Proposed Reforms to Private Health Insurance Referred to Senate Committee

Thursday 19 July 2018 @ 2.43 p.m. | Corporate & Regulatory | Legal Research

The Private Health Insurance Legislation Amendment Bill 2018 (CTH) (‘the Bill’) has been referred to the Senate Community Affairs Legislation Committee on 19 June 2018. The Bill is part of a larger package of reforms to private health insurance options as announced in 2017, and proposes to enable private health insurers to have more flexibility in offering hospital and treatment cover products by using age-based discounts. In addition, this Bill proposes to improve information for consumers, and streamline benefit arrangements for hospitals.

Background and Reform Package

This Bill is part of a broader package of reforms to private health insurance, which was announced on 13 October 2017 by the Department of Health. The main bill in this package of reforms is the Private Health Insurance Legislation Amendment Bill 2018 (CTH), which was introduced by the government on 28 March 2018. The other related bills in this reforms package are A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018 (CTH) and the Medicare Levy Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018 (CTH). These two bills were also referred to the Senate Community Affairs on 19 June 2018.

According to a departmental media release issued on 13 October 2017, the reforms propose to increase the maximum excess that customers will be able to choose, and also proposes to simplify private health insurance options for consumers’ benefit. This would be done by requiring insurers to categorise products as gold, silver, bronze or basic, and also use standardised definitions in their policies to prevent confusion for consumers. According to this media release, the proposed reforms would also increase the powers of the Private Health Insurance Ombudsman, with the aim of allowing consumer complaints and issues to be resolved rapidly.

Proposed Amendments

The Bill proposes to make the following amendments to the Private Health Insurance Act 2007 ( CTH) and related legislation:

  • Amendments allowing private health insurers more flexibility to offer hospital cover with more flexible premiums;
  • Amendments related to age-based discounts on premiums;
  • Amendments related to increased maximum voluntary excess levels;
  • Amendment related to benefits for travel and accommodation as part of hospital treatment cover;
  • Amendments related to streamlining of information provided to consumers and streamlining of second-tier benefit arrangements for private hospitals.

The Bill also proposes to make the following amendments to the Ombudsman Act 1976 (CTH):

  • Amendments to strengthen consumer protections by expanding the powers of the Private Health Insurance Ombudsman;
  • Amendments for the purpose of enabling inspections and audits at the premises of private health insurers as part of complaint or issue handling.

In his second reading speech, Minister for Health Greg Hunt stated that the Bill would aim to improve transparency for consumers:

‘This bill will also improve consumer transparency by removing the use of benefit limitation periods in policies and ensure that consumers who have purchased benefit limitation period inclusive policies since the Private Health Insurance Act 2007 was introduced do not need to repay premium rebates they have received, are not retrospectively liable for the Medicare levy surcharge and are not liable for lifetime health cover loadings.’

Response to Reforms

In a submission to the Senate Standing Committees on Community Affairs, the Royal Australian and New Zealand College of Psychiatrists stated that it supported the proposed reforms.

At the time of the reform announcement, Australian Medical Association president Michael Gannon was reported by news.com.au as stating:

‘The biggest problem in the affordability of private health insurance is the amount that’s going into the pockets of the for-profit insurers. We need serious reform which addresses the simple fact that (healthcare) costs will continue to increase year on year.’

 

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Sources:

Private Health Insurance Legislation Amendment Bill 2018 (CTH), and associated second reading speeches and explanatory memorandum, as published on TimeBase LawOne.

The Royal Australian and New Zealand College of Psychiatrists, Submission to the Senate Standing Committees on Community Affairs.

[media release] Minister for Health, ‘Major reforms to make private health insurance simpler and more affordable,’ 13 October 2017.

Charis Chang, ‘Private health insurance reforms: What you need to know,’ News.com.au, 13 October 2017.

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