NIB Holdings Limited (ASX: NHF) and Medibank Private Limited (ASX: MPL) have reported their lowest level of insurance premium increases in many years.
NIB Holdings and Medibank Private are two of Australia’s largest private health insurers. Medibank operates the low-cost ahm brand, whilst NIB operates the corporate health insurer GU Health Insurance.
Approved premium increases
The Federal Minister for Health has approved NIB to increase its insurance premiums by an average of 3.38% across all of its products. GU Health Insurance premiums will increase by an average of 1.8%.
The NIB increase is the lowest for 16 years. It also said it will implement reforms of including an introduction of discounts for members under the age of 30, classifying products into easy to understand tiers and offering the choice of a higher hospital excess for members.
NIB Managing Director Mark Fitzgibbon talked up his company’s efforts to make health insurance more affordable:
“This is the fifth consecutive year we’ve been able to deliver an average premium change lower than the previous year reflecting our ongoing focus on cost containment and inflation.”
Meanwhile, Medibank said that Medibank and ahm premiums will increase by an average of 3.3%, which is the lowest increase in 18 years. Medibank also confirmed it is implementing the reforms.
To make up for the slow premium rises, Medibank is aiming to cut $60 million of costs to the end of FY20.
Is it Time to Buy Shares In Private Health Insurers?
In early trading today, the Medibank share price is up nearly 3% according to Google Finance, whilst NIB’s shares are up 0.6%.
I think Medibank’s CEO Craig Drummond may have said it best in the press release when he said: “The challenge remains, as to how we can continue to deliver quality healthcare in Australia, at an affordable price.”
Until the private health affordability issue is resolved it’s likely that policyholder growth will be low for Medibank and NIB, if not negative. For example, Australian wage growth is less than the premium rises each year, making it even harder for households to justify.
It could be a better move to pick healthcare shares that are creating growth regardless of the difficulty in private health affordability, such as the two growth shares outlined in the free report below.
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