Are health insurers using loopholes to increase premiums?
The Commonwealth Ombudsman, Iain Anderson, released a public statement today following a review of allegations by Choice Magazine in February 2024 that some insurers were increasing premiums by far more than was expected, after the average premium increases for 2023 had been announced.
Choice reported in February that during the past three years, some insurers closed cheaper Gold-tier policies to new customers and released very similar Gold policies for new customers that were much more expensive. The report by Choice indicated some insurers may be introducing new policies as a way to circumvent the annual premium approval process applicable to existing policies.
In response to the Choice report, the Office of the Commonwealth Ombudsman reviewed these allegations against data it holds.
The Commonwealth Ombudsman did note that insurers who may be engaging in this behaviour are not breaching health regulations: insurers do not require approval from the Minister to introduce new policies or to close off policies to new customers.
He did say however that it is a matter for government whether they amend the regulations to stop this practice.
“These practices may be circumventing premium approval processes, but they are also restricting consumer choice – because any new Gold policy a consumer may want to move to will have a much higher price than their existing Gold policy.”
“Furthermore, consumers who may otherwise be unhappy with their insurer may feel compelled to keep their existing policy because of the significant cost of change – even if the policy that they would like to move to is actually very similar,” Mr Anderson said.
“As the Private Health Insurance Ombudsman, I have a role in raising concerns about the fairness of practices and procedures in the health insurance industry, even when no law has been breached. I have therefore raised my concerns with the Hon Mark Butler MP, Minister for Health and Aged Care, and his department.”
In a separate statement released today, Mark Butler MP, Minister for Health and Aged Care, said:
“I share the Commonwealth Ombudsman’s concerns that this practice may be circumventing the premium approval processes and restricting consumer choice. It also undermines the fairness principle in private health: that two people should pay the same price for the same policy, regardless of age or background.”
“This ‘loophole’ tactic is a sleight of hand that makes the best value policies disappear and forces customers to take out more expensive policies.”
“Insurers are putting a new name on the same policy, with a higher price tag. It’s a cheap trick that makes your health insurance more expensive, and it’s got to stop.”
“Let me be clear: we will be monitoring this closely. If insurers don’t stop this practice immediately, then I will force them to stop.”
In response, Private Healthcare Australia (PHA), the private health insurance industry’s peak representative body, said health funds will work with the Federal Government to thoroughly examine problems with Gold health insurance products following the Commonwealth Ombudsman’s public statement today.
In its own statement, PHA said health funds want to deliver affordable Gold products that will meet their members needs without incurring losses that make those products unsustainable. However, it said this has been a challenge for some time with health inflation surging and health insurance claims rising for an older, sicker population.
PHA said the product tiering system imposed by the former federal government has also made it more difficult. For several years, PHA has been calling for an overhaul of the rigid ‘Gold, Silver, Bronze, Basic’ tiering of products introduced by the former government in 2020.
For more information
Ombudsman Statement – fairness of private health insurance practices
Statement by The Hon Mark Butler MP, Minister for Health and Aged Care