Jan McLucas (Queensland, Australian Labor Party, Shadow Minister for Mental Health) Share this | Hansard source

The purpose of the Private Health Insurance (Prudential Supervision) Bill 2015 and related bills is to transfer the prudential regulation functions of the Private Health Insurance Administration Council to the Australian Prudential Regulation Authority from 1 July 2015. This means that PHIAC will be abolished and its functions absorbed by the existing regulator of general and life insurance and superannuation, APRA.

The Private Health Insurance Administration Council is an independent statutory authority that was established to ensure competition in the health insurance industry and to ensure the prudential safety of individual private health insurers. PHIAC has also played a critical role in protecting the interests of the more than 13 million people who are covered by 6.4 million private health insurance policies. Commonwealth legislation requires all Australians earning above a certain income to be covered by an appropriate level of private health insurance or face a tax penalty.

PHIAC operates a powerful database which can compare every single policy—and there are more than 40,000 of them—and provide this information to consumers in a simple and understandable format via its website. Despite the significant benefit this provides to consumers, enabling them to compare premiums and understand the differences between policies before they make decisions about what is best for them, it seems that the government does not think it is important for people to understand more about private health insurance. The government says that, by getting rid of PHIAC, they are delivering on their commitment to smaller government and that it will lower costs for industry and ensure that Australia's private health insurance industry remains stable and well regulated. PHIAC estimates its administration costs at 60c per policy. It seems to me that Australians who have private health insurance get pretty good value for money from PHIAC and that 60c is a small price to pay for good, non-biased information on health insurance products.

What the government has failed to tell people is what the benefits of scrapping PHIAC are for the 13.2 million Australians who have private health insurance, especially since there is no suggestion that premiums will be reduced or services improved. Instead, it seems as if the government would rather diminish its role in the oversight of private health insurers at a time when it should be exerting maximum pressure to keep down health insurance premiums.

Since 2007, health insurers wanting to raise premiums have had to seek approval from the Minister for Health. Under Labor, insurers typically found their first request was questioned, sometimes denied, and met with a demand to justify their fee rises. Under the Abbott government, private health insurance premiums have risen 6.818 per cent this year, after a rise of 6.2 per cent last year; and for the major funds, which cover the vast majority of Australians, the average increases were well in excess of seven per cent. These rises were bigger than any rise between 2007 and 2013 under Labor, when the average rise was 5.35 per cent.

Along with scrapping the stand-alone regulator, PHIAC, the government is getting rid of the stand-alone Private Health Insurance Industry Ombudsman. In 2012, Labor gave PHIAC greater oversight of the private health insurance industry and tasked it with being the health minister's primary adviser. We also provided $1.4 million to increase the Private Health Insurance Industry Ombudsman's capacity to manage complaints and respond to consumer inquiries, and $2.3 million was allocated to establish the PHIAC Premiums and Competition Unit. However, it is clear that the Abbott government is adopting a hands-off approach and appears to be laying the groundwork for the minister to abandon oversight of premium rises. It may only be a matter of time before private health insurers have totally unregulated powers to increase premiums as they see fit, to drive bigger shareholder returns, particularly since there is now no longer a government owned insurer to keep prices down.

There are strong concerns in the health sector that a generic industry regulator will not have the specialist knowledge needed to properly regulate such a vast and complex industry. APRA itself has been the subject of some findings by parliamentary committees—findings that have not been complimentary—for its failure to properly regulate the insurance and superannuation sectors, which led to the collapse of major institutions such as Storm Financial, HIH and Trio/Astarra.

Private health insurance is highly complicated in Australia, with community rating, risk equalisation, taxation surcharges, rebates and membership incentives. But many consumers do not have the time to make sure they fully understand exactly what they are paying for, and that is why PHIAC has been critical. It has ensured people can access information to better inform their decision making.

Having said that, Labor indicate that in this case we will support this legislation, but I do indicate to the minister that I will be asking a series of questions during the committee stage.