The share prices of Australia’s two large listed private health insurers, Medibank Private Limited (ASX: MPL) and NIB Holdings Limited (ASX: NHF), both went up today.
What happened?
Every year, private health insurance providers must apply to the Australian Government Minister for Health for approval to increase private health insurance premiums. They can do this once each year.
Both Medibank and NIB announced their approved premium increases to the market today, along with some comments.
Medibank
The Medibank share price went up 3.75%.
The private health insurer said that it has received approval to increase Medibank and ahm private health insurance premiums by an average of 3.25% from 1 April 2021 – this is the lowest average premium increase in 20 years.
Medibank reminded investors that it postponed premium increases for six months for all customers.
Medibank chief customer officer David Koczkar said: “2020 has been an extraordinary year and we have remained focused on supporting our customers through this difficult time. Some of our customers have struggled financially, some have even lost their jobs. But we’ve all experienced the uncertainty created by COVID-19.
“Despite the fact that we continue to pay more for health costs, because as a community we are getting older and going to hospital more, Medibank is working hard to ensure that private health insurance remains affordable.”
NIB
NIB said that it had approval to increase its health insurance premiums by an average of 4.36% from 1 April 2021 to meet future claims and medical costs. NIB’s average premium increase for the past three years is 3.55%.
The health insurer said that its products continue to remain competitive and affordable with its products coming from a lower premium base compared to the industry average.
NIB Managing Director Mark Fitzgibbon said: “Premium changes are never welcomed but the reality is that the cost of medical treatment continues to rise well above inflation and we’re increasingly seeing members access healthcare services with health insurance a critical funding tool enabling treatment and care.”
Summary thoughts
Both of these businesses have seen a lot of volatility during 2020, particularly because of COVID-19. Their share prices are not as high as they were before COVID-19 came along. But they are recovering, with this premium increase helping them go higher. I’m not sure if they are worth buying today because health insurance affordability is still a topical issue. Long term growth could be tough.
In the healthcare space, there are other ASX growth shares that I’d prefer to own in my portfolio like Volpara Health Technologies Ltd (ASX: VHT) and Pro Medicus Limited (ASX: PME).
