Helen Polley (Tasmania, Australian Labor Party, Shadow Assistant Minister to the Leader (Tasmania)) Share this | Link to this | Hansard source

I rise to speak on the Private Health Insurance Legislation Amendment Bill 2018, A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018 and the Medicare Levy Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018. Labor has a real plan to rein in soaring private health insurance costs by capping premium price increases at two per cent for two years, effectively tying them to general inflation. A Shorten Labor government will deliver real relief for the 13 million Australian consumers struggling with the cost of living. This strong policy will put an average of $340 back in the pockets of Australian families. That's only fair, given that wages are so low and private health insurance profits are so high. We're shifting the balance back to ordinary Australians.

For decades, Australians have been getting whacked by premium price rises that are double and even triple the rate of inflation. Families are now paying $1,000 more every year for private health insurance than they were when the Liberals came to power in 2013. Labor's policy will deliver the smallest premium price rises in decades. More than that, Labor's policy will deliver much-needed certainty so that Australians can plan their household budgets around these more modest increases—no more February surprises when the insurance companies say, 'Hey, your premiums will rise by four, five or even six per cent on 1 April.'

We believe private health insurance plays an important role in Australia's world-class health system. We're not looking to dismantle it. But this is an industry that gets $6 billion in taxpayer subsidies every year. Australians are entitled to demand a better deal. Alongside Labor's policy of an unprecedented two per cent cap, we will also order a sweeping Productivity Commission review of private health insurance. This inquiry will give us ideas on how to bring down the cost and improve the quality and value over the longer term.

In contrast to Labor's bold plan, the package the government announced in October last year is underwhelming. After two years of talking, the best the government could come up with was a range of mostly minor changes. They're really only tinkering around the edges, which isn't surprising given how closely the government collaborated with private health insurers in devising this package. The opposition welcomes the elements of the government's bills that strengthen the powers of the Private Health Insurance Ombudsman. We also welcome changes that allow insurers to cover travel and accommodation costs under hospital treatment products, in order to help people in rural and remote areas of Australia.

However, Labor has raised concerns with this legislation around the issues of maximum excesses, age based discounts and the termination of products. The bill before us allows insurers to offer maximum excesses of $750 for singles and $1,500 for families. This is up from $500 and $1,000 respectively. The government is trading higher excesses for lower premiums. We are concerned that consumers will opt for higher excesses they will not be able to afford to pay when care is needed, forcing them into the public system and further eroding the value of private health insurance. The bills also allow insurers to offer age based discounts to young people, requiring amendment 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.

Labor fears this will be an insufficient incentive for individuals to take out private health insurance but expensive for insurers, possibly increasing premiums for others. Under these changes, a young person signing up to an average $1,800 policy will save only around 70c a week, not even enough money to buy one coffee a month. The change also undermines the important principle of community rating under which policyholders are supposed to pay the same premium for the same product, regardless of age. This hints at an Americanised model that would not be welcomed here in Australia. These bills will allow insurers to terminate products and to transport all people covered by these products to a new policy.

Labor is also increasingly concerned about the government's change to insurance categorisation laws. These rules are not detailed in these bills. Those details are apparently going to come later in the form of regulation. But this new system deserves some comment, nevertheless. The government claims its new gold, silver and bronze basic system will make private health insurance simpler and more affordable. It also claims that the changes will give consumers more clarity and certainty around their coverage. Labor support the idea of simplifying private health insurance policies so Australians can make more informed choices and we are certainly committed to delivering more affordable insurance. However, we note there is growing anxiety about the government's changes amongst patients, clinicians and industry groups. Most recently, a number of stakeholders have expressed concerns that people suffering from chronic pain will only be covered if they hold the most expensive gold level of coverage. One in five Australians will suffer from chronic pain in their lifetime. Many of these people are already missing out on treatment that could improve their health and quality of life. We are concerned the government's changes will make life even harder for many of these people.

How does the government justify this? What is the government doing to make sure people with chronic pain aren't left disadvantaged through either higher premiums or poorer coverage as a result of these changes? Will people be forced to pay more to maintain their current level of coverage or will they be forced to accept a lower level of coverage because they cannot afford to upgrade? Either way, we are concerned this may have the unintended consequence of accelerating the private health insurance extras that are putting the entire industry at risk.

The Senate inquiry we initiated has not entirely allayed our concerns on these issues. However, on balance, we will not oppose these bills, but we will closely monitor the impact of these measures and we hope they will not have unintended consequences. Ultimately, we do not believe these bills will deliver significant savings to Australian consumers. That's not just us saying that. Groups like the AMA and some of the health funds themselves have said the same thing. Having said that, we believe that Australians need and deserve every bit of price relief they can get.

I would also like to foreshadow Labor's position on the Greens second reading amendment. Labor do not share the Greens' position on the private health insurance rebate. We recognise it is an important incentive for some people to maintain private health insurance coverage. However, we have already announced that a Labor government would refer the entire private health system to the Productivity Commission, with a focus on affordability and value for consumers. Labor will therefore support this amendment. I move:

At the end of the motion, add:

", but the Senate condemns the Government for putting insurer profits before patients, forcing Australians to either drop their private health insurance, or pay more and more for less and less."

Richard Di Natale (Victoria, Australian Greens) Share this | Link to this | Hansard source

I rise to speak to the Private Health Insurance Legislation Amendment Bill 2018. I flag now that the Australian Greens will move amendments to improve this bill because what we've got before us needs significant improvement. Let's look at what we're doing right now with the private health insurance industry. We are on track to spend $26.5 billion on the private health insurance rebate over the next four years. That's three times more than we are spending on vocational education and TAFE. It's double what we spend on paid parental leave. It is more than we spend on veterans and the families of veterans, the ABC and SBS, renewable energy and natural disaster relief combined. This is a policy that is a complete and utter failure, because nobody can tell you what on earth we get for that $26 billion expenditure.

I've just heard from the Labor Party. I welcome their contribution. But, as always, the Labor Party have said that they don't support the principle of where this bill is going, yet they won't oppose it. They've expressed concerns, but they won't oppose it. It seems that the Labor Party's going to need some health care of their own to have the splinters removed from their backsides, because they continue to walk both sides of the fence. What we have, according to Jenny Macklin, who was then the Labor Party spokesperson on health, is 'the worst example of public policy' she'd ever seen in Australia—Jenny Macklin's words, the Labor member who was spokesperson for health at the time when the private health insurance rebate was introduced. It is the worst case of public policy making that she's seen, and yet here we are with the Labor Party saying they're going to back it.

We don't expect anything else from members of this government. Of course they're going to back a cashed-up corporate interest. They're going to support the private health insurance industry because their mates working in that sector are pleased to be able to offer the sort of largesse to big business that these rebates offer to the big end of town. And they've never supported universal health care. They fought Medicare every step of the way. We don't expect anything from this Liberal coalition government. But it is so disappointing that, with the Labor Party expressing concern about this policy, they have indicated that they ultimately will support these measures and ultimately will do nothing to redirect the private health insurance rebate into public health care where it belongs.

