Private health insurance premiums to rise by an average 5.6 per cent

Parliament house flag post

Private health insurance premiums to rise by an average 5.6 per cent

Posted 8/02/2013 by Amanda Biggs

Early each year the Health Minister announces the average increase to private health insurance (PHI) premiums that will apply from 1 April, following her annual assessment of applications for increases from the 36 health insurers. The announcement invariably attracts considerable attention, particularly if the increase is higher than community expectations. This year, the average increase to premiums will be around 5.6 per cent, according to the Minister’s statement. This is broadly in line with the magnitude of increases over recent years, and just marginally above last year’s increase of 5.06 per cent. For families with top cover this will mean an average increase of $3.70 per week.

Over the last decade premium rises have tracked well above the consumer price index (CPI), at around an average of 6.1 per cent, as can be seen in the graph below.

 As this Parliamentary Library paper explains, under the Private Health Insurance Act 2007 health insurers must seek approval from the Minister for Health and Ageing for any change to health insurance premiums. While the Minister must approve an application unless she deems it to be not in the public interest (and must disclose her reasons in writing), this rarely happens. Instead there is a process of negotiation, whereby the Minister can request an insurer to resubmit their application with more evidence to support their claim or she can ask them to re-apply for a lower increase. During the 2012 premium round process, 7 insurers sent in new applications for lower premium increases while 17 provided further evidence in support of their original application.

The process around premium setting largely reflects the highly regulated arrangements around private health insurance in Australia. However, by having the Minster so closely engaged in annual premium setting it also inevitably politicises the process. Some argue the process needs greater transparency and have called for reform. A recent report from Deloitte (p. viii) argues that the premium approval process should be moved to an independent regulator such as APRA, beyond the influence of the Health Minister.

It should be noted that the announcement is for an average premium increase, so the premium for individual products may be above or below this figure. But some consumers may find they are paying even more for their PHI. Following the recent means testing of the PHI rebate, higher income earners now receive a lower level of rebate, and among the highest income earners, none at all. After July 2013, those who have incurred a Lifetime Health Cover Loading on their premium—a 2 per cent loading on the premium for each year they delay purchasing hospital cover after they turn 30—will receive a lower rebate if legislation currently before the Parliament is passed. This is because the bill proposes that the rebate amount be calculated only on that component of the premium which is not attributable to the loading, as this Bills Digest explains. Meanwhile, those consumers who took up the offer made by many insurers to lock in last year’s premium by pre-paying in advance will then face a jump in their premiums once this pre-paid time period expires.

It seems highly likely therefore, that consumer concern around PHI affordability can be expected to remain high and that the Private Health Insurance Ombudsman may see an increase in consumer complaints around cost issues. Health insurers have already registered their concerns around the proposed changes to PHI, running a series of half page advertisements in daily papers and on the internet, as well as through a submission to the Senate enquiry into the current bill before the Parliament. And a further change mooted in the Mid Year Economic and Fiscal Outlook (MYEFO p. 237) which could affect PHI affordability—aligning annual premium increases to CPI if CPI is lower than the average increase sought by insurers—may generate further concern when it is introduced.

The Minister argues that the ongoing reforms to PHI are about making PHI more equitable and effective, as well as helping to achieve much needed budget savings to partially fund other health priorities, such as dental reforms (see MYEFO, p. 237).

Overall, 2013 looks set to be a year where PHI will remain in the spotlight, with issues around consumer affordability and potential impacts on membership levels likely to feature.

Thank you for your comment. If it does not require moderation, it will appear shortly.
Facebook LinkedIn Twitter Add | Email Print


Flagpost is a blog on current issues of interest to members of the Australian Parliament

Parliamentary Library Logo showing Information Analysis & Advice




immigration refugees elections taxation asylum Parliament criminal law election results Australian Bureau of Statistics social security disability citizenship Indigenous Australians political parties United Kingdom UK Parliament Census statistics banking early childhood education Middle East Australian foreign policy OECD Australian Electoral Commission voting mental health Employment military history by-election election timetable China; Economic policy; Southeast Asia; Africa housing Speaker; House of Representatives; Parliament Productivity Defence income management asylum seekers High Court; Indigenous; Indigenous Australians; Native Title Senate ACT Indigenous education Norfolk Island External Territories leadership aid Papua New Guinea emissions reduction fund; climate change child care funding Electoral reform politics refugees immigration asylum Canada procurement Australian Public Service firearms Indigenous health constitution High Court e-voting internet voting nsw state elections 44th Parliament women 2015 International Women's Day public policy ABS Population Age Pension Death penalty capital punishment execution Bali nine Bali bombings Trade skilled migration Private health insurance Medicare Financial sector EU national security fuel China soft power education violence against women domestic violence Fiji India Disability Support Pension disability employment welfare reform Tasmania Antarctica China Diplomacy Australian Sports Anti-Doping Agency World Anti-Doping Agency Sport ASADA Federal Court WADA ADRV by-elections state and territories terrorism terrorist groups Bills corruption anti-corruption integrity fraud bribery transparency corporate ownership whistleblower G20 economic reform science innovation research and development transport standards Afghanistan Australian Defence Force NATO United States social media Members of Parliament Scottish referendum Middle East; national security; terrorism higher education Higher Education Loan Program HECS welfare policy pensions social services welfare ASIO Law Enforcement Australian Federal Police Australian Secret Intelligence Service intelligence community Criminal Code Amendment (Misrepresentation of Age to a Minor) Bill 2013 sexual abuse online grooming sexual assault of minors labour force workers

Show all
Show less
Back to top