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Insurance premium hikes waved through by Minister

Health Minister Sussan Ley did not challenge or knock back some of the biggest premium increases proposed by health insurers in years, it has been revealed.

Government officials have told a Senate Estimates hearing that Ms Ley did not reject any premium increases proposed by insurers prior to announcing approval for an average 6.18 per cent rise this year, following a 6.2 per cent hike in 2014.

Private Health Insurance Administration Council (PHIAC) Chief Executive Officer Shaun Gath told Labor Senator Jan McLucas that Ms Ley had not required any insurer to “show cause” for proposed rate hikes, or to make them re-submit a proposal.

But Mr Gath said this was because of an exhaustive process of investigation, negotiation and assessment undertaken by the Council before making recommendations to the Minister regarding premium increases.

He told the hearing that PHIAC assessed premium pricing according to three criteria: ensuring that insurers were raising sufficient revenue to remain financially viable; that the proposed price hike accurately reflected growth of business costs; and that the increase was competitive in the insurance marketplace.

Mr Gath said this approach, which had evolved in the past three years, involved “a lot of transparency, a lot of contact with the industry, a lot of clarity about our expectations, and also a very strong adherence to a competition-based model of pricing”.

“It has become quite a complex and sophisticated process which goes much longer than a simple exchange of paper in a flurry before Christmas.”

He said the proof of the success of the process was exactly that no proposed increases were challenged or rejected by either PHIAC or the Government.

“The reason that there was no return or show cause was that the process was designed to not to allow that to occur, because everybody knew…exactly what sort of pricing would be supported by PHIAC in its recommendation to the Government,” Mr Gath said.

This year’s increase, which came into force in April, drew criticism from the Opposition and consumer groups who complained that the average premium was growing a several times the rate of inflation.

The hike in premiums has fuelled concerns many consumers will downgrade their policies, leaving them with inadequate cover.

While the proportion of Australians with private health cover is growing – more than 47 per cent of the population had private hospital cover last year – doctors are worried that as premiums rise, more are opting for policies with multiple exclusions that often do not provide the benefits that they need.

AMA President Professor Brian Owler said the growth of such policies concerned the medical profession because they saw the consequences for their patients.

“Too often my members see patients who think they have cover, but don’t, because they purchased a cheaper product several years ago,” A/Professor Owler told a private health insurance conference late last year. “Treatment is planned, surgery is booked, only to be cancelled shortly beforehand because the patient is not covered.”

The AMA’s concerns have been echoed by the Private Health Insurance Ombudsman, who recently reported that policies with exclusions and restrictions regarding hospital-based treatment were a significant cause of consumer complaint.

The Ombudsman reported receiving almost 350 complaints about benefits in the 12 months to September last year, up from a little more than 250 in the same period a year earlier.

“There is demand from consumers for more affordable policies, particularly from younger people who may be taking out a policy for the first time, and from people who are purchasing health insurance primarily for tax purposes,” the Ombudsman said. “One way insurers can reduce the cost of a policy is by restricting or excluding certain treatments on the policy.”

Adrian Rollins

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