The private health insurance industry right now is dependent on these government subsidies. It relies on the largesse from the public purse to encourage people to buy products they don't want and don't need. We've got a range of sticks. We have the Medicare levy surcharge that says to somebody, 'If you don't take it out, you will receive an additional tax cost.' Well, if we have a progressive income tax system in this country, there is nothing wrong with people on higher incomes paying a higher level of taxation; they shouldn't get a discount for taking out private health insurance. We have lifetime health cover, which penalises people two per cent of the cost of the premium for every year over 30 they're not in private health insurance.

And, of course, we have the private health insurance rebate. The rebate was worth $6.6 billion in 2015-16. There was $1.6 billion in tax-free income for those who got the rebate. There is an estimated $1 billion in exemption of taxpayers from the Medicare levy surcharge, and $2 billion for the estimated cost to taxpayers of the higher costs and unnecessary treatments that are subsidised. So what we have is over $10 billion redirected from the public purse to those people who have private health insurance, who, by and large, are on high incomes—not exclusively, though, but we know that the breakdown of people with private health insurance skews towards people on higher incomes. We have this massive redistribution—$10 billion every year—that could be going into public health care. Yet where is it going? It's going to line the pockets of big insurers who make billions of dollars in profits as a result of these massive subsidies.

Meanwhile, right now in Australia, we have 40 per cent of Australians who earn less than $75,000 a year and can't afford to even go and see a dentist. We have people who don't want to go out at night, who don't want to socialise, because they're ashamed of the way they look, because they can't get access to dental care in this country—they simply can't afford it. Yet here we are, with a multibillion-dollar annual bill, propping up an industry that most consumers actually believe doesn't offer any value to them. We know, from the evidence that we've heard, that they themselves can't say what value the taxpayer is getting for that extraordinary taxpayer subsidy. CHOICE CEO Alan Kirkland said:

It's hard to imagine any other area of public expenditure where you have the same number of Australians contributing from their own pockets, with significant public expenditure and subsidies backing that up, without us having clear data on what we're getting in return.

Australian taxpayers are spending billions of dollars for very little in return. This is money that, if it was invested in the public health system, if it was invested in Medicare-funded dental care, would deliver a huge health dividend for the Australian community.

What this bill does is let insurers offer discounts to young people as a way to get more young people to purchase private health insurance. Why do we want to do that? Why is the government aiming to do that? It is very, very clear. The more young people you have with private health insurance the less likely they are to make claims and the better the value of that product. What we're effectively saying to young people in this country is, 'We want you to take out private health insurance, not because it's of value to you'—in fact, quite the opposite—'but because it will subsidise the health care of those people who are much more likely to use that policy.' Yet again we're encouraging young people to do something against their own interests, indeed, to screw them over, as this government is doing, whether it be on health care, housing, climate change or education, rather than investing in the public health care that we know benefits them and everybody else. That's the big problem we have right now. We've got a government desperate to prop up a system that's failing and trying to recruit customers for whom the product has little or no value. The bill also allows insurers to offer higher maximum excesses in exchange for lower premiums. If you take those two things together, what you've effectively got is a product that's targeted at young people but one that they wouldn't buy at a higher price and that they're less likely to use thanks to the higher excess. It works against their interests. Both policy arms of this bill work against the interests of young people.

We know this will take no pressure off the public hospital system. We know that if that money was reinvested into our public health system, we'd get much better bang for our buck. The evidence on that is absolutely clear. If anything, it weakens our public health system. It undermines it. What it says to people is, 'You need private health insurance because our public system will no longer cater for your needs.' We are running down universal health care in this country to satisfy the interests of big corporate lobby groups who are the mates of the coalition government. What it does is legitimises tax minimisation. We're encouraging people to minimise their tax not to improve their health care but to effectively cross-subsidise a product that Australians don't need. Lower premium products simply require a greater share of the cost of the procedure on admission, so you're faced with a bigger up-front cost. You might have a lower premium, but, when you go to have that surgery done, what you're faced with is a much bigger up-front cost. For a lot of people, that cost will be too great, so they won't have that treatment under the private system; they'll simply choose to have it done publicly—again, another huge waste of resources. This does not take pressure off the public health system. Let me say that again. In the words of Jenny Macklin, the former Labor spokesperson on health, this is 'the greatest failure of public policy', and we would have to agree. This is a huge and monumental diversion of public money towards for-profit companies.

One of the other issues with this legislation is the proposed changes to clinical categories. Again, what we're seeing with private health insurance is fewer and fewer people covered for fewer procedures at higher costs. The cost of premiums is going up. The number of things that are covered is going down. No wonder people are deserting their private health insurance coverage. So this is a desperate attempt to try to get people back into private coverage. It is purely ideological; it has nothing to do with the evidence of effectiveness when it comes to the provision of public health care versus that within the private system.

The proposed changes to those clinical categories in recent weeks would restrict a number of things, including access to chronic pain management. In effect, what you're going to see is over 6.5 million consumers, or almost half the people with private health insurance, losing their existing access to private chronic pain management, with the proposal aimed at removing chronic pain as a minimum component across the product class, which has the potential of restricting access for chronic pain patients. Chronic pain is a shocking condition that many people have to endure. It's the most common reason people seek medical help, and one in five Australians are now living with chronic pain, so these changes have the potential to make a huge impact on the care received by many millions of Australians.

As a result of these changes, it is no wonder that Australians are now voting with their wallets. Sixty per cent of those with health insurance say they don't believe it delivers them value for money. No other industry would be sustainable in the face of such poor customer satisfaction. It can be sustained because we punish people who don't have it. We've taken an ideological position that says, 'You must have it. We'll punish you if you don't,' not because it provides benefit to those individuals, not because it provides benefit to the taxpayer, but because we have a government, captured by corporate interests, that is more interested in serving those interests than it is in serving the Australian community.

In the last financial year, Australians paid $4 billion more in private health insurance premiums than they got back in benefits. The industry made a pretax profit of close to $2 billion. That's $2 billion that could be invested in Medicare-funded dental care. The benefit of universal public health care is that it doesn't need to make a profit. As long as it is working efficiently, every cent paid by the taxpayer goes to providing health care for Australians, not to lining the pockets of big multinational corporations with nearly $2 billion in profits subsidised from the taxes paid by ordinary Australians. The government is pushing people to buy a product that they don't want and that it thinks is not worth having, and it is punishing those who don't have it.

Someone's winning out of this deal, but let me tell you it's not Australians. That's why you see the rapid rise of these junk policies that people will never use and that exist simply so people can try to reduce their tax burden. That's why people take them out. People are taking out junk policies because they know that they're better off if they have a policy they won't use. They'll pay less in tax than they pay in dishing out for that policy. That is a waste. That is inefficiency. It is money that should be invested in public health care that, instead, is going to line the pockets of these corporations.

