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

I too rise to speak on the Private Health Insurance Legislation Amendment Bill 2018 before the House, which has been called on much earlier than it was on the Notice Paper, hence my contribution is a little later than anticipated. Australia is in the midst of a private health insurance crisis. That word gets thrown around a lot in this place, but I don't use it lightly in this instance. There is no other way to put it. We are facing a private health insurance crisis. Faced with relentless price rises, double and sometimes triple the general inflation rate, many Australians simply cannot keep up with the cost of private health insurance any longer. Under the Liberals, premiums have increased by 27 per cent since 2014, costing families on average $1,000 more a year. This year alone Australians will have to find $1 billion extra out of their own pockets for the same level of private health insurance cover. Health insurance is now a leading cost-of-living concern for many families, right up there with energy bills and child care. Every year, when they get that letter from the health fund telling them how much more they are required to pay, for no extra benefits or services, families ask the question: can we really afford to keep paying for this? Is there anything else we can cut from our budget to keep our private health insurance? Maybe they'll try to make savings at the grocery store or skip the summer trip down to the coast, if they're lucky to be able to afford that. But 12 months later they'll be forced to have exactly the same conversation and make the same sort of choices, and before too long there is nothing else in their budgets to cut.

At a time when wages aren't rising, meaning household budgets aren't getting any bigger, something has to give. Australians aren't just paying a lot more for their health insurance policies; they're also getting a lot less bang for their buck. Ten years ago only 6.6 per cent of health insurance policies contained exclusions. Now, that is at 40 per cent. Under this government, the number of private health insurance policies with an exclusion has soared to more than two million, an increase of 65 per cent since 2014. It's no wonder that, eventually, many families decide to try to live without their health insurance. Tens of thousands of people have ditched their hospital cover in recent years. The latest official figures show that the number of people with hospital cover as a proportion of the population continues to decline—down another 0.1 per cent in just three months, to 45.5 per cent. It is at its lowest level since 2011.

If we don't act now, this trend will only accelerate. As we know, if enough people ditch their cover, it could put the viability of the whole industry at risk. As the AMA's former president, Dr Michael Gannon, said earlier this month, the industry is fast approaching a tipping point. In fact, this is about more than just the private health insurance industry; it's about our health system as a whole. As the AMA's latest private health insurance report card stated:

Private health insurance premiums continue to rise year on year—far beyond the consumer price and wage price indices. If affordability is not addressed, membership rates will continue to fall, threatening the viability of the entire health system.

Last year, the Member's Health Fund, then called hirmaa, used similar language when it warned the Senate Community Affairs Committee about an imminent 'death spiral' in private health insurance. It told the committee:

If younger people continue to leave the system, private health insurance will become more expensive, thus exacerbating affordability further and potentially driving even more people out. This potential death spiral will drive many people into the public health system and onto already overstretched public hospital waiting lists.

We agree. An industry collapse would be in no-one's interest and will have significant knock-on effects for our public health system.

We believe private health insurance plays an important role in Australia's world-class health system. Contrary to the scaremongering of the government, we're not looking to dismantle it. Labor is not considering any changes to the private health insurance rebate, other than those we have already announced. We want to maintain private health insurance coverage and the unique balance between our public and private systems. But there is no doubt that meaningful intervention is required. In contrast to Labor's plan, which I'll come to later, the package announced by the minister in October was not meaningful intervention. In fact, it was thoroughly underwhelming. After two years of talking, the best the government could come up with was a range of mostly minor changes. They're tinkering at the edges. But perhaps that's not surprising given how closely the government has collaborated with the private health insurers in devising this package. The fact the big insurers welcome this package with open arms tells you everything you need to know. They know that under this government they themselves won't face any major changes. They'll get everything they asked for and their profits will be totally untouched.

Turning to the details, the principal bill in the package is the Private Health Legislation Amendment Bill 2018. This makes eight changes, four of which I want to flag that we have some concerns about. First, the bills allow insurers to offer maximum excesses of $750 for singles and $1,500 for families. This is up from $500 and $1,000 presently. The government is trading higher excesses for lower premiums, but we're concerned that in the short term consumers will opt for higher excesses that they will not be able to afford to pay when they need care, forcing them into the public system and further eroding the value of private health insurance. We know that many consumers are doing that now: not being able to pay the excesses, they are not using their private health insurance at all and opting into the public system.

