Ms Catherine King (Ballarat, Australian Labor Party, Shadow Minister for Health) Share this | Link to 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.

Nick Champion (Wakefield, Australian Labor Party) Share this | Link to this | Hansard source

It is a great pleasure to follow the member for Ballarat in this debate on the Private Health Insurance (Prudential Supervision) Bill 2015. We can see the amount of interest on the government benches in their own bills! The health minister this morning did not even speak on the bill establishing a medical research fund, so it is a pretty extraordinary day for the parliament. We have had a bill where the minister did not articulate her views on medical research. And then the bill was guillotined. Yesterday they were against the guillotine. They voted against passing their own small business bill. So, you could forgive the public for being a bit untrusting of this government.

So much of what we do in our lives, particularly in societies like Australia, is based on trust. We certainly seek to trust institutions, not just governments but other institutions as well—things like private health insurance. And as the member for Ballarat was saying, the last thing you want in what is a pretty bewildering market is the idea—

Mr Tudge interjecting—

The minister across the table is talking about my wonderful tie. I bought this upon my election, actually. It is the tie I gave my maiden speech in. But back to private health: we do trust private health institutions. We pay our money and generally we do not look at the fine print. You are relying on two things. You are relying on the institution and its reputation and its ethical considerations in doing the right thing by the consumers of its product. You are also relying on the government to set up an institutional framework that actually underpins some of those ethical considerations and expectations we all have as consumers. And that is what allows us to trust institutions like private health insurance providers, or indeed any insurance provider, and that is what underpins fundamentally many of the transactions in our own community.

We know how damaging it can be to the public interest to have that trust undermined. As the shadow minister said, in cases like Storm Financial, we know that they are regulated by APRA and we know that there were certain failings there, and they have been articulated in various government reports. We do not want that same situation to occur here because the government, in a frenzy of red tape reduction, has undermined the things that protect consumer interest and in protecting consumer interest, reinforce the trust in civic institutions and commercial institutions in our society. We need to be very careful that that does not occur. That is why, when this bill goes to the other place, we will be referring it to a committee, which no doubt will look at those areas in some detail and get experts and others to give us submissions, to look at the framework to see whether this can be done without any detriment to consumers. It is one of those bills where I guess the devil will be in the detail, and we just need to be careful that in the frenzy of enthusiasm against regulation we do not undermine the very things that underwrite much of this commercial activity.

It is interesting that whenever we talk about private health—and we can see the interest on the government benches; they are packed in like sardines over there, listening to my speech on their favourite subject, private health! We normally get a few of them biting from over there.

Mr Hawke interjecting—

Mr Hawke is over there in the corner. Normally he would give us a contribution.

Alex Hawke (Mitchell, Liberal Party) Share this | Link to this | Hansard source

You haven't drawn a crowd of your own people.

Nick Champion (Wakefield, Australian Labor Party) Share this | Link to this | Hansard source

Look at this; it's packed over here. Normally the member for Mitchell would give us an ideological spray; he would normally give us his ideological contribution and tell us all about how the private market was going to benefit us and how public systems let us down, but even he is not biting today. The fish are not biting. The drones from the coalition back bench are not biting. And I can tell you why. Last election they made a whole lot of commitments about private health, and this is one of the things they said in their Policy to Support Australia's health system on 22 August:

Importantly, a Coalition government will alleviate the burden on our public hospitals by reinvesting in private health insurance rebates as soon as fiscal circumstances allow.

And this is what the Prime Minister said on 25 August 2013:

Within a decade, the budget surplus will be one per cent of GDP, Defence spending will be two per cent of GDP, the private health insurance rebate will be fully restored, and each year, government will be a smaller percentage of our economy.

Well, we know what has actually happened. Interestingly enough, ABC Fact Check shows how this promise has been tracking—and the promise has stalled. Doesn't that tell you so much about this government!

