Shorten’s plan for backflip on health cap

Bill Shorten is preparing a retreat on his proposed 2 per cent cap on health insurance premium increases.

Labor Leader Bill Shorten. Picture: Chris Kidd

Bill Shorten is preparing a retreat on his proposed 2 per cent cap on health insurance premium ­increases in a bid to shield regional and smaller not-for-profit funds favoured by unions and better target big, listed insurers.

Any move to modify the 2 per cent limit would complete a trifecta of major backdowns after the Opposition Leader was forced to carve out pensioners from his dividend imputation crackdown and abandon his plan to repeal ­already legislated tax cuts for businesses with a turnover of up to $50 million.

In an email marked “strictly confidential” and “not for circulation”, the chief executive of the Members Health Fund Alliance, Matthew Koce, detailed a private meeting with Mr Shorten at Parliament House in Canberra in June where he received assurances that smaller funds would not be affected by the shake-up.

The Members Health Fund ­Alliance represents 23 smaller health funds covering more than 1.7 million Australians in regional areas and unionised sectors of the economy, including nurses, midwives, teachers and police, as well as railway, transport, mining and emergency services

workers.

In the email — sent on June 29 and obtained by The Australian — Mr Koce told chief executives that Mr Shorten “provided us with very strong reassurances that the 2 per cent cap policy is not directed at our funds and that he would ensure that none of the Members Health funds would be disadvantaged by this policy initiative”.

“We are working directly with Bill Shorten and his office on finding a mechanism to protect our funds,” he said. “The Opposition Leader and his office now appear to realise how devastating a 2 per cent cap would be to our sector and that it would perversely drive consolidation with the big, listed health insurers — who are the real target of the 2 per cent cap policy.”

Health Minister Greg Hunt said Mr Shorten was “doing a ­secret deal to protect his union mates” and urged Labor to reverse the ­imposition of the cap, claiming it was a “captain’s call”.

“Bill Shorten created this policy on the run and now he’s caught out creating a two-tier system which negatively affects millions of Australians with private health ­insurance,” Mr Hunt said. “The fact that Mr Shorten has to protect people from his own policy just shows how devastating it is.”

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Mr Shorten’s office did not comment yesterday on whether the Labor leader had held any meetings to discuss an overhaul of the policy, but Labor sources told The Australian the intent of the policy was to target the big health insurance providers.

It is still unclear how smaller ­regional health funds would be protected from the premium freeze, with the issue threatening to affect the Labor campaign ahead of the Super Saturday by-elections in just under two weeks.

St Lukes Health in Launceston — which covers 10,600 low-­income earners in the by-election seat of Braddon — and the smaller, Burnie-based Health Care Insurance, have been identified by industry leaders as being at risk.

The private health sector also sounded the alarm on any move by Labor to carve out not-for-profit funds from the 2 per cent cap, warning that it could create a two-tiered system and trigger an ­exodus to the larger funds.

“There are people who review their health cover every year. And although some of the smaller funds do tend to offer higher value and more comprehensive policies — because their claims ratio is high — they do take on more risk with premium increases,” the chief executive of Private Healthcare Australia, Rachel David, said.

“So if they were given an exemption (from the 2 per cent cap) they would almost certainly lose low-claiming members to the bigger funds … for some newer members who are less rusted-on and less likely to claim, they will ­almost certainly move to funds that will offer the lower premium ­increases.”

Mr Hunt yesterday unveiled his own shake-up to the sector by releasing a new system to arrange all of the existing 70,000 private health insurance policies into four tiers — gold, silver, bronze and basic.

Labor health spokeswoman Catherine King said the opposition would study the government’s changes — saying they would provide better information to consumers — but warned they were “not designed to bring down the cost of private health ­insurance”.

“We’ve had a 4 per cent rise again this year,” she said. “We’ve had $1000 over the time of this government in private health insurance premium increases.”

The Labor policy to set a 2 per cent cap on premium increases was announced by Mr Shorten and Ms King on February 4 — just days after the Opposition Leader delivered a speech to the National Press Club in Canberra slamming premium rises for being too steep.

Mr Shorten said Australians were paying more but “getting a lot less” in health insurance coverage, accusing the sector of “gouging people on the basis of a con”.

Under the Labor policy, the cap would remain in place for two years and the Productivity Commission would investigate how the quality and affordability of health insurance could be improved.

Mr Shorten also lashed out at the large insurers yesterday after it emerged that members had paid $600,000 to send about 40 health fund chiefs to attend a conference last month in Lisbon, Portugal.

“Labor will cap premium ­increases at 2 per cent for our first two years — so more money stays in your pocket,” Mr Shorten said on Twitter.

Labor argues that its policy would benefit 13 million Australians with private health insurance while also providing savings of more than $340 over two years to more than 1.7 million families.

Ms King has said Labor would give new powers to the competition watchdog and the Private Health Insurance Ombudsman to ensure the 2 per cent cap did not trigger an increase in exclusions. A rise in exclusions would weaken policies by narrowing coverage.

Dr David told The Australian the sector was looking at how to best comply with the 2 per cent cap but warned that options were limited given rising health costs.

Dr David also warned that, once the cap was removed, some of the smaller funds may have no choice but to introduce large premium rises.

‘Not a policy retreat’

Labor frontbencher Ed Husic this morning denied Mr Shorten’s move was a policy retreat, arguing the opposition has always vowed to look after smaller funds.

Mr Husic said it was “not accurate at all” to describe the carve-out as a policy retreat.

“We said from Day One that we would work with the smaller and not-for-profit providers to make sure that they weren’t unduly impacted, and our big focus is this: we think families are paying too much for private healthcare,” Mr Husic told Sky News.

“We think that the big insurers have been getting away with these price increases for too long.

“We believe that the cap will save roughly $340 for families. We want to ensure that there’s a lot more fairness injected into the system, and instead of seeing premiums wasted as we saw on the weekend on junkets for CEOs, delivering value for families should be the priority.”

Mr Husic said Labor would ensure APRA, the prudential regulator, would work with the smaller providers to ensure they’re not unduly affected by the 2 per cent cap.

Liberal frontbencher Michael Sukkar said the Turnbull government had delivered the lowest health insurance premium rise (by an average of 3.95 per cent) in many years (since 2001), and Mr Shorten was now conceding funds needed protection from his own policy.

“It’s a bit like when he said that pensioners needed protection from his retirement tax policy,” Mr Sukkar told Sky News.

“The reality is under this captain’s call from Bill Shorten, this policy-on-the-run approach, people’s out-of-pocket expenses will be higher, funds and the viability of funds is certainly going to be in question, which is why he’s had to come out, presumably, although I don’t think he’s confirmed this, but come out and basically decided to carve out some smaller funds, including some union funds, unsurprisingly. Bill Shorten cutting special deals for his friends.

“But the reality is, why on earth would you create a policy that some funds need protection from? If you need protection from it, I would say to Bill Shorten, ‘Do what you’ve created some form over in the last few weeks: just dump this captain’s call, dump it now, because we know the consequences for consumers could be quite devastating’.”