Medibank has called for reform of private health insurance regulation, to promote competition and keep prices down.
A report commissioned by Medibank, which was launched today by Medibank Chairman Paul McClintock AO at the Private Healthcare Australia Directors' Day, recommends a shift away from the annual premium setting model to a price monitoring model.
The report, authored by Deloitte, found that the current regulatory process is not best practice as far as promoting choice and affordability. Furthermore, the current approach offers funds 'herd protection' as premium increases tend to cluster around a tight average, resulting in a lack of competition. The report recommends a staged approach to reform and oversight by an independent regulator.
Mr McClintock says the regulatory framework should aim to promote a strong incentive for innovation and competition:
"We welcome the Government's recent commitment to consult with industry and consumer groups on options for further simplification of premium setting that will drive competition and continue to deliver strong consumer protection from 2014."
"The time is right for an independent review of the current regulatory settings to determine if they are still fit for purpose, particularly given the recent changes to the Australian Government's private health insurance rebate and also the rapidly changing environment in which health funds operate.
"The report highlights several areas where regulations produce unintended cost impost on health funds which, if changed, would lower the cost of health benefits that flow into premium rises."
George Savvides, Managing Director of Medibank, says, "We have been invited to engage with the Government and work together to review the regulatory framework in a way which puts members at the forefront. We want to encourage debate within the PHI industry to determine the best regulatory structure going forward. This report is part of that discussion."
In preparation for the report, Deloitte consulted with a number of senior Government stakeholders from across Health, Finance and Treasury in the development of the report. Representatives from APRA, ASIC and PHIAC were also engaged.