Labor to regulate any response to premium cap

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Labor has gone further in its commitment to cap premiums by saying it will grant regulators new powers to block any move by health insurers to reduce benefits.

The private health sector, including the insurers and hospitals, have responded to Labor's two-year two per cent cap by pointing to a likely reduction in benefits, including higher gap payments, and long-term 'rebound' increases in premiums.

An analysis published today by HealthDispatch shows health fund premium revenue and benefit outlays have grown at an almost identical rate over the past decade.

Speaking to media, shadow health minister Catherine King committed to regulate any response by health funds to Labor's cap on premium increases.

"What we’ve said with our 2% cap over two years is we will also give new powers to the ACCC and to the Ombudsman to make sure that private health insurers do not increase exclusions as a result of this policy," she said.

Private health insurers have said the proposed regulations will put smaller and already marginal insurers at risk.

According to Private Healthcare Australia CEO, Dr Rachel David, "An enforced premium pathway will immediately put at risk a number of small, employee-based and regional mutual heath funds who are already close to breaching prudential reserves.

"These health funds have been serving their local communities for decades and this election-focused policy will directly threaten their future and competition in the sector. With this level of interference bankruptcies will occur. Further, the Opposition Leader should explain how Labor intends to override APRA’s strict prudential requirements."

It is unclear whether current regulation would even permit the prudential regulator to allow a health fund to limit a premium increase by 2 per cent while increasing benefit outlays by the normal 5-6 per cent.

"An arbitrary cap on health insurance premiums could inadvertently drive health funds into financial difficulty- damaging consumer competition and choice, destroying jobs in small regional communities where many health funds are headquartered and leaving consumers without health cover. That would not be in anyone’s interests," said Members Health Fund Alliance.