Speaking on the Private Health Insurance Bill

05 June 2015

Following the member for Wakefield in a debate on any matterand on private health insurance in particularis always an intimidating task. I am very pleased that the member for Mitchell is in the chamber at the same time.


The bill before the House concerns private health insurance and the Private Health Insurance Administration Council, which was established in 1989. The council is responsible for monitoring the prudential performance of registered private health insurers. The council's role includes the registration of private health insurers; developing solvency, capital adequacy and prudential standards; publishing circulars and statistics on insurer activities and performance, which is a valuable source of information on what is going on in the industry; and administering the Risk Equalisation Trust Fund. Under this bill the PHIAC will cease to exist as a separate body and its prudential and regulatory functions will be transferred to APRA. Private health insurance is of deep concern to all members of parliament and to all Australians who are policyholders. It is also of deep concern and interest to all Australians who are taxpayers, because the industry is intimately linked with government health policy and government finance policy.

Witness the great debates we have had in this place over private health insurance and tax concessions to private health insurance policyholders over the years. The member for Rankin is in the chamber. He was very involved in some of the policies about ensuring that the growth in private health insurance rebates, which is one of the greatest costs in the health budget, was at a sustainable level. The member for Rankin and the member for Melbourne Ports would know that those opposite opposed the reforms we put in place when we were in government about ensuring that we had a steady control in that area of health expenditure. When they came to government and were faced with the responsibility of managing the treasury bench, they changed their view. They have not declared it, but they have not reversed any of the changes of the previous Labor government. That being the case, the industry receives about $5 billion in annual subsidies from the taxpayer. So prudential standards, the regulation of the industry and ensuring consumers get good value for money matters not only in terms of health policy but also in terms of the fiscal strategy of any government from any point in time.

The bill provides for the transfer of functions of the Private Health Insurance Administration Council to APRA from 1 July this year. It will provide for the continued imposition of levies upon private health insurance to fund those responsibilities, that is, APRA's supervision of the industry, the risk equalisation unit and the Risk Equalisation Trust Fund, and a levy to fund should there be a collapse of any particular insurer. I note that stakeholders have not yet had the opportunity to voice their views on the bill. We do not know what the views of the stakeholders will be, and we think that it is a matter of good public policy development that the government should seek the views of stakeholders on the legislation. Perhaps when this matter gets before the Senate there will be the opportunity for that to occur. The bill, as we are told, has no financial impact. While the functions of PHIAC will move over to APRA, the functions themselves do not change.

Unlike the coalition, Labor in government put pressure on the health insurance sector to ensure that premiums, which inevitably will increase, increased at a sustainable rate, and the industry was put on notice to ensure that they were no higher than they absolutely needed to be. Labor provided $1.4 million to increase the Private Health Insurance Ombudsman's capacity to manage complaints and to respond to consumer inquiries, and $2.3 million to establish the private health insurance Premiums and Competition Unit. These measures were put in place because we think it is appropriate, indeed, necessary. Bear in mind, that figure of over $5 billion, which I mentioned, in subsidies to the industry ensures that consumers, policyholders, get good value for money.

It is important to remember how the PHI industry has developed in Australia. When bills come before the parliament on this matter it is always an opportunity for us to talk about the important role PHI has played and how its role has changed over the last century. They started as friendly societies, particularly in communities such as my own where the state played a very miniscule role, compared to today, when it came to the provision of medical services in coalmining, agriculture and manufacturing areas where workplace injuries were all too common. Friendly societies and lodges created their own private health insurance companies to cover the cost of, generally, access to general practitioner services. They grew strongly over the course of the 20th century, but in the 1970s it was quite clear there was a problem. There was a significant problem in the industry and, indeed, a series of reviews of the PHI over that point in time discovered that they were, in fact, ineffective, inefficient and that 17 per cent of Australians outside of Queensland had no health coverage at all. Queensland was different, as you would know, Deputy Speaker Vasta, because of a different history of the health system in that state.

After the Whitlam government introduced Medicare and the Fraser government pulled it apart, the Hawke government re-established Medicare and Australians enjoyed universal health coverage, and PHI levels dropped. There was still a role for private health insurance particularly when it came to the provision of dental services, which today represent over 50 per cent of the claims received by private health insurance companies. So PHI still playa, and has played, an important role in relation to dental care, but rates were dropping. This moved the Howard government, which, at the same time as abolishing the Commonwealth dental program, introduced incentives which would encourage the take-up of private health insurance in the population. Eventually we moved to the lifetime cover provisions together with the rebates that I have already spoken of. That saw a significant uptake in private health insurance but also a significant increase in the cost to the Commonwealth of private health insurance. These things obviously had to be moderated to ensure that we had some sustainability within the industry.

Since coming to office the government have been very active in the health space. In fact more active than successful, but very active in the health space. They have had their targets set on universal health cover through the Medicare system with four different versions of the GP tax. We are seeing bulk-billing rates in general practice declining again after almost six years of consistent increase. Of course there are significant cuts, over $55 billion worth of cuts, to our public hospital system. How is this relevant to private health insurance? As the Commonwealth takes deliberate steps to minimise, to shrink, to control the rate of growth within the public side of the health system, many patients are forced into the private side and are forced to rely even more on their private health insurance cover. This, as we argue, is going to put increased pressure on private health insurance premiums.

The architecture for the prudential regulation and the consumer protections in private health insurance are more important now than ever as the government, through a mean-spirited policy towards health care in this country, is shifting the burden towards private cover. We are going to see upward pressure on private health insurance premiums in this country. These are matters which need to be debated. We have a bill before the House and we expect more. As I said at the outset, there has been insufficient stakeholder consultation in this, and I sincerely hope that, when this bill comes before the Senate, there will be the opportunity for further scrutiny of the matters, which are of great public import and, I am sure, of concern to all members of the House.