Labor risks insurers’ push for deregulation

Labor’s bid to examine health insurance premium increases may inadvertently reignite the industry’s push for deregulation.

Health Minister Greg Hunt. Picture: AAP

Labor’s bid to have the Productivity Commission examine the process for deciding health insurance premium increases may inadvertently reignite the industry’s push for deregulation.

Under the Coalition government, the deregulation push reached the advisory committee that worked on a reform package introduced by Health Minister Greg Hunt.

Documents obtained by The Australian under Freedom of ­Information laws shed new light on the proposal to remove the minister’s responsibility for ­deciding premiums, subject to a public interest test, and let the market take over.

“Under the proposal, the public interest test would be removed and an approval power, limited to prudential viability, would be transferred to the Australian Prudential Regulation Authority,” advisory committee chair Jeffrey Harmer told Mr Hunt.

“Most committee members supported a move toward deregulation of premium-setting but were concerned that a ‘big bang’ approach may not work.

“The committee generally agreed that a transitional ­arrangement, for example retaining a single annual premium increase date in the short term, would be preferable.”

Mr Hunt did not include any transitional arrangement in his reform package and recently ­approved an average industry premium increase of 3.25 per cent, to take effect on April 1.

Last month, Labor released a discussion paper for its promised Productivity Commission inquiry and kept the premium-setting process on the agenda.

The inquiry would coincide with a two-year, 2 per cent cap on premium increases and potentially culminate in another wave of reforms.

The paper asks “could the model for PHI premium increases be improved” and, after ­explaining the current role of the department, minister and APRA, “is there a case for a ‘one-stop shop’ to combine the various regulatory and oversight functions”.

In 2017, the commission questioned the high level of government involvement but also suggested “any consideration of removing price regulation must form part of a larger reform of health insurance”.

Removing the minister’s role in the process might also alter the politics of health insurance. Mr Hunt took credit for the lowest average increase in 18 years — “down over 40 per cent since Labor’s last year in office”.

The insurer with the highest average increase this year will be Nurses and Midwives Health, with 5.91 per cent, while Westfund will have the lowest (1.64 per cent).

Labor has agreed to work with not-for-profit, member-owned and community-based insurers to reduce the impact of its 2 per cent cap in premium ­increases.