The federal government is moving to amend legislation in response to concerns about “product phoenixing” within Australia’s private health insurance sector.
This practice, where insurers discontinue an existing policy and introduce a near-identical product at a higher price outside the annual premium review, has drawn criticism for circumventing regulatory oversight of premium increases.
The Australian Medical Association (AMA) has welcomed the proposed legislative changes.
Under the amendments, insurers would be required to obtain approval for new product pricing solely during the annual premium round, except in narrowly defined exceptional situations.
The AMA’s submission emphasised the importance of clear definitions for terms such as “exceptional circumstances” and “public interest” to ensure the rules are not open to interpretation or exploitation.
AMA president Dr Danielle McMullen commented: “Private health insurance premiums have outpaced wages and inflation in recent years, all while insurers’ management expenses and profits continue to soar.”
She noted that the prevalence of product phoenixing has made it more challenging for consumers to secure adequate coverage and has contributed to declining trust in the private health system.
McMullen also pointed to the essential function of private hospitals, particularly as demand grows outside the public sector.
“Unacceptable conduct from insurers threatens the integrity of our entire healthcare landscape,” she said.
The AMA has urged the government to implement substantial penalties for insurers found to be engaging in product phoenixing after the legislative changes take effect.
“There are just a few insurers that dominate the market in Australia, and given their extraordinary financial resources and profitability, severe penalties must be in place to deter illegal behaviour,” McMullen said.
She also advocated for the creation of a Private Health System Authority to streamline regulation.
“There are multiple bodies involved in regulating the private health sector, and the absence of a coherent approach has clearly been a contributing factor in allowing this practice to go on for far too long,” McMullen said.
The debate over regulatory reform coincides with recent findings from Canstar, which show that some private hospital insurance premiums have increased well beyond the government’s average of 3.73% as of April 1.
Gold-tier individual policies rose by an average of 13.8%, or $442 annually. Family policies at this level increased by $858, reaching an average of $7,207 in June.
Adjustments were less pronounced in the Bronze and Silver tiers, which saw increases between 1.5% and 5.2%.
Basic-tier policies experienced a slight decrease. The Gold tier, however, was subject to the steepest increases, reflecting broader cost pressures.
Regional differences were also observed, with Victoria and Queensland reporting some of the highest average Gold-tier premiums, while the Northern Territory and Western Australia recorded the lowest.
These variations are attributed to differences in competition, service delivery costs, and insurer pricing strategies.
