A new AMA submission has condemned a price-gouging tactic too commonly used in private health insurance.
Sneaky practices from private health insurance companies have been put on notice by the AMA, with the organisation calling for an end to these tactics.
The practice under fire is known as “phoenixing” and is commonly used to price gouge new customers.
This practice involves insurers closing off existing products then opening a near-identical product for a higher price and outside the regulated premium round process.
Ministerial approval for the higher-priced premiums are thus bypassed.
“We think that there’s a necessity to outlaw product financing,” AMA vice president Associate Professor Julian Rait told Dermatology Republic.
“We obviously noticed that the private health insurers have enjoyed extraordinary profits for many years with few consequences for poor behaviour.
“Private health insurance premiums outpaced wages and inflation in recent years, while insurers management expenses and profits have been increasing, so there’s clearly a need for external intervention.”
The AMA has backed reforms that would force insurers to only use the annual premium round to seek pricing approval for new products, unless in specific “exceptional circumstances”.
These circumstances would have to be clearly defined in the new legislation, as a safeguard against the exploitation of any potential loopholes as recommended by the AMA.
The AMA also suggested penalties for non-compliance, with the repercussions needing to “be sufficiently serious to act as an effective deterrent to this practice”.
Evidence from the AMA 2024 Private Health Insurance Report Card has shown that the Private Health Insurance Ombudsman found some insurers using phoenxing to increase the cost of certain products by more than 30%.
“Because there’s really multiple bodies involved in regulating the private health sector, and there hasn’t really been a coherent approach to sort of like supervising the private health insurers,” Professor Rait told DR.
“The AMA has called repeatedly for private health system authority to better regulate the sector and drive long term reform.
“We’re again calling on the government to implement our request, because we think, unless there’s an overarching authority with ability to develop sound policies around private health insurance, or these sorts of loopholes will continue to be exploited by insurers.
“We think that it would be a direct benefit to the patients of GPS, and obviously would mean that over the long term, it might be able to make private health insurance a more affordable option for many patients.”
Last December federal health minister Mark Butler threatened the insurers with legislative action, calling phoenixing “a sleight of hand that makes the best value policies disappear and forces customers to take out more expensive policies”.
“It’s a cheap trick that makes health insurance more expensive, and it’s got to stop.”
In March Mr Butler doubled down, making an election promise that he would have the DoHDA “urgently investigate” the funds’ exploitation of the loophole.
Then, in September the DoHDA launched a public consultation on its proposed reforms to the Private Health Insurance Act 2007 which would close the infamous “phoenixing” loophole.
“The government intends to outlaw product phoenixing by amending the PHI Act to require insurers to apply to seek the minister’s approval of the premium for a new product against a public interest test,” said the consultation paper.
“This is proposed to be similar to the current public interest test for a premium increase on an existing product; i.e. the Minister must approve the premium for a new product unless satisfied that it would be contrary to the public interest.”
