House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Health, the Honourable Greg Hunt MP)

Outline

This package of three Bills supports the implementation of reforms to private health insurance announced by the Government on 13 October 2017. The Private Health Insurance Legislation Amendment Bill 2018 (the Bill) contains the primary amendments that will amend the Private Health Insurance Act 2007 (the PHI Act), the Ombudsman Act 1976 and the Age Discrimination Act 2004.

The measures contained in the Bills will:

•

allow for age-based premium discounts for hospital cover;

•

allow private health insurers to cover travel and accommodation costs for regional Australians as part of a hospital treatment;

•

strengthen the powers of the Private Health Insurance Ombudsman;

•

improve information provision for consumers;

•

reform the administration of second tier default benefits arrangements for hospitals;

•

allow insurers to terminate products and transfer affected policy-holders to new products;

•

increase maximum voluntary excess levels for products providing individuals an exemption from the Medicare levy surcharge; and

•

improve consumer transparency by removing the use of benefit limitation periods in private health insurance policies.

The private health insurance reform package was the result of extensive consultation, including through the Private Health Ministerial Advisory Committee.

Private Health Insurance Legislation Amendment Bill 2018

This Bill will amend the Private Health Insurance Act 2007 (the Act) and associated legislation to support reforms enabling private health insurers increased flexibility to offer hospital cover products with improved value in terms of lower premiums through the application of age-based discounts, increased maximum voluntary excess levels, and allowing insurers to offer benefits for travel and accommodation as part hospital treatment cover. The Bill also includes amendments to the Act to facilitate the introduction of reforms that improve information provided to consumers; streamline second tier default benefit arrangements for private hospitals; and allow insurers to terminate products and transfer affected policy-holders to new products. It includes transitional provisions to address issues arising from possible non-compliance with the Act.

The Ombudsman Act 1976 is also amended under this Bill to strengthen consumer protection through the expansion of the powers of the Private Health Insurance Ombudsman (PHIO). The PHIO's existing powers will be strengthened to enable inspections and audits at the premises of private health insurers or brokers as part of complaint handling or in the context of investigations by the PHIO at his or her own initiative.

Schedule 1- Increase to maximum excess levels

Insurers will be able to offer products with increased maximum voluntary excess levels that exempt the holder from the Medicare levy surcharge. This will be enabled by amendments in the three Bills which contain amendments to the Private Health Insurance Act 2007, A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999 and Medicare Levy Act 1986.

Consumers will have the opportunity to purchase products with a larger excess, in return for lower premiums.

Schedule 2 - Age-based discounts for hospital cover

Insurers will be permitted to offer products which provide age-based discounts which meet the conditions to be set out in the Private Health Insurance (Complying Products) Rules. It is intended that, in line with the announced policy, the Private Health Insurance (Complying Product) Rules will be amended to introduce a framework for insurers to offer products with age-based discounts.

This is intended to improve the affordability of private health insurance for young Australians, increasing their access to private hospital services.

An amendment to the Age Discrimination Act 2004 has also been included to allow for these discounts to be made available to younger people.

Schedule 3 - Strengthening the powers of the Private Health Insurance Ombudsman

The Private Health Insurance Ombudsman will have the power to conduct inspections, and investigations associated with complaints or compliant related matters and conduct audits at the premises of private health insurers or brokers. Offence provisions have been established to support the enforcement of these powers.

Schedule 4 - Transitional provisions relating to the treatment of certain health insurance policies

The Government will improve consumer transparency by removing the use of benefit limitation periods in private health insurance policies. The Bill ensures that consumers who have purchased benefit limitation period inclusive policies since the Private Health Insurance Act 2007 was introduced:

•

do not need to repay premium rebates they have received;

•

are not retrospectively liable for the Medicare Levy Surcharge; and

•

are not liable for Lifetime Health Cover loadings.

Schedule 5 Part 1 - Benefits for travel and accommodation for hospital treatment cover

Insurers will be allowed to offer travel and accommodation benefits as part of hospital treatment cover. As part of hospital treatment benefits for travel and accommodation are eligible for risk equalisation. This provides an incentive for insurers to offer travel and accommodation benefits as part of the hospital treatment cover. Risk equalisation supports community rating by sharing much of the costs for high risk members between all insurers. This change benefits people (particularly those that live in rural and remote areas) who need to access hospital services not available locally.

