The Australian Prudential Regulation Authority (APRA) has released the private health insurance risk equalisation statistics for the 2019/2020 financial year, sourced from calculations conducted by the regulator and the Private Health Insurance Administration Council (PHIAC).
Risk equalisation aims to support the community rating principle legislated under the Private Health Insurance Act 2007. Insurers are not allowed to risk rate premiums, and Risk Equalisation partially compensates insurers with a riskier demographic profile by redistributing money from insurers paying less than average benefits to those paying higher than average benefits.
Annual net transfers for the 2019/2020 financial year hit $425,391,316 – less than the $456,052,618 transferred in the prior financial year. Meanwhile, the total gross deficit for the same period was $7,208,929,698 – a small increase from the previous financial year's $7,142,591,691.
The risk equalisation annual results for each state are as follows:
- New South Wales reported a $2,421,955,595 gross deficit for the 2019/2020 financial year, a significant increase from $2,394,624,789 in the previous financial year.
- Victoria reported $1,832,973,295 for 2019/2020 from, smaller than $1,835,574,446 in the previous financial year.
- Queensland had $1,493,525,134, a small increase from the previous financial year's $1,463,625,990.
- South Australia had $535,644,659, a small decrease from the previous financial year's $537,113,892.
- Western Australia reported $734,599,312 for the latest financial year, a small increase from $725,316,942 in the previous financial year.
- Tasmania had $167,393,702 during the same period, a significant increase from $164,576,705 in the previous financial year.
- Northern Territory recorded a $22,838,001 gross deficit for the 2019/2020 financial year, a significant increase from $21,758,927 in the previous financial year, but the smallest among the states.
The report's calculations used benefits paid and the number of policies from quarterly data provided by private health insurers to determine whether individual insurers will pay into or receive from the RETF.
Other data can be found on the APRA website.