Outlawing phoenix policies from insurance cowboys

PRIVATE hospitals back the Federal Government's legislative move to "outlaw" the loophole that allows private health insurers to shutdown policies only to reopen them under a different name and dramatically increase the premiums charged to unwitting customers.

In its submission to the Federal Government's consultation on the reform, the APHA notes that phoenix policies have caught out untold families. Federal Health Minister Mark Butler said in December that, while not illegal, "it is clearly against the spirit of the law. It's an underhanded, largely secret way of health insurers raising their prices outside of the usual approval process".

"The Minister warned insurers if they didn't stop the practice he would legislate to stop them. A CHOICE investigation found that just two months later HCF brazenly closed its Premium Gold policy to new members and released the almost identical policy Optimal Gold, with a 35% mark up," APHA CEO Brett Heffernan said.

"CHOICE found that over the past four years, despite average premiums rising by an approved 11.9%, health insurer phoenixing jacked up the average price of Gold cover by 45%.

"We have been pressing the case for health insurance cowboys to be reined in. So we support the legislative move to do away with phoenixing. But, in the government's own words, it is seeking to "outlaw" and "ban" phoenix policies.

"The proposed legislation confers discretionary power on the Minister to approve new insurance policies. The government intends to amend the Private Health Insurance Act (PHI Act) to require "insurers to apply to seek the Minister's approval of the premium for a new product against a public interest test".

"This may not, as intended, "outlaw" or "ban" private health insurers from phoenixing. While strengthening the approvals process for new insurance products is, without doubt, a positive move, it may not be sufficient to deter or eliminate phoenixing practices in private health insurance.

"There are several compelling reasons to consider criminalising phoenixing, rather than solely relying on administrative controls, to ensure there is no wriggle room for insurers to exploit.

"Criminalising the practice would provide stronger deterrence and accountability, it would shut tight any loopholes and prevent evasion, provide consumers with better protection and enable more effective monitoring and enforcement.

"Further, 'public interest' is not currently defined with respect to the PHI Act and risks inconsistent application by the current or a future Health Minister. There is a need for the government to amend legislation to provide for a clear definition of the 'public interest' to ensure accurate and appropriate interpretation and application of the law and to ensure fairness, reliability and consistency.

"Insurance product phoenixing undermines consumer trust, inflates premiums and destabilises essential health services, including maternity and mental health. While we welcome the government's initiative, we respectfully suggest that the government has the opportunity to put in place stronger legislative protections.

"Criminalising phoenixing will provide the necessary deterrence, close loopholes, and reinforce the integrity of Australia's private health system."

-ENDS-

APHA's submission to the Federal Government's 'Regulating Product Openings for Private Health Insurance' consultation is available at: Submissions.

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