The number of policies containing exclusions has risen fivefold in the last 10 years. Meanwhile, the share of policies without exclusions has fallen by 20 per cent. We're seeing a product deliver less and less value for Australians. Exclusionary products undermine the principle of community rating. Community rating means that people are treated equally and everybody gets access to the same level of health care. That, of course, is at the centre of the private health insurance model. The principle of community rating is that premiums are not to be determined discriminately as a function of your age, your health or your occupation. It's that everybody contributes to the risk pool and those who need treatment are able to access it when they need it. This policy proposal undermines that principle.

With exclusionary products, you also undermine the principle of community rating by working backwards. If you're young and healthy, you're unlikely to need cardiac surgery and you're unlikely to need a hip replacement. You can opt to avoid a product that offers those things. But if you're older or if you're living with other chronic conditions, you might not have the luxury of that choice. You bear the risk that comes with it, so your premiums are higher. That's not how community rating works. Indeed, it undermines the very model of the way we deliver health care in this country.

People are being coerced into buying a product that's worth less and less with every year that passes. Premiums have risen three times faster than inflation since John Howard introduced the private health insurance subsidy in 1999. We need to ask ourselves why. Australians have already shown that their preference is for universal health care. They like Medicare. They like our public hospitals. They value them, and they want us to invest in them. But the more money we push into the private sector, the more pressure we put on Medicare. That's because every cent that's spent that goes to the profits of private corporations and every cent that goes to the administrative overheads or the advertising budgets of the private health insurance industry is a cent that's not invested in Medicare funded dental care, our hospitals or our general practices. Of course, we know it's not an accident. The chief executive of nib made it clear that this is the goal: to bring us back to the days before Gough Whitlam introduced Medicare. This is a problem if you care about funding a quality system that's fair, that's efficient and that delivers good value for money.

All you need to do is have a look at the health care provided in the US to see where a two-tiered, highly privatised model—where there is one level of health care for people who have private health insurance and another level of health care for those people who use the public system—to see what sort of health care that delivers. They spend nearly double what we spend here in Australia as a proportion of their GDP. We spend roughly 10 per cent. They're spending upwards of 17 per cent of their GDP on health care. They get a worse product. The biggest cause of personal bankruptcy in the United States right now is people not being able to pay their medical bills. That is the model that the Liberal coalition government want to take us towards. It's a privatised, two-tiered model where Medicare is seen as some safety net for people who can't afford it and where we drive people to expensive, inefficient private health insurance that drives up the profits of corporations but doesn't deliver for people when they need it.

Giving any player the market power to restrain costs is dangerous when the market player has a profit motive. That's why it's so important that we have Medicare and our public hospital system and that we have universal health care as the centrepiece of health provision in this country. The motive of introducing Medicare was not to drive a profit for a corporation; it was to provide quality health care for all Australians when they need it, regardless of how young or old they are, regardless of where they live, regardless of whether they're a regional Australian or somebody living in a capital city, regardless of whether they're somebody who comes from overseas or whether they're born in Australia and regardless of whether they're Indigenous or non-Indigenous. Health care in Australia, funded through Medicare, is something that is designed to deliver for everyone.

We're chipping away at it every year, at a huge cost to the budget and at a huge cost to the health care of Australians. We don't have to accept it. If we made a decision right now to invest more in our public health system, what we would find is that every Australian, right now, could afford to go to the dentist just in the same way as they go to the doctor. Medicare funded dental care is something that the Greens want to see introduced into Australia. We could do it by scrapping the unfair, inefficient private health insurance rebate, by redirecting that money into our health system and by making sure that every cent that's invested in health care is invested not to drive a profit for a corporation but, indeed, to provide health care for every single person in this country. That's why the private health insurance rebate needs to be redirected into our public health system.

Slade Brockman (WA, Liberal Party) Share this | Link to this | Hansard source

I rise today to speak on the Private Health Insurance Legislation Amendment Bill 2018, A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018 and the Medicare Levy Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018.

I will just begin by pointing out that those on this side of the chamber believe in a government-funded system. Obviously, Medicare and the public hospital system provide an excellent level of service to all Australians on a universal basis. There is no means testing and there is no restricted access. But we also believe in a strong private health insurance system. This balance is something that has been difficult to achieve in a public policy sense, but it is something that I think has, over a long period of time—and with the occasional and half-hearted support of those directly opposite—served Australia very well.

The balance between a public and a private health system has given people options and choices. It means that in many categories of health care people haven't had to be placed on waiting lists, which in the end are the inevitable result if we go down the way of a purely public model, where the only way of controlling healthcare costs is rationing. We've seen that all around the world.

Richard Di Natale (Victoria, Australian Greens) Share this | Link to this | Hansard source

Rubbish!

Slade Brockman (WA, Liberal Party) Share this | Link to this | Hansard source

Those from the Greens say, 'Rubbish!' to that. I just say to look at the examples around the world. That is the only way of controlling costs in a purely public healthcare system. We believe that people have a right to choose private health and we believe that the government has a role in supporting that choice, hence the current structure that has been put forward.

To the bills: the bills give effect to a number of private health insurance reforms that were announced in October 2017, including a number of significant changes that look to the long-term sustainability and viability of the private health insurance sector and the wellbeing of our entire healthcare sector. They allow insurers to discount hospital insurance premiums for 18- to 29-year-olds by up to 10 per cent. They allow insurers to expand hospital insurance to offer travel and accommodation benefits for people in rural and regional areas who need to travel to treatment.

I will just pause here, momentarily. Coming from a regional area in Western Australia, I know that a lot of people in regional Western Australia particularly—but I suspect this is reflected right across regional Australia—have private health insurance that they can't necessarily use in their own local hospital system because of the nature of the access to choices in smaller country areas. They retain it because they want that choice in case something happens in the future. The ability to include accommodation benefits for those people means they are more likely to be able to access and use their health insurance. I think we've already seen a number of insurers start to talk about how that may be offered as part of private health insurance arrangements.

The bills also boost the powers of the Private Health Insurance Ombudsman and increase its resources to ensure that consumer complaints are resolved clearly and quickly. The bills increase the maximum voluntary excess consumers can choose under their health insurance policy for the first time since 2001. Obviously, consumers have a lot of experience dealing with excess, particularly in terms of car insurance and house insurance, so I think that consumers in the marketplace understand those things very well and that increasing this for the first time in 17 years is a sensible policy change.

The bills also replace the standard information statement with a new, more flexible private health information statement. People should be engaged with any financial decision they make, and also any decision they make regarding their insurance. Making information clearer and easier to understand, and making sure consumers are informed about what a product actually is and what it will enable them to claim, are very important. The bills also look to the administration of second-tier default benefit arrangements for hospitals.

