Medibank shares fall as hospital claims jump

Shares in Medibank Private, Australia's largest private health insurer, fell heavily today after it said hospital claims have jumped unexpectedly.

At midday its shares were down 8 per cent - of 27 cents - to $3.11 after being down further earlier in trading.

The other sharemarket listed health insurer, NIB, saw its shares down 3.3 per cent - 23 cents - to $6.73.

Medibank says it's still trying to understand why claims growth per policy grew so sharply - from 2 per cent at June 30 to 2.4 per cent now.

The core reason is not the volume of patients going into hospital, but the cost per hospital visit.

In particular, the cost of prosthesis procedures - this can include artificial knees or hearts to screws and plates to reinforce bones - has jumped much faster than expected.

People are also using their private health insurance more cleverly, especially around claiming for extras - though this had less impact on Medibank's profit downgrade.

But all members will ultimately pay a price.

The increase in these costs will add pressure to the price of all private health premiums.

Medibank and all other providers are now making submissions to the Federal Government for price increases from April 1 next year.

Last year, Medibank's average premium increased 3.3 per cent - the lowest in 18 years.

But the recent escalation in claims will put pressure on premiums to rise by much more when the premium review is announced.