Private Health Insurance Amendment Bill

It is with great pleasure that I speak on the Private Health Insurance Amendment Bill (No. 2) 2014, because private health insurance is a matter of deep concern to the nation at large and to the, roughly, over 50 per cent of residents of my electorate who hold a private health insurance policy. That is slightly below the national average but important nonetheless.


The bill is about the Private Health Insurance Ombudsman and the oversight role that the ombudsman's office plays in the private health insurance industry. The PHI Ombudsman has an important role in protecting the interests of people covered by private health insurance. Unlike the current government, which has presided over record levels of private health insurance premium increases, the ombudsman has its eye on the industry. The government clearly does not. The PHIO also manages the very important consumer information website and deals with a prodigious amount of work.

I just ask you to consider this: there are 12 staff currently working in the Private Health Insurance Ombudsman's office. In 2013-14, in that year alone, they dealt with nearly 3½ thousand complaints. You can do the maths yourself; when you do, you will work out that this is a busy office dealing in a very professional way with the complaints and concerns of the more than half of my constituents who have private health insurance and those throughout the population at large. They have not been sitting around doing nothing. They have been very, very busy.

Against that backdrop, you can understand some concerns that we might have in the context of a government which is hell-bent on withdrawing resources from the public sector. This bill has savings attached to it, albeit modest savings; but we are concerned that, without sufficient resources, the Private Health Insurance Ombudsman and the staff who work in the wider ombudsman's office will not have the resources available to them to do their job.

Contrast that with what we did when we were in office. We put in place over $1.4 million to increase the resources available to the Private Health Insurance Ombudsman and to enable them to do their job. We have, through this bill and other budget measures, attempts by the government to withdraw resources from the PHI Ombudsman's office.

When you look at the amount of complaints, I ask you to consider this: there is a stubborn correlation between the volume of complaints that the Private Health Insurance Ombudsman receives and the level of increase in private health insurance premiums. We can predict a very steady increase in premiums under this government. I would like to say that the last two health ministers have got the record for overseeing the highest levels of private health insurance premium increases, but, of course, as the member for Ballarat said in her contribution to this debate, that medal belongs to the Prime Minister, because when he was the minister for private health insurance and the minister for health, we saw record premium increases of in excess of seven per cent.

So I would make this point: we are seeing a steady trajectory of increases in private health insurance premiums, we are seeing a government which wants to rip money out of the oversight body and we are seeing customers increasingly wanting to get information and to make complaints where they see that the industry has not done the right thing. Our concern, and it goes to the heart of our concern about this bill, is that the body charged with oversight will not have the resources available to it to meet customer demand. That is a reservation, and that is a concern that Labor members of parliament who have spoken on this bill have expressed.

I want to add a voice for people in regional Australia—and I will have some comments about the coverage of private health insurance in regional Australia in a moment. I know that the member for Wakefield is equally concerned about this, and I see him in the chamber here today. People in regional Australia need access to a complaint service, and they want to be assured that these changes are not going to adversely impact their ability to get both information and access to a complaint service in relation to private health insurance.

The government seeks to transfer the Private Health Insurance Ombudsman functions to the office of the Commonwealth Ombudsman. Like the staff of the Private Health Insurance Ombudsman, the staff of the Commonwealth Ombudsman are very busy indeed. If you have a look at the oversight role that they already have, it goes to the Defence Force, immigration, law enforcement, taxation, the postal industry, ACT and overseas students.

Ms Ryan interjecting—

Mr STEPHEN JONES: They are about to get functions, as the member for Lalor reminds me, in relation to data retention. This is a very busy office. We are expecting, in less than a month and a half, another shock budget with further cuts to services. We have real questions about the capacity of the Ombudsman, already struggling under a high workload, diminished resources and the impact of an efficiency dividend and other cuts, to deal with this new and increased workload.

I do admit some of the functions are not going to be transferred. This is one of these 'falling between chairs' issues. The PHI Ombudsman may currently permit additional time to respond to the subject of a complaint. That is not going to be a feature of the new system. The minister himself or herself will no longer be able to intervene, should the ombudsman refuse to investigate a matter. We think that this is an important safeguard—the capacity of the minister to direct the ombudsman to proceed with an investigation. Similarly, the minister will no longer be able to request that the ombudsman investigate a matter.