As part of the entire package that the government put forward in October last year, we also saw a $1.1 billion saving to private health insurance members through lower medical device costs; better access to mental health services through removing the two-month wait period to upgrade on a once-off basis; the introduction of standard clinical definitions across all policies; and the introduction of an expert committee to deliver options to reduce out-of-pocket costs and to improve models of care for outpatient rehabilitation and psychiatric care. Obviously, the final one is very important; out-of-pocket costs are a huge concern to many consumers. The government is very cognisant of the need to not only allow consumers to understand the nature of the out-of-pocket costs that they are incurring but also give consumers as much choice as possible in reducing those out-of-pocket costs.

The bill also allows insurers to transfer all policyholders, with their consent—I make a very strong note that it is with their consent—from closed products to current products. There are a very large number of products in the marketplace that have a very small number of participants in them. Obviously, that is an inefficiency in the system that would be beneficial to clean up, but, again, it needs to be with the consent of the insured. This measure will assist insurers in the implementation of the new gold, silver, bronze and basic products. Obviously, this categorisation has been met with fairly widespread support. There are those who wish to label the basics as junk policies. Obviously, those on this side disagree with that; they are what they say they are: they are basic policies that offer a low level of cover in a private health insurance sense but they come at a lower cost than other options that are available. As long as people go into these policies with open eyes, we should be accepting of those decisions that people make.

Benefit limitation periods, which restrict access to services such as psychiatric care and gastric banding for up to 36 months, have been a source of confusion for some private health insurance members. The bill improves consumer transparency by removing the use of benefit limitation periods in private health insurance policies including psychiatric care and gastric banding. This bill ensures that the consumers who have purchased benefit limitation periods—inclusive policies—since the Private Health Insurance Act was introduced do not need to repay premium rebates they have received, are not retrospectively liable for the Medicare levy surcharge and are not liable for Lifetime Health Cover loadings. As part of the package of reforms, the government committed to a significant range of changes to the private health insurance system. I think most people would agree, regardless of where they stand on the issue, that it is the most significant reform in this area for a long period of time. It has been widely welcomed, though not universally.

In terms of the amendments that have been put forward by the government—as I say, we are strengthening the viability of the private health insurance system and we are addressing issues of affordability, complexity and the perceived lack of transparency. I think all insurance documents have a level of complexity that probably baffles many of us, so any simplicity and clarity that can be applied in that respect is very important. I was part of the legislation committee report for these bills, and I note that the committee, of course, recommended that the bills be passed.

The committee report refers to comments made about the strengthening of the Private Health Insurance Ombudsman's powers. This bill will strengthen the powers of the Private Health Insurance Ombudsman to protect consumer interests. The Private Health Insurance Ombudsman will be able to conduct inspections or audits at insurers' premises to verify the accuracy of information. Private health insurers have consistently and actively provided access to ombudsman investigating officers to verify the accuracy of information, and this is expected to continue. The ombudsman will provide private health insurers with at least 48 hours notice of access, with the ombudsman delegated functions or powers to be exercised by persons with appropriate expertise. Having a reserve power, even if rarely used, will give consumers confidence in the role of the ombudsman. The powers are analogous to ombudsman's powers in other parts of the jurisdiction of the ombudsman and they are to be used as a reserve power to address consumer complaints where there is a compelling justification to do so. The purpose of entry in these circumstances is not to obtain evidence to support a criminal prosecution. The intention is to confirm information provided by a consumer and to enable the ombudsman to make non-binding recommendations, having received comprehensive information from both parties. The proposed government amendments also postpone the commencement date of the increase in powers of the Private Health Insurance Ombudsman from 1 July 2018 to the day after the act receives royal assent, because these changes are, of course, not intended to be retrospective.

There has been some concern raised—and it was raised in the Senate inquiry—that the entry and inspection powers are too extensive. The ombudsman's powers are recommendatory rather than allowing criminal or civil enforcement action, such as those available to the ombudsmen for other agencies where entry and inspection requires consent or a warrant. A written-notice period of 48 hours is appropriate and proportionate, given the need for the effective and efficient exercise of the ombudsman's powers. Labor senators supported a call in the committee report for a review of the measures after implementation. Reviews of government policy changes are conducted regularly, often by independent experts, without the need for directive legislative provisions. The government is already committed to a review of the clinical categories used for the gold, silver, bronze and basic product tiers, in 2020 and 2020-21, to ensure they are relevant and effective and are achieving the outcomes desired, certainly by those of us on this side of the chamber.

In the committee report Labor senators also called on the government to set a two per cent cap on private health insurance premium increases and to task the Productivity Commission with a review of private health insurance. If a two per cent cap were applied at the insurer level, it would likely result in multiple private health insurers breaching prudential standards. Obviously, that is not something the government would support. Independent modelling shows that, under claims inflation of four per cent, 39 per cent of all insurers would be making negative underwriting margins after one year of the two per cent cap, with 58 per cent of insurers having negative underwriting margins after two years.

A 2017 Senate inquiry into the value and affordability of private health insurance and out-of-pocket costs reported at the end of 2017 and substantial reforms are currently being implemented—the reforms I have just talked about. It is very sensible to bed down those reforms and consider their impact before we embark on another review. During the Senate committee hearing into the legislation, several senators argued that the ability of people with private health insurance to receive the premium rebate and then to elect to be treated as a public patient in a public hospital meant that their treatment was being paid for twice. This is simply not true. Premiums charged by private health insurance companies reflect the benefits they pay for their members. The rebate is then based on the premium charged. If people with insurance are opting to be treated as public patients when they attend a public hospital then this will be reflected in the benefits paid by the insurer, and ultimately in the premiums and the private health insurance rebates paid. The rebates do not include amounts for hospital treatment that has not happened and will not happen.

We also need to be very clear that people have a choice about whether to use the public or the private system. This goes back to where I started. People in Australia do have a choice. They have a strong choice between the private and public hospital systems. The public hospital system has no means testing and no barriers to entry, and that is a very important part of our system, our mixed system, which those on this side of the chamber are very keen to promote.

In terms of where we sit on the overall health system, we on this side want to see a balance between the public and private sectors in the Australian healthcare system, something that has served us well for a number of years, and continues to service us well, and something that the Australian people have voted with their pockets to support.

Although Senator Di Natale particularly wishes to label this as a matter of serving certain corporate masters or the big end of town, the reality is that many of those who have private health insurance who are on low and fixed incomes decide to spend a significant part of their income on the flexibility, choice, security, certainty and peace of mind of having a private health insurance policy that suits them. Obviously, those on lower incomes aren't gaining a huge tax benefit out of their decision to have private health insurance because they simply aren't paying tax or as much tax. So I think it's very important to realise that Australians choose private health insurance for a range of reasons. It's not simply for those set out by Senator Di Natale, There are a range of reasons. People in the bush have a range of reasons why they choose to have private health insurance, even though they may not have access to any facilities in their local area that they can claim.

