Sector slams Labor's pre-election 'thought bubble'

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Private health insurers have slammed as a pre-election "thought bubble" Labor's proposed two-year cap on premium increases.

Labor leader Bill Shorten announced a planned two-year 2 per cent cap on premiums and a Productivity Commission review into affordability. 

"That a future Government would seek to set prices in any highly competitive market is absurd," said nib CEO Mark Fitzgibbon, describing the move as a dreadful overreaction.

“This may be politically popular but it’s an affront to how the free market operates. What next? Food, clothing, car insurance, school fees and petrol? Private insurance is a fiercely competitive sector with 35 health insurers and a number of other companies such as Qantas and Suncorp today offering health insurance,” he said.

Mr Fitzgibbon said prices and the consumer interest are best served by competition not more regulation. 

“It’s especially hypocritical when you consider Government spending has been increasing at a much greater rate than spending within the private sector. It grew 7.4% only last year," he said.

Mr Shorten strongly criticised private health insurers in speech last week at the National Press Club but did not commit to any specific action. 

He subsequently committed to retain the private health insurance rebate. Changes to the rebate made by the former Labor government, including means testing and changes to indexation, have significantly contributed to declining affordability.

“The Opposition Leader’s policy to fix premiums at 2% for the first two years of a Labor Government won’t fix the challenges facing Australia’s health system and will undo years of reform which is just starting to deliver real dividends to Australian consumers,” said Private Healthcare Australia CEO, Dr Rachel David. 

“There is only one reason premiums increase and that is because health funds are paying for more healthcare. The introduction of a capped premium model will do nothing to address increasing utilisation of private and public health services.  

"The key driver of premium growth is increases in input costs such as the cost of medical devices, hospital accommodation, and provider fees charged by medical specialists and allied health providers.  Health funds are strongly committed to continuing to provide these services to members.

“Labor’s plan makes absolutely no economic sense and the longer-term impact on Australians and our health system could be disastrous. With hospital cost inflation at 5.2% for the private sector and 7% for public hospitals, the PHI industry regulator APRA could forced to agree to double digit premium increases after a two year freeze. If this is the way of the future, spending on hospitals and other services will have to be capped too, meaning people will miss out or need to wait for treatment even in private hospitals," added Dr David.