Regulatory loopholes must be closed to put an end to private health insurance product 'phoenixing' — a sneaky tactic used by insurers to price gouge new customers.
The Australian Medical Association welcomes proposed amendments to legislation to outlaw this deceptive practice, which involves insurers closing an existing product offering before opening an almost identical one at a higher price outside the regulated premium round process. This is done to circumvent the requirement for ministerial approval of the higher-priced premiums.
In a submission on the proposed amendments , the AMA supports changes that would force insurers to use only the annual premium round to seek approval for the pricing of new products, unless in exceptional circumstances.
The AMA argues those "exceptional circumstances" must be clearly defined in legislation to prevent any possibility of insurers finding loopholes to implement product phoenixing. The term "public interest" — already used in the legislation to guide ministerial decisions on premium increases — should also be clearly defined.
AMA President Dr Danielle McMullen said private health insurers had enjoyed extraordinary profits for many years with few consequences for poor behaviour.
"Private health insurance premiums have outpaced wages and inflation in recent years, all while insurers' management expenses and profits continue to soar," Dr McMullen said.
"The widespread practice of phoenixing is a major factor in consumers struggling to access the level of cover that meets their needs, and it is eroding public confidence in the private health system.
"Private hospitals play a vital role, especially as more Australians seek care outside the overwhelmed public sector. But unacceptable conduct from insurers threatens the integrity of our entire healthcare landscape."
The AMA welcomes the federal government's commitment to outlaw product phoenixing, which Health Minister Mark Butler described as an "underhanded" and "sneaky" practice in December 2024.
The AMA calls for serious penalties to apply for insurers that continue product phoenixing once legislative changes are implemented.
"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," Dr McMullen said.
Dr McMullen said the issue also highlighted the need for a Private Health System Authority to better regulate the sector and drive long-term reform.
"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," she said.