We saw a fear campaign on Medicare at the last election and we continue to have lies told, particularly about the government's view on Medicare, the public hospital system and the public healthcare system. Medicare funding continues to increase each and every year. Medicare will never be privatised; it will never be sold. It is a core government service. We will continue to deliver every element of Medicare, going forward. It's certainly a very, very important part of our healthcare system. In fact, this government is investing record levels of funding into Medicare—more than $22 billion into Medicare this year, over $1 billion more than last year. This will increase to $26 billion in 2019-20.

Obviously, funding of health care and funding of the private health insurance rebate come on the back of good economic growth and a good economic plan for the future of this country. That underpins everything that this government is trying to do. With a strong economic plan, we can have the positive dividends that deliver a strong economy, a strong level of economic growth and strong employment growth, with over a million people into jobs since this government came into power. Through that, we can also deliver a very strong mixed public and private healthcare system.

Catryna Bilyk (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Private Health Insurance Legislation Amendment Bill 2018 and the related bills. Australians are doing it tough under this government, no matter who it makes Prime Minister. Wages are stagnating, work is becoming more insecure and bills, such as power bills and private health insurance bills, are skyrocketing, partly because this dysfunctional government cannot work together with a coherent policy agenda. One of the worst costs for members of our community is the skyrocketing increase in the cost of private health insurance. For years, private health insurance premiums have been rising at triple the rate of inflation, way above the pace of wages, and families are paying an average of $1,000 more than they were when the Liberals came into power in 2013. According to a recent report by CHOICE, 77 per cent of those with private health insurance are struggling to meet the cost of their policies. That's an extraordinary number of the population. Things are clearly not working.

This country is in the midst of a private health affordability crisis. People are downgrading or even dropping their cover altogether in droves, putting the entire industry at risk of a death spiral. Prices are up and profits are up, but quality and value are way, way down. Meanwhile, we see scandals in the industry and we see insurance company chiefs somehow thinking it is okay to spend hundreds of thousands of dollars of their members' money to attend junkets like the one in Portugal. Reports say that there were business-class airfares, opulent hotels, fine dining and even a luxury cruise, and that a number of officials tacked on private European jaunts. How does this help any Australian facing huge out-of-pocket costs for surgery or a hospital stay? And how does it help to bring down the price of premiums?

No wonder Australians are angry. Australians are paying a lot more for their health insurance policies and getting a whole lot less. Ten years ago, only 8.6 per cent of health insurance policies contained exclusions. Now it's 40 per cent—40 per cent of policies now contain exclusions. These exclusions are often hidden in the fine print, meaning that people are paying for insurance without being covered. It's just turning health insurance into a con. We've all heard of people who go to their doctor needing cataracts removed or knee surgery or a hip replacement or a hysterectomy and are told that, even though they are paying some of the highest out-of-pocket costs in the OECD and even though they're paying in excess of $4,000 to their private provider, it just so happens that that particular procedure isn't covered by their insurer.

While there are many small operators and not-for-profits doing good work, the larger players in the industry raked in $1.8 billion in profit before tax last year, and yet Mr Morrison still wants to give a tax cut to these large companies. I think it's pretty informative to have a look at the profits of the health insurers in context. Most publicly listed companies get a return on equity of about eight per cent, and the banks—the ones we've seen ripping off consumers—average well north of 10 per cent. But do you know how much some of the biggest health insurance providers pocket—how much their return is? Over 20 per cent. It's astronomical! And, not only that, it's really concerning, considering what people are getting. People aren't getting bang for their buck.

This is an industry holding about $6 billion over and above the legal capital requirement, as well as receiving $6 billion in taxpayer-funded subsidies each year. Yet, despite having large cash reserves, profits in the billions and government support, the private insurers keep aggressively increasing their premiums each year. This year alone, some families with two kids are facing $200 premium increases. That's a real struggle for families trying to balance a budget. Two hundred dollars can mean a lot to a family living on the line. It might mean that they don't buy as many groceries or that the kids miss out on a school excursion or can't access some sporting activity. I could list any number of things that that $200 could be better spent on. It has got to the point where some insurers are just gouging consumers. And it has got to stop.

Today we're looking at minor changes to private health insurance. In October 2017, the government announced a range of mostly minor changes to private health insurance arrangements, following a reform process that began in late 2015. This package of three bills implements the changes that require legislation. The government's private health insurance package also includes a number of changes that are not reflected in these bills because they don't require legislation.

The principal bill in the package is the Private Health Insurance Legislation Amendment Bill 2018, and that makes eight changes to current arrangements, including four about which we have expressed scepticism or concern. The two minor bills in this package are the A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018 and the Medicare Levy Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018. They amend the A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Act 1999 and the Medicare Levy Act 1986 to allow increased maximum excess levels. They also repeal grandfathering provisions that had allowed policies with higher excesses than the current maximums. These policies were grandfathered when the current maximums were introduced in 2000, but they will no longer be compliant for the purposes of the rebate surcharge or lifetime health cover loading.

The opposition welcomes elements of the bill that strengthen the powers of the Private Health Insurance Ombudsman. We have also welcomed changes that allow insurers to include travel and accommodation costs under hospital treatment products to help people in rural and remote Australia access care. But, ultimately, we don't believe these bills will deliver significant savings to Australian consumers. And it's not just us saying that; it is groups like the AMA, and some of the health funds themselves have said the same thing. Having said that, we believe Australians need and deserve every bit of price relief they can get. As an alternative, Labor have a real plan to rein in soaring private health insurance costs because Labor understand that we have to put downward pressure on family budgets. We have to make life easier for everyday Australians because they are being ground underfoot under this Abbott-Turnbull-Morrison government.

Under the Private Health Insurance Act, the Minister for Health is required to approve the premium increases that take effect each April. Under the act, the minister can reject changes that are deemed not to be in the public interest. Labor will not improve any increases above two per cent in its first two years in government. Labor will manage the implementation of this cap through the Australian Prudential Regulation Authority, particularly with respect to ensuring the viability of not-for-profit insurers. By capping premium increases at two per cent for two years, effectively tying them to general inflation, a Shorten Labor government would deliver real relief to 13 million Australian consumers struggling with the cost of living. This tough policy will put an average of $340 back into the pockets of Australian families and savings of around $150 for young singles and around $290 for young couples. Labor's policy will benefit over 13 million Australians, including 267,000 in my home state of Tasmania. And, might I say, with me I have Senator Polley and Senator Urquhart, who are both great Tasmanian senators as well. It will benefit 267,000 in our home state.

Murray Watt (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

Hear, hear!

Catryna Bilyk (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

Thank you, Senator Watt. And that's only fair given wages are so low and private health insurer profits are so high. We are shifting the balance back to ordinary Australians. Large insurers are highly profitable and have the capacity to absorb these savings. For decades, Australians have been getting whacked with price rises double or even triple inflation. So Labor will also task the expert Productivity Commission with the biggest review of the industry in 20 years to improve the quality, value and affordability of private health insurance. The Productivity Commission is the most appropriate organisation to consider questions of competition and provide recommendations to strengthen the sector. Labor will immediately begin consulting with the sector on terms of reference, which will include how to restore the affordability and value of private health insurance for consumers; the underlying cost drivers, including insurer margins; the range of carrots and sticks to encourage insurance coverage; the balance between the private system and Medicare, Australia's universal public health insurance scheme; and issues arising from sector consultation.

