Health premium cap may push some insurers to insolvency - reports

Health premium cap may push some insurers to insolvency - reports | Insurance Business

Health premium cap may push some insurers to insolvency - reports

Labor’s proposed cap on health-insurance premium increases has the industry and the Department of Health concerned about its negative impact on the financial viability of some insurers.

A departmental analysis for health minister Greg Hunt found that capping private health-insurance rate increases to 2% for two years, and the flow-on effects, were likely to require a public interest test and explanation to parliament.

According to the analysis, “if a premium change is not approved, it is possible that the organisation will have to restructure their investment strategy, renegotiate funding arrangements with doctors (possibly resulting in a higher out-of-pocket expense for consumers), lower dividend payments to investors, or restructure their products to remove high cost items,” The Australian reported.

The publication said it obtained the analysis under Freedom of Information laws but three and a half pages were redacted and appear to have discussed insurers’ ability to meet prudential requirements under a cap. Also redacted was correspondence with the Australian Prudential Regulation Authority.

A separate briefing note for Hunt last month warned the cap would threaten the solvency of three insurers – supporting the department’s previous partly-redacted analysis, the report said.

“If a 2% cap was applied at an insurer level, it would likely result in multiple private health insurers breaching prudential standards,” the note said.

 

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