Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Minister allows health funds to link premiums to inflation, but reserves right of veto.

Download WordDownload Word



This transcript has been prepared by a source external to the Department of the Parliamentary Library.


It may not have been checked against the broadcast or in any other way. Freedom from error, omissions or misunderstandings cannot be guaranteed.


For the purposes of quoting verbatim from a transcript, it is advisable to verify the transcript against the broadcast.






Wednesday 11 September 2002



Minister allows health funds to link premiums to inflation, but reserves right of veto.



HAMISH ROBERTSON: The Federal Government has decide d to allow health funds to raise the price of health insurance each year by the value of inflation. 


Federal Cabinet took the decision yesterday. 


The Government argues that the current system of reviewing every request for a premium rise wastes the resources of the funds, but it will retain the right to veto price rises based on inflation if they are deemed to be not in the public interest. 


And the Health Minister, Kay Patterson, says any increases above inflation will still be reviewed and potentially vetoed by the Government. 


The Private Health Insurance Ombudsman will get beefed up powers to investigate complaints and report on the industry. 


Senator Patterson spoke to Matt Brown in our Canberra studio. 


MATT BROWN: Kay Patterson, does this mean that Australians will have to cope with more price rises for their private health insurance, more often? 


KAY PATTERSON: No it doesn’t matter. Once a year, health funds are able to come to the Government to apply for price rises, and they’re investigated and looked at by the Private Health Insurance Council, the regulator, and then comes Government or to the Minister to say yea or nay to veto, or to agree. 


MATT BROWN: But previous to the last rise in premiums, there hadn’t been a rise for three years, is that right? 


KAY PATTERSON: No there hadn’t been, but there’s been significant, well some funds have had small increases and even this year many funds had increases which were below CPI. 


MATT BROWN: But now we could be looking at an annual CPI rise, an annual rise in. 


KAY PATTERSON: Not necessarily, as I said to you, some funds even though they could have applied for more than CPI in the past have not done so, and what we’re saying is that there’s enormous administrative and management costs associated with making application, and to reduce those costs, cos what we want is to make them as efficient as possible, to make sure that we keep downward pressure on premiums, and it was an impost on the funds to do that. Most, many of them, 38 out of 44, are not for profit and what we want to do is to make sure we don’t put large administrative and management costs on them which drive up the premiums. 


MATT BROWN: The Federal Opposition says that this amounts to a broken promise, they do go back to August 1996, but they quote the Prime Minister saying that he gives an absolute guarantee that any rise would be as a result of a decision taken at a political level. Does this potential for a CPI rise each year, mean that that has been abandoned? 


KAY PATTERSON: No it doesn’t. Any rise above CPI will be looked at by the independent regulator and they will have to justify the claim that it’s in the public interest, and if it’s not in the public interest, it will be disallowed. 


MATT BROWN: But it won’t be a decision at a political level if it’s a rise of the rate of inflation? 


KAY PATTERSON: I think most people realise that there are enormous pressures on insurance and that to have a rise of CPI or less is a reasonable, to allow the private health funds to have that rise to that level or below CPI. Once it goes above CPI, it requires the Government to actually assess it, and to either veto if we think it’s not in the public interest or not appropriate. 


MATT BROWN: And why is it that you’ll be changing the system so that the funds no longer have to seek the approval of the Government to actually change their products, to change the premiums, sorry to change the policies that they’re offering? 


KAY PATTERSON: Well what we’re doing is to make sure that the funds are as efficient as possible, that they don’t end up with a range of products, some of them have an inordinate number of products, which again makes them inefficient. What we’re doing is making the funds as efficient as possible. We’re also putting in place a number of measures for consumers. The private health insurer’s ombudsman is going to be given increased power to deal with complaints and to resolve disputes.  


In addition, the ombudsman will present, every year, a state of the health funds report for consumers, which will contain information like how the funds are performing, how well they’re serving their members, how much they spend on management as opposed to playing claims to their members. 


HAMISH ROBERTSON: The Federal Health Minister, Kay Patterson.