*** CHECK AGAINST DELIVERY ***
There is never a dull moment in private health insurance.
But this year you are meeting – and I am joining you – at a particularly interesting time for your industry.
Over recent weeks and months, we have seen a steady stream of negative stories on private health insurance.
There are many things to note about those stories. But one of them is how rarely the funds in this room are mentioned. For example:
- Yesterday, we learned that complaints to the Private Health Insurance Ombudsman have soared by 30 per cent. Once again, Medibank Private was over-represented in the complaints, with almost double its market share. And once again, Members Health Fund Alliance insurers were – on the whole – under-represented.
- Last week, we learned that Bupa would radically restrict its cover – again, not one of your funds.
- And last month, we learned from APRA that insurers had made a record $1.86 billion in pre-tax profits – but by definition, your funds reinvest every dollar.
And so I want to say at the outset that I understand – that Labor understands – that there are effectively two private health insurance industries.
One is dominated by large for-profits – three in particular.
The other is made up of the two dozen funds in this room.
Members Health Fund Alliance represents what private health insurance was – and arguably should still be.
Not-for-profit. Member-owned. Community-based.
That’s not an ideological proposition. It’s a proposition that’s supported by the evidence:
- Your funds return a greater share of premium revenue to policyholders – around 90 per cent.
- Your funds have lower complaints, higher retention, and higher surveyed satisfaction.
- And as a result, your funds are growing while your industry is shrinking.
When Bill Shorten and I talk about private health insurance, we make sure to talk about those differences.
In his speech to the National Press Club in January, Bill said – and I quote:
“I’m not talking about the small operators in this industry or the not for profits”.
And when we announced our policy on private health insurance last month, Bill reiterated the point:
“the mutuals and some of the smaller players, we get that they’re doing different things …We do clearly distinguish the mutuals and some of the smaller [funds], who we think [are] offering good value”.
So be assured – Labor understands the unique context and needs of Members Health Fund Alliance insurers.
All of which brings me to Labor’s policy to task the Productivity Commission with an inquiry into the private health system, and to cap premium increases at two per cent for two years.
To be clear, the cap will apply to your funds, because your members are struggling to afford private health insurance like other Australians.
I know that is not popular in this room.
But we are committed to working with you on the implementation of our policy. And so I want to give you a sense of our thinking, and then take your questions.
Our policy was driven by two messages that we heard over and over in recent years.
The first was from consumers, who told us that private health insurance premiums have become unaffordable.
Premiums have increased by 27% since 2014 – costing families an average $1,000 more.
Health insurance is now a leading cost-of-living concern – right up there with energy bills.
That’s reflected in the stories I hear from my own constituents and from consumers around Australia.
And as you know, it’s also reflected in the national statistics.
12,000 Australians dropped their hospital insurance in the last three months of 2017. Hospital cover has dropped to its lowest level since 2011.
But private health insurance is still a product that Australians want – rightly.
So Labor is intervening on their behalf, to make private health insurance more affordable.
The second message we heard loud and clear was from you and your industry.
You told us that governments and regulators needed to step in urgently to turn the tide.
Last year, Members Health Fund Alliance – then HIRMAA – warned the Senate Community Affairs Committee about an imminent “death spiral” in private health insurance.
You told the Committee’s inquiry that – and I quote:
“If younger people continue to leave the system, private health insurance will become more expensive, thus exacerbating affordability further and potentially driving even more people out. This potential death spiral will drive many people into the public health system and onto already overstretched public hospital waiting lists.”
And so while Labor’s policy prescription is different than yours, we have the same aim: to maintain private health insurance coverage and the unique balance between our public and private systems.
I accept that the cap will have an impact on the private health insurance industry.
For some funds, it will mean lower margins. For others it may affect capital stock that is held above and beyond prudential requirements.
But importantly, we have committed to working with you and with APRA to ensure that not-for-profit insurers remain strong.
The funds in this room are crucial to competition and choice in the private health insurance market. For the reasons I touched on earlier, you are the funds that we most want to encourage.
So while a Shorten Labor Government will not approve premium increases above the two per cent cap, we will work with you to manage its implementation.
Productivity Commission inquiry
We think that the two year cap will be an important circuit-breaker in the private health insurance affordability crisis.
But it is only a short-term measure.
We know that our private health system also needs long-term reforms to improve affordability and value for consumers.
And so Labor will task the Productivity Commission with the most significant review of the private health system in 20 years – since the then-Industry Commission’s last review.
The reality is that recent reviews and reforms – including by the Government – have barely scratched the surface of the complex private health system.
In contrast, the last Productivity Commission review led to the modern private health insurance system. Within a few short years of that review, we saw the introduction of important measures like the Private Health Insurance Rebate and the Lifetime Health Cover loading.
Members Health Fund Alliance and your members should be no less ambitious for this review.
Importantly, the review will go beyond the private health insurance industry and consider the whole private health system. We envisage that the Commission will consider issues including:
- The underlying cost drivers that you face;
- The range of carrots and sticks that encourage insurance coverage;
- And the balance between the private system and Medicare – Australia’s universal public health insurance scheme.
I want to end where I started – by acknowledging the unique place of Members Health Fund Alliance and your members, and by asking for your help.
If we are lucky enough to be elected to Government, we will hand the terms of reference for the inquiry to the Productivity Commission on day one.
But we have not yet written those terms, because we want to draft them in consultation with you and other stakeholders.
In the weeks ahead, Bill and I will call for your submissions.
Those will form the basis of our terms of reference, and we will also hand your submissions in their entirety to the Productivity Commission if we are elected.
So while I know that there is disappointment about parts of our policy – there is also work to do, and I hope you will take the opportunity to do it with us.
Thank you and I look forward to your questions.