Health insurers fear Labor plan blowout

Australian health insurers fear a plan to cap premium increases at 2 per cent would result in a cost blowout.

Bill Shorten at Bentley Hospital in Perth. Picture: Colin Murty

Australian health insurers have warned Bill Shorten that if he fails to introduce reforms to support his plan to cap premium increases at 2 per cent, the policy will eventually push the cost of ­insurance significantly higher.

Leaders in the health insurance industry told The Weekend Australian that while Labor’s promise to cap health insurance premium increases at 2 per cent for the first two years of a Labor government had forced debate on the affordability issue, it lacked detail and could significantly hurt the sector.

“What is the detail of the 2 per cent policy that achieves competitive neutrality and does not destabilise a sector that pays for two-thirds of non-emergency surgical procedures?” said Matt Walsh, the chief executive of ­Australian Unity.

Mr Walsh added that should Labor win government, a Productivity Commission review into the sector — already proposed by the Opposition Leader — should be done before the 2 per cent policy was introduced.

“There are two election cycles to think about because what happens at the election after the 2019 one if the healthcare system is being destabilised because we haven’t implemented systemic change but just pulled one lever (the 2 per cent cap).”

Rachel David, chief executive of Private Healthcare Australia, warned that if the 2 per cent policy was introduced without ­addressing the underlying cost pressures in the system, annual premium increases could push into double digits once the cap was removed. “There could be some huge blowout in the end, unless they have done something ­tangible to bend that cost and value curve that underlies it,” Ms David said.

HBF’s chief executive John Van Der Wielen, who previously worked in financial services, ­echoed the concerns.

He said without reforms, the blunt measure of the 2 per cent policy meant that rates would have to be “jacked” up after the first two years of a Labor ­government.

“If reforms come in some time during the 2 per cent for two years, then coming out of that policy premium increases might normalise back to 3 or 4 per cent, depending on the reform,” he said.

Mr Van Der Wielen added that though he did not believe the 2 per cent blunt measure worked, it was a catalyst for the entire ­private healthcare industry to ­engage on measures to address cost issues.

Byron Gregory, chief executive of South Australia-based Health Partners, said if premium increases were capped at 2 per cent but healthcare costs were going up at 5 per cent, then the “pain” would be passed on to those that provided the care. “You will start to see a more aggressive change (from insurers) in terms of keeping people out of hospital and getting people treated in a lower-cost setting,” Mr Gregory said.

The health insurance industry body has prepared a list of ­proposed reforms for the next government, which it said could reduce healthcare cost inflation to 2 per cent to 3 per cent annually by 2030, significantly reducing ­pressures on health insurance ­premiums.