Schedule 5 Part 2 Information requirements

A 'Private Health Information Statement' will replace the current 'Standard Information Statement' (SIS) as the required method by which an insurer must provide information to consumers.

The SIS will be discontinued from 1 April 2019 and insurers will be required to maintain and provide up to date information about complying health insurance products in the form of a Private Health Information Statement, the requirements for which will be set out in the Private Health Insurance (Complying Product) Rules. This updated Information Statement will provide insurers with more flexibility surrounding the format, content and delivery of information, and give consumers access to better information.

Schedule 5 Part 3 Second tier administrative reforms

A legislative framework will be established in which the Minister for Health will assess and determine whether or not to include a private hospital in a class of hospitals eligible for second-tier default benefits. This is a departure from the current decision making process which is administered by the industry-based Second Tier Advisory Committee.

Under the new arrangements, a hospital can apply to the Minister to be included in a class set out in the Private Health Insurance (Health Insurance Business) Rules. The length of a private hospital's second tier eligibility approval will also be increased to align with the hospital's independent hospital accreditation cycle. There will be provision for certain decisions to be subject to review by the Administrative Appeals Tribunal.

Schedule 5 Part 4 - Closed and terminated products

The Bill includes amendments to allow insurers to terminate a product and to transfer all people insured under that product to new policies. The insurer will be required to inform the person being transferred of a range of matters which are intended to be included in the Private Health Insurance (Complying Product) Rules. These provisions do not reduce an insured person's other portability entitlements such as not having to re-serve waiting periods when moving to a new policy.

Medicare Levy Surcharge exemption and related matters

In order to give effect to the increased maximum voluntary excess levels which is included as part of Schedule 1 of the Bill, this package also includes two additional Bills containing amendments to taxation laws:

(1)

The A New Tax System (Medicare Levy Surcharge-Fringe Benefits) Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018 (Medicare Levy Surcharge Amendment Bill) to amend the A New Tax System (Medicare Levy Surcharge-Fringe Benefits) Act 1999; and

(2)

Medicare Levy Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018 (Medicare Levy Amendment Bill) to amend the Medicare Levy Act 1986.

A New Tax System (Medicare Levy Surcharge-Fringe Benefits) Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018

This Bill amends the principal Act to provide that the maximum voluntary excess level a policy can have to exempt the holder from the Medicare Levy Surcharge is set out in the Private Health Insurance Act 2007.

The Bill also removes grandfathering provisions that provided the Medicare Levy Surcharge exemption for certain health insurance policies that pre-date the commencement of the Private Health Insurance Act 2007. Individuals will need to migrate to a policy that has an excess no more than the new maximum in order to remain eligible for the Medicare Levy Surcharge exemption.

Medicare Levy Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018

This Bill amends the principal Act to provide that the maximum voluntary excess level a policy can have to exempt the holder from the Medicare Levy Surcharge is set out in the Private Health Insurance Act 2007.

The Bill also removes grandfathering provisions that provided the Medicare Levy Surcharge exemption for certain health insurance policies that pre-date the commencement of the Private Health Insurance Act 2007. Individuals will need to migrate to a policy that has an excess no more than the new maximum in order to be eligible for the Medicare Levy Surcharge exemption.

Policy Background

On 13 October 2017, the Government announced reforms to private health insurance designed to simplify private health insurance and make it more affordable for consumers. The package consists of the following reforms:

o

Product design reforms, including:

•

A new system for categorising health insurance products (Gold/Silver/Bronze/Basic product categories);

•

Enhancing mental health support to improve patient access to mental health services;

•

Establishing the Improved Models of Care Working Group to provide advice on improving the funding arrangements for private health insurance funded mental health and rehabilitation services;

o

Introducing standard clinical definitions;

o

Improved access to travel and accommodation benefits which will benefit regional and rural patients and their carers;

o

Strengthening the powers of the Private Health Insurance Ombudsman;

o

Establishing the Ministerial Advisory Committee on Out-of-Pocket Costs to consider best practice models for transparency of out-of-pocket costs;

o

Information provision reforms, including upgrading the Government's website (privatehealth.gov.au) and the development of a minimum data set for consumers;

o

Allowing private health insurers to offer discounted private hospital cover to people aged 18 to 29;

o

Prostheses List benefit reductions;

o

Increasing maximum excess levels;

o

Changing coverage for some natural therapies; and

o

Second-tier administrative reforms.

