The head of Australia's biggest private hospitals operator says he expects health cover to continue to rise indefinitely by more than inflation and that Australians can afford the hikes.
The comments were viewed as a rebuttal of Medibank Private's chief executive George Savvides' statement last week that he was ramping up pressure on hospital providers such as Ramsay Health Care to rein in prices so he can control premiums.
The six per cent-plus recent annual premium rises and rebate cuts have had an unintended effect of customers downgrading or dumping their insurers, leading to a looming battle between the insurers and hospitals.
Ramsay chief executive Chris Rex was unconcerned and suggested it was illogical and not in the federal government's interests to radically change legislation because it would end up footing the bill in an ageing society.
"We have got a way to go before any kind of crisis point is reached," he told an analysts' briefing.
"We are unlikely to see any kind of structural change in the way things are because there doesn't need to be.
"If and when there needs to be I would be very surprised if the government at the time didn't do what was necessary to stimulate a continuation or preferably growth in the number of people that have private health insurance."
The conviction of the comments surprised analysts given how strident Medibank's Mr Savvides was and the response from disgruntled policyholders.
One analyst said it had reassured investors, who pushed the share price $2.61, or 4.1 per cent, higher at $66.71, which is up 37 per cent in 12 months.
Morningstar analyst Chris Kallos said he was sceptical about how easy it would be to increase premiums and how much of that would flow through to hospitals.
"With the floating of Medibank Private, there seems to be a mobilisation on the part of health insurers to become more active than they have been and I think pricing negotiations will be a bit tougher," he said.
Federal Health Minister Sussan Ley is expected to approve 6-7 per cent premium rises this year.
Ramsay is Australia's largest private hospitals operator and the world's third largest.
It has lifted its forecast for full year net profit to increase by 18-20 per cent, up from 14-16 per cent.
Ramsay increased net profit by 21.3 per cent to $191.4 million in the half year to December 31.
The result was driven by growth in admissions in its Australian operations, which represent the majority of its earnings and its purchase of a controlling stake in France's largest operator Générale de Santé.
RAMSAY RIDES HIGH ON HEALTHCARE DEMAND
* First half net profit of $191.4m, up 21.3pct from $157.8m profit in 2013/14
* Revenue of $3.3b, up 42pct from $2.4b
* Fully franked interim dividend of 40.5 cents per share, up from 34 cents
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