There's broad support for this inquiry, including from the Consumers Health Forum, CHOICE, the Australian Healthcare & Hospitals Association, the Public Health Association and the National Rural Health Alliance, who've already called for a Productivity Commission inquiry into private health insurance. The commission's report will provide the basis for ongoing reform under a Shorten Labor government, with long-term reforms to improve the affordability and value of private health insurance to be implemented in Labor's first term. And there is wide support for our policy by consumer groups. The Public Health Association of Australia has said:

Scare tactics by the Private Health Insurance industry … should not be surprising. However, they should be rejected out-of-hand. The focus of this industry is on profits and return to shareholders rather than the health of all Australians.

The highly respected consumer organisation CHOICE has said:

CHOICE welcomes any action to apply more scrutiny to this highly subsidised and highly profitable industry … While costs for private health insurance are increasing, the value that people receive from private health insurance has dropped.

Similarly, the Consumers Health Forum has said:

A commitment by the Opposition to a wide-ranging Productivity Commission review of the private health system is a welcome step and a level of independent inquiry we have been recommending for some time.

The Australian Nursing & Midwifery Federation is also supportive, saying:

… the ANMF is supporting practical policy reforms which enhance the affordability and value of private health insurance … "fees for private health insurance cover are out of control and now becoming unaffordable for most families."

And, finally, the Australian Healthcare and Hospital Association has said:

A comprehensive review of private health insurance by the Productivity Commission, as put forward by the Opposition today, is the only sensible way forward out of the mess that private health insurance has become.

So it's pretty clear that Australian families need relief and that the system needs to be tidied up.

All this is clearly unsustainable. We've seen people abandoning their policies in droves because they just can't afford them anymore, and if enough people leave it will put the whole industry at risk. Labor's policy would deliver the smallest price rises in decades. More than that, Labor's policy would deliver much needed certainty so that Australians could plan their household budgets around these more modest increases—no more February surprises when your insurer informs you that your premium will rise by five or six per cent on 1 April.

We believe that private health insurance plays an important role in Australia's world-class health system. We're not looking to dismantle it but this is an industry that gets $6 billion in taxpayer subsidies every year, so Australians are entitled to demand a better deal. In contrast to Labor's bold plan, the package the government announced in October last year was pretty underwhelming. After two years of talking, the best the government could come up with was a range of mostly minor changes. They're really only tinkering around the edges. This isn't surprising, given how closely the government collaborated with the private health insurers on devising this package.

We also have significant concerns about elements of these bills. Firstly, 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, so the government is trading higher excesses for lower premiums. But we're concerned that consumers will opt for higher excesses that they cannot afford to pay when the care is needed, thus forcing them into the public system and further eroding the value of private health insurance.

The bills also allow 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, up to a maximum of 10 per cent. Labor fears this will not only be an insufficient incentive for individuals to take out private health insurance but will also be expensive for insurers, possibly increasing premiums for others. Under these changes, a young person signing up to an average $1,800 policy will only save around 70c a week, so they won't even get a cup of coffee a month out of it. But the changes also undermine the important principle of community rating, under which policyholders are supposed to pay the same premium for each product, regardless of their age, health status or other characteristics. This hints at an Americanised model that would not be welcome here in Australia.

The bills will allow insurers to terminate products and transfer all people covered by those products to new policies, but the government has released disturbingly little information on how this change is supposed to work. The Senate Community Affairs Legislation Committee undertook an inquiry into these bills, and Labor senators supported the committee's recommendation that the bills be passed. But these bills do little to address the affordability crisis in private health insurance, and we call on the government to adopt Labor's policy of capping premium increases at two per cent for two years and tasking the Productivity Commission with the biggest review of the sector in 20 years. Sadly, the government and insurers are putting profits before patients.

Private health insurance is a very important part of Australia's healthcare system, and it always will be. But under the Abbott-Turnbull-Morrison-whoever government, a private health insurance crisis is putting undue pressure on family budgets and on our healthcare system. For private health insurance to deliver value, it needs to be affordable for working Australians. The last Labor government scrutinised every dollar in premiums, with lower average increases than under the Liberals over the last 15 years. The last Labor government also responded to evidence that the private health insurance rebate was growing unsustainably and overwhelmingly benefitting wealthy Australians.

Labor's reforms made the rebate fairer for working Australians and sustainable for taxpayers, while continuing subsidies for singles earning up to $140,000 and families earning up to $280,000. Only Labor is choosing to put Australian families first instead of the interests of the multibillion-dollar private health industry. It's just not good enough from those on the other side.

David Leyonhjelm (NSW, Liberal Democratic Party) Share this | Link to this | Hansard source

Today we are debating a number of health bills: the Private Health Insurance Legislation Amendment Bill 2018, the A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018 and the Medicare Levy Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018. One, which will slightly worsen the budget position, is about proposed changes to private healthcare legislation and the Medicare levy. One is a bill that will add an extra layer of secrecy to the Aged Care Quality Agency and its advisory board by quarantining them both from freedom of information laws. Another imposes a further tax impost on pathology collection businesses. I suppose each of them has a few positives to offset these concerns, but I will not be supporting any of them. That's not just because they are poor policy; I've previously stated that I will not be supporting any legislation introduced by health minister Greg Hunt. Why? Because he does not have Australians' best interests at heart when it comes to a crucial health issue. Each year, tens of thousands of Australians die from smoking related diseases. We all know it's true.

It would be great if people stopped smoking. We've tried a lot of things to promote that. We were the first country in the world to have plain packaging. This must surely be the most evidence-free policy ever invented, and it is yet to stop a single person from smoking. We have tobacco excise, which is so high Australia has the most expensive cigarettes in the world. This probably has stopped some people from smoking. but now we have a multibillion-dollar illegal tobacco market, with organised crime having a field day. We have nicotine gum and patches and the drug Champix. Each works for a time for some people. We have health warnings on the packs with gruesome pictures. Yet the rate of smoking is not falling; it's stuck at around 13 per cent of the population.

That's not the case in other countries. In other countries, the rate of smoking is falling, and it's not as if the rate is falling from a higher level either. Without plain packaging and without the rampant theft of tobacco excise, the rate of smoking in countries most comparable to Australia is much the same but falling. What's the difference? The difference is a much more acceptable nicotine substitute in the form of e-cigarettes, or vaping. We know that an acceptable nicotine alternative makes a big difference because we have the example of Snus. It's a form of tobacco that's placed under the lip, with the nicotine absorbed through the gums. In Sweden, where Snus is widely available, just five per cent of the population smoke.

