More Australian than hot summers and bagging cricket selectors is the habit of criticising the Big Four banks' "outrageous" profits.
Forget the banks, they're relative amateurs. If you want outrage, check out the private health insurance rip-off as demonstrated by NIB and Medibank.
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Forget banks, your health insurance is a rip-off
The utter gall of NIB in boasting about ripping off the public makes the banks look nice.
Little NIB was one of this reporting season's star turns, the market applauding the 65 per cent surge in its first-half net profit to $71 million, and its chief executive afforded a lap of honour in the AFR, where he called for his industry to return to the good old days before Whitlam introduced Medicare, when 70 per cent of the population bought health insurance instead of the present 46-point-something per cent.
That's the private health insurance industry that is one of Australian capitalism's more galling sheltered workshops, where the government uses both sticks and carrots to push customers through insurers' doors and rubber stamps annual premium increases that are multiples of the inflation rate.
The peanut gallery regularly complains about the Big Four enjoying returns on equity (ROE) of 15 or 16 per cent. NIB just scored 32 per cent – and it's a business that is subsidised by the taxpayer.
Analysts wet themselves over NIB increasing premium income by 6.2 per cent to $830 million.
That's hardly a massive achievement after the government granted a 5.55 per cent increase in premiums. NIB had to grow the number of premiums by only 2.1 per cent – 11,005 people – to appear a hero. (It seems that was mainly done through its "white label" market deal with Qantas. One might wonder how many of the new customers bothered to look through the offer of bonus Qantas points for signing up to what they were actually buying.)
Medibank, on the other hand, was berated by the market for reporting an effectively flat result as it dropped 41,000 policies. It still managed ROE of nearly 29 per cent and an operating margin of 7.7 per cent.
The CEOs of Medibank – formally government owned – and NIB – formally a mutual – are set to take home millions for their efforts, multiples of the CEO salaries before the companies were floated.
NIB boss Mark Fitzgibbon may have sounded a little sheepish in his AFR interview about the size of last year's premium hike that resulted in such a fat profit, pointing to NIB premiums this year increasing by "only" 4.48 per cent, a little under the industry average of 4.84 per cent. .
Yes, health costs keep rising by more than inflation, but the ease with which the government approves insurance premium increases does nothing to exert downward pressure on those costs. There is nothing for the government to be proud about in this year's average increase being the lowest in a decade when these quasi-government businesses are creaming it.
One of the ways our ballooning health costs could be contained is for the insurers to be forced to enforce discipline on private hospitals and specialists, instead of the whole circus merrily rolling along to higher profits by passing higher prices onto mug consumers and taxpayers.
I have heard the chief executive of MLC Life – now 80 per cent owned by a Japanese mutual – argue that life insurance is properly the realm of mutual structures. That argument can very easily be applied to health insurance, with its surging costs and rich pickings for no apparent societal benefit by private investors.
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