Financial Impact Statement

The total financial impact of the measures contained in the Bill from 2017-18 to 2020-2021 is $6.2 million.

Regulation Impact Statement

A Regulation Impact Statement is not required for Schedule 4 (OBPR ID 23453).

The following Regulation Impact Statement covers the remaining Schedules.

Name of Proposal: Private Health Insurance Reforms

Office of Best Practice Regulation (OBPR) ID number: 22741

Note: The announcement of the reform package (described in detail in Section 3) limits the scope of this RIS. This RIS considers two options: the implementation of the reform package as a whole, and the status quo.

1 - What is the policy problem you are trying to solve?

Decline in private health insurance participation

Private Health Insurance is a key part of Australia's health system providing choice for 13.5 million Australians. As at 31 December 2017, 11.3 million Australians were covered by hospital treatment cover (45.6 per cent of the population) and 13.54 million Australians had some form of general treatment cover (54.6 per cent of the population). General treatment is also known as extras or ancillary cover which includes services such as optometry and dental.

While in 2018, there was the lowest average weighted premium increase in almost 17 years, at 3.95 percent, in the past nine consecutive quarters coverage has declined in proportion terms and in the December 2017 quarter has declined by about 20,000 people compared with the same quarter in 2016. If this trend continues it may signal the start of a decline in coverage similar to that seen in the 1990s when hospital insurance dropped from 45 percent to 30 percent of the population over the decade. That decline was only arrested by the introduction of the premium rebate (which lowered the cost), the Medicare Levy Surcharge (MLS) and Lifetime Health Cover (LHC) (which created incentives for higher income earners and younger people to purchase insurance).

Table 1 below includes a comparison of the number of people and the percentage of the population with hospital and general treatment policies over the past four years. Table 1 shows that the percentage of the population with hospital treatment and general treatment has declined over the past three years.

Table 1: Hospital treatment and general treatment health insurance policies

The current decline in participation is attributed to the cost to consumers growing on average by 68 per cent in 10 years and the confusing product offerings. In addition, the two thirds of the population that are aged under 50 have been born or reached adulthood under Medicare. Many people in this age group regard health insurance as a supplement rather than a necessity, and they are therefore more likely to respond negatively to increasing premiums.

Figure 1 below shows the change in the number of people with hospital treatment policies by age category over the past four years. This graph shows the decline in participation rates, particularly for the 20-24 and 25-29 age groups.

Figure 1: Private health insurance participation (hospital cover) by age category ^[1]

If no changes are made to the current arrangements, it is expected that private health insurance premiums will continue to increase and people may choose to downgrade or cancel their health insurance or not take out private health insurance at all.

Falling membership, particularly among younger Australians (who cross subsidise the premiums of older people), risks the overall stability of Australia's health system as people dropping out or not taking out insurance must use the public hospital system which significantly increases cost to governments.

In the 12 months to 31 December 2017 health insurers paid $14,812 million in hospital treatment benefits. This included more than 4.6 million episodes and 11.9 million hospital treatment days. ^[2]

Industry data shows that private health insurance pays for almost two-thirds of non-emergency surgery, 90% of day admissions for mental health care and 50% of all mental health admissions, 70% of joint replacements, 60% of chemotherapy and 88% of retinal procedures.

Background

Australia's health system is funded by a mixture of public and private funding and service delivery. The role of private health insurance in Australia is unique among OECD countries, in that it operates as a Commonwealth supported and regulated industry, but is complementary to a universal public insurance system - Medicare. Most medical practitioner services are funded or subsidised through Medicare and state public hospital services are generally provided free to public patients. Private health insurance covers some or all of the costs of healthcare for private patients and provides consumers with greater choice in the provision of treatment, access to shorter waiting times, and coverage for some services not funded by Medicare.

A key feature of Australia's private health insurance industry that makes it different from many other forms of insurance is that it is community rated. This means insurers are prohibited from discriminating between people who wish to be insured on the basis of their health or likelihood to claim. Under community rating, everyone is entitled to buy the same product, at the same price (except for Lifetime Health Cover) and an insurer cannot refuse to insure an individual.

