Ms Catherine King (Ballarat, Australian Labor Party, Shadow Minister for Health) Share this | Hansard source

I rise to speak on the Private Health Insurance (Prudential Supervision) Bill and related bills. These bills seek to transfer the prudential regulation functions of the Private Health Insurance Administration Council, or PHIAC, to the Australian Prudential Regulation Authority, or APRA, from 1 July 2015 and, in the process, abolish PHIAC effective from that date. As you can see, whilst this intention has been around for a while, it has taken the government some time to bring these bills on. Now we will be hitting the 1 July deadline very quickly. Again, one questions why yesterday we had to spend eight hours debating a bill that all 150 members of this place supported when we have a bill which, if it is not passed by 1 July, will be a problem for the government.

The government cites as justification for these bills its commitment to smaller government, an end to unnecessary duplication and claims that this will over time result in lower costs for industry while ensuring the private health insurance industry remains stable and well regulated. Immediately what leaps out at you from that explanation is the complete lack of any mention of the benefits of this for the 13.2 million Australians now covered by private health insurance. There is no suggestion, in fact, that this move will in any way lower premiums, improve services or achieve anything other than the abolition of a regulator dedicated to both sides of the equation—health insurers and health fund members.

But what it does strongly suggest is that this is the first step towards removing all oversight of health fund premiums, as recommended by the Harper review and openly endorsed by the former minister. It must be remembered that this bill is not in isolation, because the Abbott government is simultaneously moving to abolish the designated Private Health Insurance Ombudsman. That was part of the overall package of smaller government recommendations, again in the name of smaller government. Once the dedicated regulator is gone and the dedicated ombudsman is gone, it will only be a very small step for the minister to declare that it is now too difficult to keep tabs on health insurance, particularly in relation to health insurance premiums, so the annual oversight of premiums can be dropped and it is open slather for the health funds.

Remember, this is now in an environment where for the first time there is not a big government-owned health insurer in there, competing along with the privately owned funds and the not-for-profits. With Medibank Private privatised, we now have a concentrated market largely driven by big health funds seeking to maximise returns for their shareholders. There are obviously, of course, in this space some not-for-profits.

It is worth taking a moment to identify why it was necessary to have a dedicated health insurance industry regulator and why Labor has concerns about handing this all over to a single insurance regulator which, to be blunt, has had a few problems in recent years doing its own original job. The Private Health Insurance Administration Council is an independent statutory authority that reports to the Minister for Health. On its own website, PHIAC says it aims to achieve an 'appropriate balance between fostering an efficient and competitive health insurance industry, protecting the interests of consumers of private health insurance and ensuring the prudential safety of individual private health insurers'.

Equally, and in many ways just as importantly, PHIAC collates and disseminates financial and statistical data regarding health funds to enable consumers to make informed choices. Again, it is a terrific website. I often refer people to this. I know there are some commercial entities in this space, but the government has its own website where people can go and put in all of the information they need to find what might be the best value private health insurer for them. It is the privatehealth.gov.au website and it is a very good piece of information provided by government, not a commercial entity, and it contains all of the private health insurance products.

PHIAC's database compares every single policy across the country and provides this information to consumers, as I said, in a simple and understandable format via its website. It is a critical resource. It is one of the few tools available to consumers to try and keep down the cost of health insurance by shopping around. As I said, it is a government piece of software. It is a website that includes all private health insurers, not just those that pay fees to a private supplier of that information, where you will not get all of the information. So it is a really important service.

Using the PHIAC website and answering a few simple questions—what state you live in, whether you are searching for a single or a family policy, whether you have dependents, whether you want hospital or just general cover, how much of an excess you are prepared to risk to keep down the premium and whether you want top, medium or basic cover—the website instantly sorts through all of the policies on offer, and there are many of them, and offers you 20 or so options and how much they cost. It is an extraordinary resource when one considers that PHIAC regulates 34 private health insurers offering 40,000—yes, 40,000—different products, taken up by 6.4 million policies covering 13.2 million Australians. Does anyone seriously think that a generic regulator of all insurance products can, in any way, provide the level of expertise needed to keep tabs on 40,000 different products? And all this comes at a minuscule administrative cost, which PHIAC estimates adds about 60c per person to the cost of an average premium. As PHIAC's CEO stated recently, in the context of a $3,000, $4,000 or $5,000 annual premium, 'That ain't a lot to ensure that people are protected.'

Some of course might argue that we should just leave it to the market and they question why government should even have a role, especially now that Medibank Private is no longer government owned. Well, the facts are: private health insurance is very different from most other products because, by law, most of us who have private health insurance are required by government to take out this product, at quite considerable cost, or pay a substantial tax penalty. And then, in recognition of this cost, the same government which requires us to pay for this product spends well over $5 billion every year compensating us for that enforced expense. So, when a government forces millions of Australians to take up a very expensive product and then spends billions of dollars a year through the rebate compensating for this decision, this clearly requires detailed oversight to ensure both the taxpayer and the health fund members are getting value for money in that decision.

