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Monday, 10 September 2018
Page: 5829


Senator BILYK (Tasmania) (13:07): I rise to speak on the Private Health Insurance Legislation Amendment Bill 2018 and the related bills. Australians are doing it tough under this government, no matter who it makes Prime Minister. Wages are stagnating, work is becoming more insecure and bills, such as power bills and private health insurance bills, are skyrocketing, partly because this dysfunctional government cannot work together with a coherent policy agenda. One of the worst costs for members of our community is the skyrocketing increase in the cost of private health insurance. For years, private health insurance premiums have been rising at triple the rate of inflation, way above the pace of wages, and families are paying an average of $1,000 more than they were when the Liberals came into power in 2013. According to a recent report by CHOICE, 77 per cent of those with private health insurance are struggling to meet the cost of their policies. That's an extraordinary number of the population. Things are clearly not working.

This country is in the midst of a private health affordability crisis. People are downgrading or even dropping their cover altogether in droves, putting the entire industry at risk of a death spiral. Prices are up and profits are up, but quality and value are way, way down. Meanwhile, we see scandals in the industry and we see insurance company chiefs somehow thinking it is okay to spend hundreds of thousands of dollars of their members' money to attend junkets like the one in Portugal. Reports say that there were business-class airfares, opulent hotels, fine dining and even a luxury cruise, and that a number of officials tacked on private European jaunts. How does this help any Australian facing huge out-of-pocket costs for surgery or a hospital stay? And how does it help to bring down the price of premiums?

No wonder Australians are angry. Australians are paying a lot more for their health insurance policies and getting a whole lot less. Ten years ago, only 8.6 per cent of health insurance policies contained exclusions. Now it's 40 per cent—40 per cent of policies now contain exclusions. These exclusions are often hidden in the fine print, meaning that people are paying for insurance without being covered. It's just turning health insurance into a con. We've all heard of people who go to their doctor needing cataracts removed or knee surgery or a hip replacement or a hysterectomy and are told that, even though they are paying some of the highest out-of-pocket costs in the OECD and even though they're paying in excess of $4,000 to their private provider, it just so happens that that particular procedure isn't covered by their insurer.

While there are many small operators and not-for-profits doing good work, the larger players in the industry raked in $1.8 billion in profit before tax last year, and yet Mr Morrison still wants to give a tax cut to these large companies. I think it's pretty informative to have a look at the profits of the health insurers in context. Most publicly listed companies get a return on equity of about eight per cent, and the banks—the ones we've seen ripping off consumers—average well north of 10 per cent. But do you know how much some of the biggest health insurance providers pocket—how much their return is? Over 20 per cent. It's astronomical! And, not only that, it's really concerning, considering what people are getting. People aren't getting bang for their buck.

This is an industry holding about $6 billion over and above the legal capital requirement, as well as receiving $6 billion in taxpayer-funded subsidies each year. Yet, despite having large cash reserves, profits in the billions and government support, the private insurers keep aggressively increasing their premiums each year. This year alone, some families with two kids are facing $200 premium increases. That's a real struggle for families trying to balance a budget. Two hundred dollars can mean a lot to a family living on the line. It might mean that they don't buy as many groceries or that the kids miss out on a school excursion or can't access some sporting activity. I could list any number of things that that $200 could be better spent on. It has got to the point where some insurers are just gouging consumers. And it has got to stop.

Today we're looking at minor changes to private health insurance. In October 2017, the government announced a range of mostly minor changes to private health insurance arrangements, following a reform process that began in late 2015. This package of three bills implements the changes that require legislation. The government's private health insurance package also includes a number of changes that are not reflected in these bills because they don't require legislation.

The principal bill in the package is the Private Health Insurance Legislation Amendment Bill 2018, and that makes eight changes to current arrangements, including four about which we have expressed scepticism or concern. The two minor bills in this package are the A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018 and the Medicare Levy Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018. They amend the A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Act 1999 and the Medicare Levy Act 1986 to allow increased maximum excess levels. They also repeal grandfathering provisions that had allowed policies with higher excesses than the current maximums. These policies were grandfathered when the current maximums were introduced in 2000, but they will no longer be compliant for the purposes of the rebate surcharge or lifetime health cover loading.

The opposition welcomes elements of the bill that strengthen the powers of the Private Health Insurance Ombudsman. We have also welcomed changes that allow insurers to include travel and accommodation costs under hospital treatment products to help people in rural and remote Australia access care. But, ultimately, we don't believe these bills will deliver significant savings to Australian consumers. And it's not just us saying that; it is groups like the AMA, and some of the health funds themselves have said the same thing. Having said that, we believe Australians need and deserve every bit of price relief they can get. As an alternative, Labor have a real plan to rein in soaring private health insurance costs because Labor understand that we have to put downward pressure on family budgets. We have to make life easier for everyday Australians because they are being ground underfoot under this Abbott-Turnbull-Morrison government.

Under the Private Health Insurance Act, the Minister for Health is required to approve the premium increases that take effect each April. Under the act, the minister can reject changes that are deemed not to be in the public interest. Labor will not improve any increases above two per cent in its first two years in government. Labor will manage the implementation of this cap through the Australian Prudential Regulation Authority, particularly with respect to ensuring the viability of not-for-profit insurers. By capping premium increases at two per cent for two years, effectively tying them to general inflation, a Shorten Labor government would deliver real relief to 13 million Australian consumers struggling with the cost of living. This tough policy will put an average of $340 back into the pockets of Australian families and savings of around $150 for young singles and around $290 for young couples. Labor's policy will benefit over 13 million Australians, including 267,000 in my home state of Tasmania. And, might I say, with me I have Senator Polley and Senator Urquhart, who are both great Tasmanian senators as well. It will benefit 267,000 in our home state.