The shadow minister, the member for Ballarat, spoke about what has in fact happened. On private health insurance costs—that is, what you pay—there has been no stalling in that department. It has been accelerated—fourth gear, flat out. We have a newly minted minister, Minister Dutton. There has never been a more reluctant health minister in the history of the Federation. He wanted to wreck the portfolio, to gut the portfolio and get out. He wanted to be finance minister or something like that. One of the first things he did, just before Christmas, was oversee an average premium rise of 6.2 per cent. That is the largest increase since 2005, when the Prime Minister, 'Mr Broken Promise', was health minister; and he had some very high health insurance premium rises—7.6 and eight per cent.

The current health minister, who is apparently an improvement on the member for Dickson, has agreed to a rise of 6.18 per cent. So we have got very, very rapid increases in the premiums consumers pay—there has been no stalling in that department—but the commitments the government have made about private health insurance rebates and the subsidies therein have not been met. And they will never be met, because they were not made in good faith. Everybody knows that to restore the private health insurance rebate would be a very, very costly exercise indeed; it would cost the Commonwealth and make a budget surplus unviable. They furiously and disingenuously opposed the very important savings Labor made when in government. They made irresponsible promises when they were in opposition, and they have now seen those promises stalled. Those promises have been broken. What consumers have got instead is not relief from private health insurance premiums but an increase in premiums—additional pressure, higher costs. People have two choices—either pay or get out. If they get out, there are very serious consequences such as losing some of the privileges that you get under lifetime health cover.

This is a government that has got nothing at all to crow about in private health. That is why we see so few speakers on the government list, such little interest in what is normally one of their great ideological endeavours. Normally the member for Mitchell would get up to give a great speech about how the private market always benefits us and how the public system always lets us down. But even he has been struck dumb by this government's miserable record on private health and miserable record on public health. This is a government that is turning its back on the interests of health care consumers in this country, and it should stand condemned for it.

Stephen Jones (Throsby, Australian Labor Party, Shadow Parliamentary Secretary for Regional Development and Infrastructure) Share this | Link to this | Hansard source

Following the member for Wakefield in a debate on any matter—and on private health insurance in particular—is always an intimidating task. I am very pleased that the member for Mitchell is in the chamber at the same time. The bill before the House concerns private health insurance and the Private Health Insurance Administration Council, which was established in 1989. The council is responsible for monitoring the prudential performance of registered private health insurers. The council's role includes the registration of private health insurers; developing solvency, capital adequacy and prudential standards; publishing circulars and statistics on insurer activities and performance, which is a valuable source of information on what is going on in the industry; and administering the Risk Equalisation Trust Fund. Under this bill the PHIAC will cease to exist as a separate body and its prudential and regulatory functions will be transferred to APRA. Private health insurance is of deep concern to all members of parliament and to all Australians who are policyholders. It is also of deep concern and interest to all Australians who are taxpayers, because the industry is intimately linked with government health policy and government finance policy.

Witness the great debates we have had in this place over private health insurance and tax concessions to private health insurance policyholders over the years. The member for Rankin is in the chamber. He was very involved in some of the policies about ensuring that the growth in private health insurance rebates, which is one of the greatest costs in the health budget, was at a sustainable level. The member for Rankin and the member for Melbourne Ports would know that those opposite opposed the reforms we put in place when we were in government about ensuring that we had a steady control in that area of health expenditure. When they came to government and were faced with the responsibility of managing the treasury bench, they changed their view. They have not declared it, but they have not reversed any of the changes of the previous Labor government. That being the case, the industry receives about $5 billion in annual subsidies from the taxpayer. So prudential standards, the regulation of the industry and ensuring consumers get good value for money matters not only in terms of health policy but also in terms of the fiscal strategy of any government from any point in time.