The excesses proposed by the government, of $750 and $1,500, also seem to be higher than the excesses that go with other types of insurance products—house or motor car insurance, for example. They appear to be at the very high end. The impact of this measure, we believe, needs to be examined more thoroughly as part of a Senate inquiry, and we will be referring the bill to that.

The bill also allows insurers to offer age based discounts to young people, requiring amendments to the Age Discrimination Act. Insurers will be able to discount hospital-cover premiums by two per cent for each year a person is aged under 30, for a maximum of 10 per cent. Any discounts can be maintained until a person turns 40, when they will be phased out by two per cent a year. Labor supports the idea of encouraging more young people to take up private health insurance, but we fear the government's plan will offer an insufficient incentive for individuals to take out insurance but prove expensive for insurers, possibly increasing premiums to other members. Insurers estimate they will need tens of thousands of new young members in order to avoid a premium increase for older policyholders. But, under these changes, a young person signing up to an average $1,800 policy will save only around 70c a week, not even enough to buy a coffee a month—hardly an irresistible incentive.

This change also undermines the important principle of community rating, under which policyholders are supposed to pay the same premium for each product, regardless of their age, their health status or other characteristics. As with so many things the government does, this change hints at an Americanised model of health care that would not be welcome here in Australia. So this, too, must be part of any Senate inquiry.

The bills also allow insurers to terminate products and transfer all people covered by those products onto new policies. At present, they can only close products to new policyholders. The government tells us that insurers will have to inform policyholders of any changes and that customer entitlements will not be affected, but the government has conceded that this may limit choice in access to health services for people who hold a terminating product and do not wish to transfer to a new product. The government has released disturbingly little detail about how this change will work in practice, and we are yet to see the regulations from the government as to how this will be done, which is why this, too, needs to be a key focus of any Senate inquiry.

The government claims that, of the 75,000 products, there is a smaller number that have only one or two members and that, in order to introduce its new categories of gold, silver, bronze and basic, some of these products may not comply. My concern is around the rights of consumers to be offered an equivalent product at the same cost to their existing product, and what value they will be offered. It is unclear that putting this power into the hands of insurers will actually benefit consumers.

Finally, these bills respond to recent revelations that insurers continue to offer products with benefit limitation periods, notwithstanding the efforts to end them in the Private Health Insurance Act 2007. These benefit limitation periods restrict benefits to minimum levels for the first 12, 24 or 36 months of a policy before allowing the full benefits that would otherwise be paid under the policy. The bill will clarify that policies with these limitation periods are not compliant PHI products for the purpose of the private health insurance rebate, Medicare levy surcharge or lifetime health cover. It will also protect consumers who have unknowingly held non-compliant policies, by ensuring that they do not need to repay the rebate and are not retrospectively liable for tax penalties. These limitation periods are another example of exploitative behaviour by the private health insurance industry. This loophole is an important one to close, but it did seem strange that people had to find out about their potential tax liability from the front page of a newspaper, not from the government or directly from insurers. Again, I would be concerned for policyholders who have taken out these policies; they should be offered new policies that continue to offer them value.

There are other measures here that the opposition has welcomed. We've welcomed the elements of the bill that strengthen the powers of the Private Health Insurance Ombudsman, allowing it to conduct inspections and audits at the premises of health insurers and brokers. We also welcome changes that allow insurers to cover travel and accommodation costs, and to cover hospital treatment products to help people in rural and remote Australia access care. Previously, travel and accommodation have only been covered under general treatment products or extras.

The bills also replace the current standard information statement with a new private health information statement. The new statement will be in a more flexible form than the current mail-out, allowing data on private health insurance products to be accessed more easily, including through sortable websites. That, again, is a welcome change. The bill also reassigns responsibility for second-tier default benefit arrangements from an industry committee to the Minister for Health. These arrangements ensure that hospitals—mostly small rural and regional hospitals that do not have contracts with private health insurers—are paid no less than 85 per cent of average prices. There is a minor change—although, again, it is a little unclear why the minister wants to assume responsibility. I would like to ask the minister, in his response and summation, to indicate whether the government is in fact signalling a future change of second-tier benefits. It's something that would have a significant consequence for small rural hospitals, but it is something that the private health insurance industry has been significantly asking for.

