medibank’s total policyholder growth for the year was 0.8% – driven by its budget AHM brand – and the company said it had grown policyholders by a further 0.6%, or 10,000 people, in the first quarter of FY20.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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