Private health insurers have been warned they will be named and shamed unless the industry cleans up its act and stops using secretive, “underhanded” tactics to increase premium prices.
The Commonwealth ombudsman has found insurers are frequently engaging in so-called phoenixing – a loophole-exploiting practice of ending a product, only to replace it with a near-identical service with a much higher price not long after.
In one case, an insurance premium increased by 21 per cent in the space of a year after it had been phoenixed, which Health Minister Mark Butler said was tantamount to price gouging.
“If two members of the same fund with essentially the same product are paying prices that might be 20 or more per cent different because of this phoenixing practice, you’d have to describe that as price gouging,” he said.
The ombudsman investigation came after consumer group Choice first reported on the practice in February and found some insurers had increased prices by up to 47 per cent over three years.
Any private health insurance price increases must be approved by the minister, and while phoenixing isn’t illegal, Butler said it was “clearly against the spirit of the law”.
“It is an underhanded, largely secret way of health insurers raising their prices outside of the usual approval process,” he told reporters.
Butler said the practice was widespread across the entire industry, particularly in relation to “gold” products, which was the only option Australians had to access products like maternity and major surgery cover.
He said the government would change the law to make phoenixing illegal, and name and shame insurers, unless the industry stopped the practice.
“If there has not been a really substantial change to the behaviour of insurers, who quite openly have admitted that they engage in this practice, and up until now at least, intend to continue engaging in this practice, then I will reserve my right to consider legislative options to outlaw the practice into the future,” he said.
“All options, as far as I’m concerned, are on the table and that will include naming insurance providers that we know are conducting this practice,” he added.
The warning comes after Australia’s 29 private health insurers submitted their price increase proposals for next year in November.
Butler said that fter receiving advice from regulator and health department advice, he had rejected those proposals and would write to all insurers, telling them to “sharpen their pencils” and come back with lower price hike proposals.