The government package also includes a number of changes not reflected in this bill, most of which Labor supports. These include, as I said, the new gold, silver and bronze categories that aim to make it easier for people to select and understand their policies and, in particular, to make it clear what is and what isn't covered by these policies. While we support this change in principle, it has been some time since it's been announced and we are yet to see the details. I note the government has now ditched its promise, its policy, to abolish entirely so-called junk policies.

These bills also include upgrading the privatehealth.gov.au website to make it easier to compare insurance products. For anyone listening to this debate, this is the government-based website: it does not accept fees; it does not have products that are not included. Every single insurer and every single product is included on that website. Making that more usable for consumers is something very important for the government to do, so promoting it far more than some of the commercially-based websites that only have products where there is a fee or an arrangement with the private health insurer and not all products are listed.

We also support increasing the Private Health Insurance Ombudsman's resources to ensure consumer complaints are dealt with more quickly. We also support requiring insurers to allow people with hospital insurance that does not offer full cover of mental health treatment to upgrade their cover and access mental health services without a waiting period on a once-off basis. There is much more to do to ensure that mental health services are more broadly covered under private health insurance, but this is a start.

Preventing insurers from offering benefits for a range of natural therapies is also something that we have supported and we are very pleased that government has now, after some initial reluctance, actually agreed with Labor that not offering the rebate, which is Labor's policy—the government is saying that policies can't actually have these products in them. We'll see how that works with the private health insurers, but that's what they're suggesting. I note that the government has included 16 therapies, some of which the NHMRC has found there is some evidence for, and yoga is one of those that I particularly highlight.

All of those are fine initiatives, and supported by Labor, but, ultimately, we do not believe that the government's package will deliver significant savings to Australian consumers. That's not just us saying it; that is the AMA. Even some of the health funds themselves have said the same thing. Labor, on the other hand, actually does have a plan to deal with soaring costs. We will cap private health insurance premiums at two per cent for two years, effectively tying them to general inflation. We would deliver real relief to 13 million Australian consumers struggling with the cost of living.

This unprecedented policy will save an average of $340 for Australian families. We think that it is only fair. We want to shift the balance away from the interests of the highly profitable private health insurers and back to ordinary consumers. This is a policy that would deliver the smallest price rise in decades. But, more than that, our plan will deliver much-needed certainty. Australians could plan their household budgets around these more modest increases. No more February surprises when the insurers say, 'Your premiums will rise by four, five or six per cent on 1 April.' People would be able to calculate well ahead of time exactly how much their premiums would increase by. We think that the two-year cap will be a very important circuit-breaker in the private health insurance affordability crisis.

We fully accept that this policy is no silver bullet. It is a short-term measure designed to give Australians immediate relief, while we do the hard work of finding some long-term solutions. That's why we didn't announce our premium cap in isolation. We announced it alongside a sweeping Productivity Commission review of the entire private health insurance industry. We're working on the terms of reference of the review, which will begin as soon as possible after a Labor government's election. We're happy to involve the industry and other stakeholders in the drafting of those terms of reference. But, make no mistake, it will be a major root-and-branch review of private health insurance.

The reality is that under recent reviews, including by the government, they have barely scratched the surface of this increasingly complex system. In contrast, the last major review, conducted by the then Industry Commission, almost 20 years ago, led to the modern private health insurance system. Within a few short years of that review, we saw the introduction of important measures like the private health insurance rebate and the Lifetime Health Cover loading. This new review will give us ideas on how to bring down costs and improve quality and value over the longer term. Importantly, the review will actually go beyond the private health insurance industry and consider the whole private health system. We envisage that the commission will consider issues including the underlying cost drivers that insurers face, the range of carrots and sticks that encourage insurance coverage, and the balance between the private system and Medicare—Australia's universal, public health insurance system.

Labor has also launched a national survey to give every Australian the opportunity to have their say on this issue. The People Not Profits survey is the first stage of Labor's consultation process on private health insurance costs. It is fair to say that big insurers don't like one part of our policy. That's to be expected. We are, after all, proposing that they limit their revenue for two years in order to deliver relief for their consumers. For some funds, it will mean lower margins. For others, it may affect capital stock that is held above and beyond prudential requirements. But let's put that doom-and-gloom claim into perspective. As the Public Health Association of Australia said: scare tactics by the industry should surprise absolutely no-one. Those tactics should be rejected out of hand. The focus of this industry, as the PHAA has said, is on profits and return to shareholders rather than the health of all Australians. The Consumers Health Forum, the Australian Nursing and Midwifery Federation, and the Australian Healthcare and Hospitals Association have also welcomed our policies in no uncertain terms. Our plan has been welcomed, too, by Choice, which says that our review will 'apply more scrutiny' to what is a 'highly subsidised and highly profitable industry'—and highly profitable these insurers are.