By requiring that the premium paid for a person's chosen health insurance product, and the cover available under that product, are the same regardless of the health or demographic characteristics of the individual seeking coverage community rating imposes a cross-subsidy from low risk to high risk policy holders. Community rating prohibits insurers from discriminating on the basis of past or likely future health or risk factors such as age, pre-existing condition, gender, race or lifestyle in the premiums that they charge. Although community rating means that people who are older or sicker do not have to pay higher premiums commensurate with their risk, it also means that younger and healthier people pay more than they otherwise would.

Community rating is underpinned by a system of risk equalisation. Risk equalisation attempts to adjust for the risk of adverse selection. It is designed to spread the burden of high cost claims across all insurers, helping to keep them all financially viable. Under risk equalisation, a proportion of claims for older and high claiming members are 'pooled' and are redistributed between insurers retrospectively through the risk equalisation arrangements. In 2015-16, annual net transfers were around $439 million. ^[3] These arrangements are designed to ensure that insurers (and policy holders with those insurers) with higher numbers of older members or high users are not financially disadvantaged compared with those insurers with a younger or healthier membership.

The ongoing viability of the community rating requires the retention of a broad membership base. Rather than target certain age segments (e.g. younger members), the current system encourages insurers to compete for both younger and older members. Without a broad membership base, premiums would need to increase to cover the cost of insuring higher risk consumers who maintain their health insurance.

If private health insurance participation rates continue to decline, private health insurance will no longer cover the cost and number of hospital treatment days mentioned earlier. This will therefore impact on tax payers and public hospital waiting times.

Current government initiatives

The Australian Government has three major initiatives in place to encourage take-up of private health insurance, the Medicare levy surcharge, Private Health Insurance Rebate and Lifetime Health Cover.

Following the introduction of private health insurance incentives between 1997 and 2000, there was large growth in the proportion of Australians holding private health insurance (Figure 2). The Medicare Levy Surcharge, the 30 per cent premium rebate, and Lifetime Health Cover saw the percentage of the population with hospital coverage increase from 30.5 per cent to over 45 per cent in 2001. Participation peaked at 47.3 per cent in June 2015.

Figure 2: Private health insurance participation in Australia since 1971 ^[4]

Medicare levy surcharge

The Medicare levy surcharge (MLS) is a tax on higher income earners who do not hold appropriate hospital insurance. It is designed to encourage individuals to take out private hospital cover.

The MLS is payable in addition to the Medicare levy.

The base income threshold (under which the MLS is not liable to be paid) is $90,000 for singles and $180,000 for families. Table 2 provides details of the MLS tiers.

Table 2: MLS income thresholds from 2014-15 to 2017-18

Table 3 shows the number of people and amount of MLS paid in 2015-16. Table 3: Payments under the Medicare Levy Surcharge during 2015-16 ^[6]

Note: The 'Others' category is for taxpayers who were liable for MLS for part of the year only.

As part of the 2014-15 Budget, the Australian Government announced that from 1 July 2015 the income thresholds used to determine the MLS and the private health insurance rebate (discussed below) would be kept at the 2014-15 rates for three years.

As part of the 2016-17 Budget, the Australian Government announced the continuation of the pause on indexation of income tiers for the MLS and the private health insurance rebate for a further three years until 30 June 2021.

Private Health Insurance Rebate

The Australian Government provides an income tested and age related rebate to encourage people to take out and maintain private health insurance. The Government's estimated expenditure on the Private Health Insurance Rebate will amount to more than $6.4 billion in 2017-18. ^[7]

Most people who hold private health insurance are eligible for a rebate on their insurance costs. A person may claim the private health insurance rebate if they:

•

are eligible for Medicare;

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have a complying health insurance product that provides hospital treatment or general treatment, or combined cover; and

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have an income for MLS purposes below Tier 3 (see Table 4 below).The Private Health Insurance Rebate Percentages are as follows:

Table 4: Private Health Insurance Rebate effective from 1 April 2017 to 31 March 2018

The rebate percentage is adjusted on 1 April each year based on the Rebate Adjustment Factor, which has the effect of increasing the rebate in line with the Consumer Price Index rather than the growth in premiums. The Rebate Adjustment Factor is set out in the Private Health Insurance (Incentives) Rules 2012 (No.2).

