Industry furious over handling of benefit limitation periods

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Private health insurers are furious and seeking an explanation over the Department of Health's handling of changes impacting policies with benefit limitation periods.

Policies with benefit limitation periods, under which impacted policy-holders can only claim a restricted for a period of time, have been a feature of the Australian private health insurance landscape since the 1950s.

However, a recent reinterpretation of legislative changes introduced in 2007 has made policies with benefit limitation periods non-compliant, and therefore not eligible for the private health insurance rebate.

Health minister Greg Hunt recently introduced three Bills to parliament implementing a range of reforms announced in October last year. One of the Bills includes changes that will remove the use of 'benefit limitation periods' and, in doing so, ensure consumers with impacted policies are protected from having to repay the rebate and not be retrospectively liable for the Medicare levy surcharge or lifetime health cover loadings.

It is understood when informed of the reinterpretation insurers committed to quickly the address the issue but have been concerned by the combative and confrontational approach adopted by Department of Health officials.

Insurers believe officials have acted to deflect blame for the issue onto the industry, despite their own responsibility for the 2007 legislation, and question how confidential information relating to the number of impacted policies by health fund, along with a very one-sided interpretation of the issue, made it into the media.

The Department has refused to provide its legal advice on the issue to the industry and ignored any alternative solutions other than legislative change.

After senior Department of Health officials assured the industry the discussions were confidential, it put information on its website implying health insurers had intentionally issued non-complying products, claiming the government would legislate to "protect consumers".

The information was taken down, following complaints from insurers that it completely misrepresented the issue, and replaced with more objective language. Yet the original post, with the inflammatory language and confidential information, appears to have been the basis of a story subsequently published in The Australian.

It is understood the industry has written to health minister Greg Hunt, expressing concern, but also confirming it will be seeking an explanation from the Department of Health.