Right now, under this government, one would have to seriously question whether that is in fact the case. In February this year, the minister approved a 6.18 per cent average annual rise in health insurance premiums. That was the second-highest increase in a decade—second only because the previous year her predecessor had approved a 6.2 per cent rise. Both of those rises were higher than any of the six rises approved by the Labor government that preceded them. But, as complaints to my office reveal, for many members those increases go way beyond the average 6.18 per cent rise quoted by the health minister, with some premiums surging as high as 15 per cent or 16 per cent. This is clearly not affordable for many families, and it is no surprise therefore that the proportion of the population with private health insurance membership now appears to be flatlining for the first time in a decade.

At a time when the government wants to force patients to pay even higher out-of-pocket costs, $57 billion has been cut from our public hospitals, doctors are being forced to cut bulk-billing and charge higher gap payments, and the government is seeking to raise the cost of prescriptions, is it any wonder that families increasingly see private health insurance, or use private health insurance, as an emergency product? It is a compelling argument for why now is not the time for the government to be removing the few powers it has to keep downward pressure on premiums or potentially to be restricting or narrowing the information that is available to consumers about how they might shop around. With just five health insurers holding 83 per cent of the market, private health insurance is a relatively concentrated market. Whilst some people change insurers each year, inertia and a fear of waiting periods tend to keep people with the same private health provider.

Since 2007, health insurers wanting to raise premiums have had to seek approval from the minister for health. Under Labor health ministers Nicola Roxon and Tanya Plibersek, this was no tick-and-flick exercise. Insurers typically found their first request was denied and met with a demand for them to justify their fee rises. From 2007 to 2013, premiums increased on average by 5.35 per cent. Labor also provided $1.54 million to increase the Private Health Insurance Ombudsman's capacity to manage complaints and respond to consumer inquiries, and $2.3 million to establish the private health insurance Premiums and Competition Unit. And importantly, in 2012 Labor asked PHIAC to become the health minister's primary adviser on premiums. As the CEO of PHIAC stated, recently they accepted this request with enthusiasm because, 'In our view, that task matched up exactly with our broader statutory mandate: protecting consumers by promoting competition and ensuring the financial security of the industry.'

But, following the election of the Abbott government in 2013, newly appointed coalition health minister Peter Dutton waved through fee increases by the insurers with lightning speed, just days before Christmas, and not just any increase but 6.2 per cent—the largest increase since 2005. And who was the minister for health in 2005? Well, it was the member for Warringah, the current Prime Minister, who waved through consecutive eye-watering increases of 7.6 per cent in 2004 and eight per cent in 2005. Sadly, any hope that Minister Dutton's 6.2 per cent increase was a one-off was dashed when the current minister approved an almost identical rise of 6.18 per cent. That is three times the current rate of inflation and, for the average family with top hospital cover, amounts to a hit on the family budget of around $200. When it comes to slugging Australians with record health insurance premiums, this is a government which you would say has form on this issue.

The Abbott government clearly regards its powers over private health premiums as just another piece of red tape to be abolished, or, in fact, a nuisance. This is a serious mistake. The government having effectively forced many people through the system to enter into the private health insurance market under the threat of tax penalties, Labor believes the government does have a responsibility to do all it can to keep premiums as low as possible, and it is hard to see how that cause is in any way advanced by scrapping the dedicated health insurance industry regulator and, indeed, the dedicated health insurance industry ombudsman, as I have said in remarks on a previous bill in this place, especially when the replacement has a far from perfect record in looking after the rights of consumers.

In recent years, a number of parliamentary inquiries have been highly critical of APRA's failings in its oversight of a number of companies, including HIH and, of course, Storm Financial. As was noted in a recent article in the Sydney Morning Herald:

APRA has plenty on its plate already and the last thing it needs is a dilution of its focus by giving it additional responsibilities.

And health insurance is not just another form of insurance. As mentioned earlier, it is an extremely complicated product, with 40,000 different premiums on offer, with a bewildering combination of excesses, inclusions and exclusions that insurers can charge, almost at will and often, despite some of the regulations, with very little notice. As the current CEO of PHIAC said, in what he billed as likely his valedictory address to the Health Insurance Restricted and Regional Membership Association of Australia in Canberra just last month: 'The Australian version of private health insurance is a highly idiosyncratic beast, with curiosities such as community rating, risk equalisation, taxation surcharges, rebates and membership incentives, all interacting to form a cauldron of regulatory and commercial complexity. Private health insurance is a mystery for many Australians. They do not really have the capacity or the time to deeply understand the product, yet they know the day will likely come when they will depend on it. And of course, very often, that day is a day full of other stress as well—illness, injury, psychiatric disturbance, and the list goes on.'

That, in a nutshell, is why Labor has some very serious concerns about these bills and why they cannot simply be waved through. As such, Labor believes that these bills will require, in the other place, much deeper scrutiny, and we will be seeking to have the proposal to abolish PHIAC referred to a committee, so that that proper scrutiny occurs and so that there can be evidence in relation to the impact this bill will have on consumers in particular, and what impact it will have in relation to the very limited information that is available—and, importantly, available through the government's own website—to at least enable consumers to compare products and what the government intends to do in relation to its obligations and responsibilities in the setting of private health insurance premiums.

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