Health insurers put on notice over ‘price gouging’
Health Minister Mark Butler has told private health insurers their proposed increases to premiums are too high, calling out the sector for ‘price-gouging’ practices.
Health Minister Mark Butler has told private health insurers that their proposed increases to premiums were too high, while calling out the sector for widespread “price gouging” practices.
As negotiations to set the next private health insurance premium hike continue, Mr Butler said he would write to the nation’s 29 insurers this week urging them to “sharpen their pencils” and present better offers.
Warning insurers to “do the right thing” or lose their social licence, Mr Butler criticised health funds for exploiting a “loophole” allowing them to increase the cost of funds without ministerial approval.
Under the “phoenixing practice” insurers shut down an existing product and readvertise the same offer for a higher price, as a backdoor method to increase the price of an existing product without his consent.
Mr Butler said the practice had been found to be “widespread”, with a commonwealth ombudsman investigation into the practice that the conduct typically concerned top tier gold insurance products, which included mental health and maternity services.
“The advice I’ve received is this practice is not strictly against the law,” Mr Butler said on Monday.
“But I do reiterate, it is clearly against the spirit of the law. It’s an underhanded, largely secret way of health insurers raising prices outside of the usual process.”
Mr Butler said the practice – which could see some consumers pay 20 per cent more than others for the same product – could be described as “price gouging”, reminding health insurers and private hospitals that they operated “with very significant support from taxpayers”.
“They must take account of the fact that they are not just private operators,” he said. “They are private operators operating as part of a public health system that receive billions of dollars in contributions from taxpayers, as well as private health insurance members.
“They need to respect that social licence that they have.”
The peak body for insurers, Private Healthcare Australia, defended the conduct of health funds, saying gold products were typically shut down because they were making a loss but agreeing to examine the issues raised.
“Under the tiering system, gold health insurance covers the most expensive treatments in our health system, including obstetrics, psychiatry, joint replacement surgery, weight loss surgery and other complex procedures,” a spokeswoman said. “Confining the most expensive medical treatments to the gold tier attracts people who know they are going to claim.
“This creates a high-risk pool where the cost of care compounds and rises quickly. This is often unsustainable for health funds.”
Mr Butler said insurers had submitted their proposals to hike premiums, but after receiving advice from the Australian Prudential Regulation Authority and his department, he would ask health funds to lower the increase.
“The advice from APRA and the department was received by me at the weekend and essentially recommends that I write back to every single one of the 29 insurers seeking that they sharpen their pencils and present to me a lower increase for their products. And I will be doing precisely that this week. I am determined to arrive at an outcome that is in the interests of fund members themselves.
“Particularly at a time of considerable pressure on household budgets, it is especially important, now more than ever, that I do the best thing by them and make sure the increases that take place next year to private health insurance products are the lowest necessary to ensure an ongoing, viable and sustainable industry.”