Senator Watt: Hear, hear!

Senator BILYK: Thank you, Senator Watt. And that's only fair given wages are so low and private health insurer profits are so high. We are shifting the balance back to ordinary Australians. Large insurers are highly profitable and have the capacity to absorb these savings. For decades, Australians have been getting whacked with price rises double or even triple inflation. So Labor will also task the expert Productivity Commission with the biggest review of the industry in 20 years to improve the quality, value and affordability of private health insurance. The Productivity Commission is the most appropriate organisation to consider questions of competition and provide recommendations to strengthen the sector. Labor will immediately begin consulting with the sector on terms of reference, which will include how to restore the affordability and value of private health insurance for consumers; the underlying cost drivers, including insurer margins; the range of carrots and sticks to encourage insurance coverage; the balance between the private system and Medicare, Australia's universal public health insurance scheme; and issues arising from sector consultation.

There's broad support for this inquiry, including from the Consumers Health Forum, CHOICE, the Australian Healthcare & Hospitals Association, the Public Health Association and the National Rural Health Alliance, who've already called for a Productivity Commission inquiry into private health insurance. The commission's report will provide the basis for ongoing reform under a Shorten Labor government, with long-term reforms to improve the affordability and value of private health insurance to be implemented in Labor's first term. And there is wide support for our policy by consumer groups. The Public Health Association of Australia has said:

Scare tactics by the Private Health Insurance industry … should not be surprising. However, they should be rejected out-of-hand. The focus of this industry is on profits and return to shareholders rather than the health of all Australians.

The highly respected consumer organisation CHOICE has said:

CHOICE welcomes any action to apply more scrutiny to this highly subsidised and highly profitable industry … While costs for private health insurance are increasing, the value that people receive from private health insurance has dropped.

Similarly, the Consumers Health Forum has said:

A commitment by the Opposition to a wide-ranging Productivity Commission review of the private health system is a welcome step and a level of independent inquiry we have been recommending for some time.

The Australian Nursing & Midwifery Federation is also supportive, saying:

… the ANMF is supporting practical policy reforms which enhance the affordability and value of private health insurance … "fees for private health insurance cover are out of control and now becoming unaffordable for most families."

And, finally, the Australian Healthcare and Hospital Association has said:

A comprehensive review of private health insurance by the Productivity Commission, as put forward by the Opposition today, is the only sensible way forward out of the mess that private health insurance has become.

So it's pretty clear that Australian families need relief and that the system needs to be tidied up.

All this is clearly unsustainable. We've seen people abandoning their policies in droves because they just can't afford them anymore, and if enough people leave it will put the whole industry at risk. Labor's policy would deliver the smallest price rises in decades. More than that, Labor's policy would deliver much needed certainty so that Australians could plan their household budgets around these more modest increases—no more February surprises when your insurer informs you that your premium will rise by five or six per cent on 1 April.

We believe that private health insurance plays an important role in Australia's world-class health system. We're not looking to dismantle it but this is an industry that gets $6 billion in taxpayer subsidies every year, so Australians are entitled to demand a better deal. In contrast to Labor's bold plan, the package the government announced in October last year was pretty underwhelming. After two years of talking, the best the government could come up with was a range of mostly minor changes. They're really only tinkering around the edges. This isn't surprising, given how closely the government collaborated with the private health insurers on devising this package.

We also have significant concerns about elements of these bills. Firstly, the bills allow insurers to offer maximum excesses of $750 for singles and $1,500 for families. This is up from $500 and $1,000 presently, so the government is trading higher excesses for lower premiums. But we're concerned that consumers will opt for higher excesses that they cannot afford to pay when the care is needed, thus forcing them into the public system and further eroding the value of private health insurance.

The bills also allow insurers to offer age-based discounts to young people, requiring amendments to the Age Discrimination Act. Insurers will be able to discount hospital cover premiums by two per cent for each year a person is aged under 30, up to a maximum of 10 per cent. Labor fears this will not only be an insufficient incentive for individuals to take out private health insurance but will also be expensive for insurers, possibly increasing premiums for others. Under these changes, a young person signing up to an average $1,800 policy will only save around 70c a week, so they won't even get a cup of coffee a month out of it. But the changes also undermine the important principle of community rating, under which policyholders are supposed to pay the same premium for each product, regardless of their age, health status or other characteristics. This hints at an Americanised model that would not be welcome here in Australia.

The bills will allow insurers to terminate products and transfer all people covered by those products to new policies, but the government has released disturbingly little information on how this change is supposed to work. The Senate Community Affairs Legislation Committee undertook an inquiry into these bills, and Labor senators supported the committee's recommendation that the bills be passed. But these bills do little to address the affordability crisis in private health insurance, and we call on the government to adopt Labor's policy of capping premium increases at two per cent for two years and tasking the Productivity Commission with the biggest review of the sector in 20 years. Sadly, the government and insurers are putting profits before patients.

Private health insurance is a very important part of Australia's healthcare system, and it always will be. But under the Abbott-Turnbull-Morrison-whoever government, a private health insurance crisis is putting undue pressure on family budgets and on our healthcare system. For private health insurance to deliver value, it needs to be affordable for working Australians. The last Labor government scrutinised every dollar in premiums, with lower average increases than under the Liberals over the last 15 years. The last Labor government also responded to evidence that the private health insurance rebate was growing unsustainably and overwhelmingly benefitting wealthy Australians.

Labor's reforms made the rebate fairer for working Australians and sustainable for taxpayers, while continuing subsidies for singles earning up to $140,000 and families earning up to $280,000. Only Labor is choosing to put Australian families first instead of the interests of the multibillion-dollar private health industry. It's just not good enough from those on the other side.