The bill provides for the transfer of functions of the Private Health Insurance Administration Council to APRA from 1 July this year. It will provide for the continued imposition of levies upon private health insurance to fund those responsibilities, that is, APRA's supervision of the industry, the risk equalisation unit and the Risk Equalisation Trust Fund, and a levy to fund should there be a collapse of any particular insurer. I note that stakeholders have not yet had the opportunity to voice their views on the bill. We do not know what the views of the stakeholders will be, and we think that it is a matter of good public policy development that the government should seek the views of stakeholders on the legislation. Perhaps when this matter gets before the Senate there will be the opportunity for that to occur. The bill, as we are told, has no financial impact. While the functions of PHIAC will move over to APRA, the functions themselves do not change.

Unlike the coalition, Labor in government put pressure on the health insurance sector to ensure that premiums, which inevitably will increase, increased at a sustainable rate, and the industry was put on notice to ensure that they were no higher than they absolutely needed to be. Labor provided $1.4 million to increase the Private Health Insurance Ombudsman's capacity to manage complaints and to respond to consumer inquiries, and $2.3 million to establish the private health insurance Premiums and Competition Unit. These measures were put in place because we think it is appropriate, indeed, necessary. Bear in mind, that figure of over $5 billion, which I mentioned, in subsidies to the industry ensures that consumers, policyholders, get good value for money.

It is important to remember how the PHI industry has developed in Australia. When bills come before the parliament on this matter it is always an opportunity for us to talk about the important role PHI has played and how its role has changed over the last century. They started as friendly societies, particularly in communities such as my own where the state played a very miniscule role, compared to today, when it came to the provision of medical services in coalmining, agriculture and manufacturing areas where workplace injuries were all too common. Friendly societies and lodges created their own private health insurance companies to cover the cost of, generally, access to general practitioner services. They grew strongly over the course of the 20th century, but in the 1970s it was quite clear there was a problem. There was a significant problem in the industry and, indeed, a series of reviews of the PHI over that point in time discovered that they were, in fact, ineffective, inefficient and that 17 per cent of Australians outside of Queensland had no health coverage at all. Queensland was different, as you would know, Deputy Speaker Vasta, because of a different history of the health system in that state.

After the Whitlam government introduced Medicare and the Fraser government pulled it apart, the Hawke government re-established Medicare and Australians enjoyed universal health coverage, and PHI levels dropped. There was still a role for private health insurance particularly when it came to the provision of dental services, which today represent over 50 per cent of the claims received by private health insurance companies. So PHI still playa, and has played, an important role in relation to dental care, but rates were dropping. This moved the Howard government, which, at the same time as abolishing the Commonwealth dental program, introduced incentives which would encourage the take-up of private health insurance in the population. Eventually we moved to the lifetime cover provisions together with the rebates that I have already spoken of. That saw a significant uptake in private health insurance but also a significant increase in the cost to the Commonwealth of private health insurance. These things obviously had to be moderated to ensure that we had some sustainability within the industry.

Since coming to office the government have been very active in the health space. In fact more active than successful, but very active in the health space. They have had their targets set on universal health cover through the Medicare system with four different versions of the GP tax. We are seeing bulk-billing rates in general practice declining again after almost six years of consistent increase. Of course there are significant cuts, over $55 billion worth of cuts, to our public hospital system. How is this relevant to private health insurance? As the Commonwealth takes deliberate steps to minimise, to shrink, to control the rate of growth within the public side of the health system, many patients are forced into the private side and are forced to rely even more on their private health insurance cover. This, as we argue, is going to put increased pressure on private health insurance premiums.

The architecture for the prudential regulation and the consumer protections in private health insurance are more important now than ever as the government, through a mean-spirited policy towards health care in this country, is shifting the burden towards private cover. We are going to see upward pressure on private health insurance premiums in this country. These are matters which need to be debated. We have a bill before the House and we expect more. As I said at the outset, there has been insufficient stakeholder consultation in this, and I sincerely hope that, when this bill comes before the Senate, there will be the opportunity for further scrutiny of the matters, which are of great public import and, I am sure, of concern to all members of the House.

Bruce Scott (Maranoa, Deputy-Speaker) Share this | Link to this | Hansard source

It being almost 1.30 pm, the debate is interrupted in accordance with standing order 43. The debate may be resumed at a later hour.