Debate continues over premium cap

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The fierce debate continues over Labor's plan to cap premium increases at two per cent for two years, while also blocking any attempt by health insurers to ameliorate the impact, with prime minister Malcolm Turnbull backing the sector in saying it could send small funds to the wall.

During question time in the House of Representatives, Labor leader Bill Shorten linked the issue to the Turnbull government's move to cut corporate tax rates.

"Medibank Private has a return on equity of 26 per cent. That's about double the return of even the big banks. At the same time, private health premiums are at record highs. Why is this government giving big private health insurers a big tax cut instead of supporting Labor's plan to cap private health premium increases to two per cent?" he asked Mr Turnbull.

In reply, the prime minister said many small funds, including those with members in a particular region or profession, are subject to the very close scrutiny of the prudential regulator.

"When he came out with his thought bubble to unilaterally cap the premiums of health insurance companies, he saw the reaction from the industry, which was that this would put the solvency of so many of these insurance funds, particularly the smaller ones, at riskā€”put them at risk of bankruptcy. What does he then say to one of his former members who is a member of one of those funds?" asked Mr Turnbull.

"I think we'd find many members opposite are members of them. What does he say to them then when they get sick and they're off in hospital with big private hospital bills, and the insurance company has gone broke? What does he say then? He says: 'Oh, well, I had my thought bubble. I thought I'd just cap the premiums without any regard to what APRA said and without any regard to the viability of the industry.'"

The prime minister then accused Labor of "crab-walking" on the future of the private health insurance rebate.

During his recent speech to the National Press Club, Mr Shorten lambasted health insurers and was equivocal on the future of the rebate, which the former Labor government reformed to reduce its contribution to premiums. However, in subsequent media statements and appearances, both he and shadow health minister Catherine King said Labor currently had no plans to make changes to the rebate.