Compulsory mediation will be abolished in the new system, and we think that is a backward step. In all disputes and in all forums that deal with litigation, it is now the norm that a compulsory mediation step occur ahead of a more litigious approach.

There are going to be some changes to the penalties, and the ombudsman will no longer require permission from a complainant to investigate their dealings on the subject matter of the complaint. I do not want to accent that last matter, but it is not purely a matter of picking up all of the functions and transferring them to the general Ombudsman.

I have expressed these concerns. In the time remaining, I would like to make a few observations about the private health insurance industry and particularly the reach of the industry into regional Australia. Private health insurance has a long history in Australia, reaching back to the friendly societies and the lodges that predated universal health cover. But it became clear to those on our side of politics by the mid-1970s that the system was broken. There were significant problems. There was an ineffective structure within the industry itself. It was very fragmented, with lots of very small societies eating up lots of the premium in administration. They were inefficient. In fact, over 17 per cent of Australians living outside the state of Queensland had no cover whatsoever. Many of those who did have cover did not have the right sort of cover.

There was this inequity within the system—the fact that, as Gough Whitlam famously remarked, the taxpayer provided him more money to subsidise his private health insurance cover than it did the person who drove him to and from his office in Parliament House. He thought that was wrong and quite rightly put in place the Medibank system with a private health insurance arm sitting alongside it. Of course, when the coalition vowed to destroy Medibank—and they did, after five goes at it—it fell to the Hawke government to reinstate universal health cover through the Medicare system. Medicare remains the cornerstone of universal health coverage in Australia. It is very strongly our view that the role of private health insurance is to complement Medicare, not to replace it.

We reject the proposition that those advising the government put in the Commission of Audit, that private health insurance should subsume Medicare for all but the very poorest in society. We think that there is something uniquely Australian about having a universal system of healthcare cover. It is not free. If you like, to use the insurance analogy, the premium comes from your pay packet, your pay-as-you-go taxes, through the Medicare levy. The more you earn, the more you pay, and we think that this is a much fairer and much more efficient system. There is a role for private health insurance, but it complements Medicare; it does not replace it.

In the period between 1996 and 2007, the private health insurance industry faced a lot of challenges. There was a significant slide in the number of Australians taking out private health insurance policies. It was the policy of the Howard government at that point in time to take steps to arrest this slide, and significant government intervention—subsidies and assistance—was put in place to support the private health insurance industry. Lifetime Health Cover together with a 30 per cent rebate on premiums were the two principal levers that were put in place to support and subsidise the private health insurance industry. They have remained the cornerstone of government policies since their inception to today.

It is true that we thought it was both a more efficient use of the public purse and a more equitable system if we put in place a means test on the rebates for private health insurance—a policy adopted by Labor, contested by those opposite. It remains to be seen in the budget that they will stand and deliver in a few weeks time whether they will make good on their promise to get rid of the means testing of the private health insurance rebate. We will see what happens on the front.

But Labor in government also took the view, in an attempt to put downward pressure on the increasing premiums—that we would only index that rebate to CPI increases and not the actual increases in private health insurance. There were two good reasons for that. The first was to ensure that the taxpayer was not effectively providing a blank cheque by a one-third subsidy for the increases in premiums. We think that had the effect of putting downward pressure on premium increases. It was also a means of ensuring that the exponential growth in the cost of the PHI rebate was not subsuming the healthcare budget. We supported those provisions in government. We continue to support them today. It remains to be seen whether those on the other side, when they introduce their budget in a few weeks time, will seek to review those measures.

I want to say a few things about private health insurance in regional Australia. The coverage of private health insurance in regional Australia, compared to metropolitan Australia, is very, very low. This is a factor of low incomes—the low socioeconomic status of people in regional Australia compared to those in the cities—and the lack of services available to people living in regional Australia. There is a challenge for both the government and the private health insurance sector to ensure we redress this. If we are going to close the gap in access to services between those living in the bush and regional Australia and those living in metropolitan Australia, this must be dealt with.

With those comments in mind, we have serious reservations about the bill but we welcome the opportunity to debate it in the House today.