The federal government says it will consider strengthening the prudential regulator's licensing powers over the private health insurance sector in response to a capability review.
The government has issued its response to a capability review of the Australian Prudential Regulation Authority (APRA).
The review recommended a number of changes to the regulator's powers, including in relation to private health insurance.
According to the review, the government should enhance APRA's power to address a current limitation under which it can only impose a licence condition upon the initial registration of a private health insurer.
"APRA’s powers should be extended to enable it to impose licence conditions where it has prudential concerns," it recommended, adding it should also be given broader powers to revoke insurer licences.
"The PHI industry has several features that create different challenges for APRA in carrying out its prudential supervisory role compared to its other regulated industries," said the review.
It identified the government's role as product and price regulator as factors that "produce risks that are largely unique to the PHI industry."
It also highlighted the importance of APRA's "working level relationship" with the Department of Health "with regular engagement on business as usual matters and an increasing appetite to engage on strategic issues."
It added, "The relationship however is weak at more senior levels. For example, APRA does not have regular liaison meetings at senior levels with the Department, unlike its other key agency relationships. This is a risk for APRA in terms of its visibility of forthcoming political risks and its capability to work with the government to address urgent issues such as a failing entity. As part of its wider peer agency refresh, APRA should strengthen its engagement and relationship with the DoH at all levels of seniority."
In its response to the review, the federal government said it would "agree to consider....enhancing private health insurance licensing powers."
In its response to the review, APRA said, it "supports" the recommendation in relation to private health insurance "but ultimately it is a matter for Government."