But we're not talking about Snus; we're talking about vaping—e-cigarettes. Even though Snus is much safer than tobacco as a source of nicotine, e-cigarettes are still safer than Snus. That's not just my view but the view of many with far more expertise than me, including Public Health England, which is not known for its anti-nanny-state views. It says e-cigarettes are 95 per cent safer than smoking tobacco. In England, e-cigarettes have been available for several years, and their use, sale and some advertising are legal. Last September, Scotland's national health agency released a statement saying that e-cigarettes are definitely less harmful than tobacco smoking and that it would be a good thing if smokers switched to vaping. New Zealand's health ministry has endorsed the use of e-cigarettes as a harm reduction aid and a smoking cessation tool. And, of course, our own House of Representatives Standing Committee on Health found no reason to oppose the approval of e-cigarettes. It recommended against doing this, apparently under pressure from the minister, but the chair and most government members dissented.

Having said all of that, nobody claims e-cigarettes are harmless. We are talking about relative harm. It is true that e-cigarettes are still fairly new, so there is not a lot of long-term data on them. Yet nobody can claim they are anywhere near as harmful as smoking tobacco. To continue to ban them is totally unconscionable. We hear quite stupid justifications nonetheless. They say there is a risk that people who have never smoked may take up the habit after using nicotine e-cigarettes. There is no evidence for this. They think that inhaling nicotine through e-cigarettes will encourage children to give smoking a try—utter claptrap. They think that vaping may make the practice of smoking more acceptable again, damaging the campaign to decrease tobacco use in Australians. There is no evidence of this in any other countries. Why would Australians be any different? In any case, tobacco use is not declining in Australia. The bottom line is this: we have a very large population of smokers who can't quit with what we're currently doing. We should give them something that will enable them to quit and that is working in other countries.

What is the real reason we are persevering with this opposition to e-cigarettes? It is because the public servants in the Department of Health have a pathological hatred of the big tobacco companies. They think the big tobacco companies are behind the e-cigarette market. To them, anything that stops what the big tobacco companies want must be good. It's policy by idiocy. It's not just idiocy but ill-informed idiocy. Regrettably, our health minister fails to challenge this idiocy. Instead, he repeats it himself. The e-cigarette market is not dominated by the big companies. It's far more diverse and competitive than the tobacco market, which the public servants are protecting by blocking e-cigarettes. It would hurt the tobacco companies if smokers were to switch to e-cigarettes, but it wouldn't hurt the smokers. Many of them would save their own lives. I won't vote for any bills put forward by this minister so long as he maintains this vendetta against tobacco companies at the expense of the lives of ordinary Australian smokers. Thus, I won't be supporting these bills today.

Murray Watt (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

I am going to make a short contribution on the Private Health Insurance Legislation Amendment Bill 2018, the A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018 and the Medicare Levy Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018 today. Like other Labor senators, I will be supporting these bills, with some reservations. As has been already indicated by Senator Bilyk, we do think this package of measures is a pretty underwhelming response from the government to the very real problems that many Australians are having with the fact that their private health insurance premiums keep increasing well above inflation levels and certainly well above the increases that most Australians are seeing to their wages. This is something a little like the energy crisis, where this government has been in power for five years now and seems utterly incapable of doing anything that is going to put some real handbrakes on the increases that Australians are experiencing to their private health insurance premiums.

Dealing with the bills to begin with, before I outline some other options that the government might wish to undertake on this front, Labor has throughout the process of examining this legislation indicated two concerns in particular. The first is that the bills clarify that insurers will have the power to terminate particular insurance products and transfer policyholders to other, new policies. Of course, that has raised a concern in our minds that, at least in the hands of unscrupulous private health private insurers, there is a risk—given that some Australians might have products that they have signed up to that they have made a judgement they can afford—that those particular policies may be terminated by insurers, and policyholders could be transferred across to other, new policies that may not be as much in their interests, whether it be in terms of the price that they have to pay or the range of coverage that is offered. We have raised that concern. Now that this matter has been explored through a Senate committee, we note the assurances the government has made to parliament that these changes will come with improved protections for policyholders to prevent them being disadvantaged by insurers. We will be paying very close attention to those measures, but we are willing to pass these bills on the basis of the assurances that the government has made.

The second concern that the opposition has had with these bills is that we note that they do allow significantly higher excesses to be charged by insurers to both singles and families. Just as we have a concern around the fact that premiums for private health insurance continue to go up under this government, we are also concerned at any measure which would allow insurers to charge people higher excesses than what they currently pay. This is an issue that has been explored through the Senate inquiry. At this point in time, we are willing to accept the evidence that was provided to that inquiry by the Consumers Health Forum which argues that consumers should be given the option to choose a policy which does involve higher excesses. The concern that we continue to have is that we do seem to be getting into a situation where the government, because it is incapable of doing anything about premium increases, is essentially trading off higher excesses for lower premiums.

This bill will allow policies to go to the market which do allow consumers to choose a higher excess in return for having some level of control about the increases in their premiums. We don't think people should be being forced into that position. We think this government should be able to come up with real policy change that actually does put a handbrake on the increases that most Australians are seeing in their private health insurance premiums. On the basis of the evidence that was received at the Senate inquiry, this is something that we are prepared to support at this point in time; but it is something we will be closely monitoring to ensure that Australians don't end up getting ripped off.

There are other options available to the government to take real action to try to mitigate the increases that many Australians are experiencing in their private health insurance premiums. The most important of those is a policy that our leader, the Leader of the Opposition, announced some time ago but which has yet to be acted upon by this government. We have announced a really bold policy to really tackle head-on this issue of increases in private health insurance premiums. We have announced that, if elected as the government, we will cap private health insurance premium increases at two per cent for two years to bring them much more in line with the inflation rate and much more in line with the wage increases Australians are experiencing under this government. If we get the chance to implement that policy, that will equate to an average of $340 a year in savings for Australians. So Australians, under a Labor policy, will on average save $340 a year in their private health insurance premiums.

Since this government, under Prime Minister Abbott, was elected in 2013—a long time ago, three incarnations ago—private health insurance premiums have increased by around $1,000 on average. While this government continues to take only small steps, as it has done with this legislation, those premiums will continue to rise. We are not prepared see that go on. As the opposition, we are calling on this government to back-in our policy which would see an increase of two per cent over two years and give Australians some real relief on their private health insurance premiums.

What that would mean in my home state of Queensland is that 2.4 million Queenslanders would generate a saving in their private health insurance premiums under a Labor government with that policy. In some of the duty electorates, where I am particularly active, in the electorate of Capricornia in Central Queensland over 86,000 people would benefit from Labor's policy and over 10,000 families would save under Labor's policy to cap private health insurance premiums. In the electorate of Forde, which runs between Logan and the Gold Coast, over 90,000 people would benefit from Labor's policy and over 11,000 families would save money on their private health insurance premiums if Labor's policy were picked up. In fact, across the five federal electorates that cover the Gold Coast, where my electorate office is based, over 430,000 people and over 54,000 families would save money on their private health insurance premiums if this government would adopt Labor's policy and cap private health insurance premium increases at two per cent for two years.