The latest official data from the Australian Prudential Regulation Authority show insurers profits are up yet again to $1.38 billion in the 12 months to March. That is up from $1.35 billion in the previous period. What is even more instructive is that they are raising $3.7 billion more in revenue than they are actually paying out in benefits to consumers. Of the $23.8 billion they raised from private health insurance premiums, they spent $20.1 billion on the medical needs of their customers. Premiums rose around four per cent while total benefits increased by only three per cent, increasing the insurers' gross margin from 13.6 per cent to 14.4 per cent. It means that each of the country's 13 million private health insurers' customers spent around $285 last year propping up the insurers' bottom lines rather than for hospitals, nurses, doctors and medicines. This is an industry that gets $6 billion in taxpayer subsidies every year. Australians are entitled to demand a much better deal than this. As respected economics commentator Michael Pascoe wrote in recent weeks:

This is an industry that enjoys the federal government acting as its enforcer, pushing customers through its doors, using the cattle prod of tax penalties. It then blows 14.4 per cent of the money customers pay on things other than health care.

These latest APRA figures show why Labor's proposed intervention is not only justified but necessary. It's also important to note that, while insurer profits are up, complaints are also soaring. In March we saw complaints to the Private Health Insurance Ombudsman had risen by 30 per cent. The bigger insurers were, as always, proportionally overrepresented in these complaints. This shows that consumers are far from happy with the services provided by their insurers.

The latest Roy Morgan private health insurance net trust score report has found Australians now rate the private health insurance industry at the same level as gambling and real estate. Bupa rated particularly poorly in this survey. That surely wasn't helped by Bupa's decision to downgrade 7,000 policies and to restrict gap cover—that's a third of Bupa's Australian customers who were told their cover for a range of procedures would change from a minimal benefit to a total exclusion. Under the changes as they were first envisaged, patients would only qualify for gap cover if treated in Bupa-approved facilities. The AMA described these changes as a move towards US-style managed care. So we are pleased that the minister subsequently ordered the Private Health Insurance Ombudsman to examine the legality of these changes. But it shows, once again, the big private health insurers are putting profits before patients.

In talking about the profits of the big insurers, I also want to make this point. Labor understands there are effectively two private health insurance industries in this country. One is dominated by large for-profits—three big companies in particular. The other is made up of two dozen smaller funds that are not-for-profit, member owned and community based. These funds return a greater share of their premium revenue to policyholders. They have lower complaints, higher retention and higher surveyed satisfaction. These funds are growing even while the industry itself is shrinking. Among those rising number of complaints I mentioned, Member's Health Fund Alliance insurers were on the whole underrepresented. These smaller funds are critical to competition and choice in the private health insurance market, and these are the funds we want to continue to encourage. That's why we're committed to working with these funds to manage the implementation of our two per cent cap.

The government's health insurance reforms, which are largely designed by the industry itself and still resulted in another double-inflation price rise earlier this year, will not deliver the sort of relief that Labor's plan will. Having said all of that, we believe Australians need and deserve every bit of price relief that they can get. That's why we will not oppose these bills in the House of Representatives. But, as I have made clear, we want a full Senate inquiry before we agree to support their final passage through the parliament. We hope the Senate inquiry will come up with ways to improve what are at the moment inadequate bills. The government trumpeted this year's four per cent premium price rise as a big win because it was lower than it had been in previous years. It is as if the Australian people should thank the government or the insurers for taking only an extra $200 out of their pocket. These are people struggling with the costs of living; these are people already making sacrifices, already making hard choices. I talked about that at the start of this speech. Are they supposed to be grateful somehow for this price rise that is double the inflation rate? It shows how out of touch the government is.

It's clear that under the government private health insurance isn't about giving Australians choice and control over their health care. It's about giving big business another way to profit off ordinary Australians. Labor will shift the balance away from company executives and back to ordinary consumers. Therefore, I move the second reading amendment which has been circulated in my name:

That all words after “That” be omitted with a view to substituting the following words:

“whilst not declining to give the bill a second reading, the House expresses its concern that this bill may allow insurers to cancel cover unilaterally, and that higher excesses may make it even harder for Australians to afford care”.

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