The Australian Financial Review has reported today that the Health Minister is expected to approve hikes of 7% to private health insurance premiums this year.
For the 11 million plus Australians with private health cover it's going to be a very nasty and unwelcome shock!
Lessen the pain
Like all forms of insurance, it is never fun stumping up for your premium each year, however, if the day ever arises when you need to claim, you sure are glad to have it. One way to lessen the pain of the seemingly exorbitant health insurance premiums is to own shares in an insurer who will profit from the hikes.
Newly listed Medibank Private Ltd (ASX: MPL) is an obvious candidate as is smaller rival NIB Holdings Limited (ASX: NHF). By owning shares in one of these two insurers you could effectively earn back some of your premium in the form of a dividend which could lessen the blow.
Insurers may not be the biggest beneficiaries
The expected premium increases may not be as big a benefit to the insurers as you might expect however. Rather, the reason the government (who regulates the industry) is allowing increases to premiums is due to higher claims costs. In other words, it is due to private hospital operators such as Ramsay Health Care Limited (ASX: RHC) and Healthscope Ltd (ASX: HSO) who are charging insurers more.
This situation leads me to think that Ramsay and Healthscope could be your best bet for profiting from the rise in private health insurance premiums.
Given the aging population, service providers such as health insurers and hospital operators hold obvious appeal from a long-term thematic point-of-view. The problem is that the market has priced many of these stocks at premium levels, which can make it difficult to find an appealing opportunity to purchase them.