They are real measures that would make a real difference to Australians' cost of living, not the tinkering at the edges that we're seeing in these bills from this government. Having said that, we are willing to accept any measure that the government is prepared to take to try and bring premium increases under control. On that basis, we will support these bills while, at the same time, continuing to call on the government to make real changes and join with Labor in capping price rises for most Australians.

Nigel Scullion (NT, Country Liberal Party, Minister for Indigenous Affairs) Share this | Link to this | Hansard source

I have listened carefully to some of the contributions today. For clarity, the bill doesn't require consumer consent to close a policy. The bill provides for the consumer to be advised clearly about the closure and the proposed change to a new policy, along with the related rules. This will ensure that consumers can choose to accept the default policy nominated by the insurer or choose a new policy themselves. I now take the opportunity to sum up the bills before the Senate—the Private Health Insurance Legislation Amendment Bill 2018; the A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018; and the Medicare Levy Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018.

Private health insurance is a fundamental element of the Australian health system, and it is supported by this government. More than 50 per cent of Australians have some form of private health insurance. The package of reforms announced by Minister Hunt last October will help strengthen the viability of the private health system by addressing consumer concerns about affordability and the complex nature and lack of transparency of private health insurance. In addition to the investment of over $6 billion per annum for private health insurance rebates, this government continues to take pressure off private health insurance with the introduction of these reforms to deliver the lowest annual premium change in almost two decades.

The Private Health Insurance Legislation Amendment Bill 2018 will amend the Private Health Insurance Act 2007 and associated legislation to support a number of the reforms announced last year. The Private Health Insurance Legislation Amendment Bill 2018 will support younger Australians by enabling private health insurers to offer discounts of up to 10 per cent off private health insurance for Australians under 30 years of age until they turn 45. This reform will improve the affordability of private health insurance for young Australians by delivering hundreds of dollars off the cost of private health insurance and providing them with the benefit of their choice of doctor, timing of treatment and shorter waiting times. It will support Australians living in regional and rural Australia by enabling private health insurance to cover travel and accommodation costs as part of a hospital product for people in regional and rural Australia attending health services often a long distance from their home. Patients and carers will see increased value from their product due to this change, with better funded travel and accommodation.

Private health insurance can be complex and confusing. Certainly this is what we've heard from consumers on the online survey, which had over 40,000 respondents. We want to make the information simpler and more transparent for consumers. The first step in this process is the introduction of a new private health insurance statement, which will replace the current standard information statement insurers are required to provide. The private health insurance statement will offer more flexibility for insurers to provide information that is relevant and personalised for their consumers. Consumers will be given the choice of a new lower-premium policy in return for a higher excess. The changes will increase voluntary maximum excess levels for products, providing an exemption from the Medicare levy surcharge. This will improve affordability for consumers and will be the first time maximum excesses have increased since 2001. Reforms will be made to the administration of second-tier default benefits arrangements for hospitals. These changes will reduce the administrative burden on both private hospitals and health insurers.

This bill will facilitate the termination of products and migration of people to new products with additional consumer protections. This change will make it easier for people to compare products and will generate considerable efficiencies in the system. This bill will strengthen the powers of the Private Health Insurance Ombudsman to protect consumers' interests. The Private Health Insurance Ombudsman will be able to conduct inspections or audits of insurers' premises to verify accuracy of information. Private health insurers have consistently and actively provided access to the ombudsman's investigating officers to verify the accuracy of information, and this is expected to continue. The ombudsman will provide private health insurers with at least 48 hours knowledge of access to best assist with investigations with these PHIO delegated functions or powers to persons the PHIO considers to have appropriate expertise.

Having a reserve power, even if only rarely used, will give consumers the necessary confidence in the PHIO's role. The powers are analogous to powers of the ombudsman in other parts of his jurisdiction. The purpose of entry in these circumstances is not to obtain evidence to support a criminal or civil prosecution. The intention is to confirm information provided by a consumer and to enable the PHIO to make non-binding recommendations, having received comprehensive information from both parties.

The government recognises that the benefit limitation periods can be an area of confusion for some private health insurance members and has now decided that all benefit limitation periods should be removed to make private health insurance products easier to understand for consumers. Although benefit limitation periods have been applied under the Private Health Insurance Act since 2007, the act prohibits benefit limitation periods longer than specified maximum waiting periods. Consequently, many health insurance policies may have not met the requirements of the act since it was introduced in 2007. Changes to the bill will ensure that people who may have purchased non-compliant private health insurance policies and insurers who may have sold those products over the last decade are essentially placed in the same legal position they would have been in if the products had complied with the act. To this effect, it will appropriately protect consumers of private health insurance and private health insurers.

The two tax bills—A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018 and the Medicare Levy Amendment (Excess Levels for Private Health Insurance Policies) 2018—deal with taxation related aspects of the reform. These changes will ensure that individuals purchasing appropriate complying health insurance products for private hospital cover with increased excess levels will be able to claim the Medicare levy surcharge exemption. While the legislation brings into effect a number of important reforms, details will be provided in the private health insurance rules, and the government has consulted on the details to these rules. The comments made in response to the exposure draft on the rules released on 16 July 2018 are currently being given careful consideration.

I thank senators for their contribution to the debate on the bills and I thank those who are supporting these bills, including particularly those opposite. There was a last contribution to encourage all Australians and particularly apparently those from Capricornia. Who would know why that would be? But perhaps I could just share with that speaker why it is that the Labor Party intends to set a two per cent increase in private health insurance premiums and to task the Productivity Commission. Well, the Productivity Commission—kick it down the road—is okay. But if a two per cent cap were applied at an insurer level, that would likely result in multiple private health insurers breaching prudential standards. Independent modelling shows under claim inflation of four per cent: 39 per cent of all insurers will be making negative underwriting margins after one year of the two per cent cap, with 58 per cent of insurers negatively underwriting margins after two years. So, this is, as the senator indicated, a matter that you're going to continue to have discussions about, and we in the coalition of course always welcome good ideas and discussions. But I just thought I'd provide some clarity around that idea. I commend the bill to the Senate.

Scott Ryan (President) Share this | Link to this | Hansard source

The question is that the second reading amendment moved by Senator Polley be agreed to.

Richard Di Natale (Victoria, Australian Greens) Share this | Link to this | Hansard source

I move the Greens amendment on sheet 8503:

At the end of the motion, add:

", but the Senate calls on the government, as a matter of urgency, to refer to the Productivity Commission the matter of whether the private health insurance rebate promotes the economically efficient operation of the health system."

Scott Ryan (President) Share this | Link to this | Hansard source

The question is that the second reading amendment moved by Senator Di Natale be agreed to.