Why Medibank and NIB shares are outperforming today

Premium increases for 2024 have been announced.

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The S&P/ASX 200 Index (ASX: XJO) may be slipping into the red today, but the same cannot be said for Medibank Private Ltd (ASX: MPL) and NIB Holdings Limited (ASX: NHF) shares.

Both private health insurers are outperforming today with solid gains.

For example, Medibank shares are currently up 2% to $3.76, whereas NIB shares are up 3.5% to $7.85.

Why are Medibank and NIB shares outperforming?

Investors have been buying their shares this morning after the Australian Government gave the green light to premium increases in 2024.

According to a government release, the Albanese Government has approved an average industry premium increase of 3.03%.

Commenting on the increases, the release states:

The Albanese Government has ensured Australians get value for money from their private health insurance, with the average cost of private health insurance premiums rising at a much slower rate than the increase in wages, the age pension and inflation.

The 3.03 per cent increase is well below the annual rise in wages, social security payments and inflation, with wages rising by 4.2 per cent and inflation increasing by 4.1 per cent in 2023, and social security payments increasing in line with inflation.

NIB increases

NIB has been able to score a larger than average increase to its premiums.

An announcement this morning reveals that its 2024 health insurance premiums will rise by an average of 4.1% from 1 April 2024.

Its CEO, Mark Fitzgibbon, notes that the increase reflects the return of hospital and ancillary treatment post COVID-19, and a rise in health and medical treatment costs. He also highlights that claims inflation has moved back to long-term trends and believes it is crucial that insurers are able to price for this.

Mr Fitzgibbon commented:

We're not sitting back passively responding to inflationary pressure by just lifting premiums. We have a range of new measures designed to help members maintain good health as well as reduce out of pocket expenses. Essentially, we're trying to provide members with more value for their premiums.

Medibank will be increasing its premiums by a lower rate of 3.3% for 2024.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended NIB Holdings. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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