Lifetime health cover

Lifetime Health Cover (LHC) is an Australian Government initiative that started on 1 July 2000. It was designed to encourage people to take out hospital insurance earlier in life, and to maintain their cover throughout their life. LHC is a financial loading that can be payable in addition to the premium for private health insurance hospital cover.

LHC loadings apply only to hospital cover. They do not apply to private health insurance general treatment cover. To avoid incurring the LHC loading, residents of Australia must ensure they hold appropriate hospital cover before they reach their LHC deadline (also known as the LHC base day which is 1 July following a person's 31st birthday).

A person's loading is determined by the number of years they are aged over 30 at the time they commenced hospital cover. Each year will attract an extra two per cent to their hospital cover premium, up to a maximum of 70 per cent loading. Once a LHC loading on private hospital insurance has been paid for 10 continuous years, the loading is removed.

New migrants to Australia who have already reached the 1 July following their 31st birthday do not incur a LHC loading if they purchase hospital cover with an Australian registered insurer before the first anniversary of (or within 12 months after) being registered as eligible for Medicare.

The Department conducts an annual mail-out specifically targeting people who are approaching their LHC deadline. The mail-out is intended to serve as a reminder for the recipients that they have an opportunity to avoid extra costs on private health insurance should they wish to purchase it before their approaching deadline.

2 - Why is government action needed?

In 2015-16 the Government consulted on private health insurance to identify key issues of consumers and stakeholders across the sector. The consultations raised common themes around people's concerns:

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poor value for money;

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high out-of-pocket costs for consumers;

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lack of transparency;

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lack of sustainability; and

•

complex regulation.

In response to these findings, the Government established the Private Health Ministerial Advisory Committee (PHMAC), consisting of key representatives of interest groups in the private health sector to consider and develop possible reforms to private health insurance with the aim of improving the value of private health insurance to consumers, as well as protecting the long-term efficiency and sustainability of the sector. Additional information about the PHMAC is available at http://www.health.gov.au/internet/main/publishing.nsf/Content/phmac .

Government action is needed to help strengthen the viability of the private health system by addressing concerns about affordability, complexity, and lack of transparency of private health insurance.

Without Government action, there is a risk that participation in private health insurance will continue to decline. As mentioned above, continued falling participation will have an impact on access to services. An increased impact on the demand for services in the public hospital system will result in greater pressure on Commonwealth and state funding for public hospitals. It will also have an impact on funding levels under the National Health Reform Agreement and implications for the contributions to public hospitals required from tax payers.

The Australian Government considers that a healthy and stable private health insurance system is essential for the stability of Australia's overall health care system. Encouraging private health insurance cover provides consumers with a greater choice of care options and relieves pressure on the state public hospital system.

3 - Government Announcement

On 13 October 2017, the Government announced a wide ranging package of reforms to make private health insurance simpler and more affordable for Australians. The key aim of these reforms is to make private health insurance better value for consumers and make policies easier to understand. The Government is helping to reduce the rising costs for health insurers - which would otherwise be passed on through higher premiums. These reforms include:

•

Younger Australians will be encouraged to take up private health insurance by allowing insurers to offer products which discount hospital insurance premiums for 18 to 29 year olds by up to 10 per cent. This discount will phase out after people turn 41.

•

People with hospital insurance that does not offer full cover for mental health treatment will be able to upgrade their cover and access mental health services without a waiting period on a once-off basis. This will significantly enhance the value of private health insurance for young people.

•

To support Australians in regional and rural areas, insurers will be able to offer travel and accommodation benefits for people in regional and rural areas that need to travel for medical treatment.

•

An agreement has been entered into with the Medical Technology Association of Australia to lower the price of implanted medical devices from 1 February 2018. This has had immediate benefits for consumers in contributing to the lowest premium rise in seventeen years.

•

Consumers will be able to select a higher excess in exchange for a lower premium. This will be the first increase in the maximum excess since 2001.

•

Private health insurance will be simplified as insurers will be required to categorise products as gold/silver/bronze/basic, and use standardised definitions for treatments to make it clear what is and isn't covered in their policies.

•

The privatehealth.gov.au website will be upgraded to make it easier to compare insurance products, and insurers will be able to provide personalised information to consumers on their product every year.

•

The powers of the Private Health Insurance Ombudsman will be boosted and its resources increased to ensure consumer complaints are resolved clearly and quickly.

•

Following consultation with the private health insurance and medical sector, the Government has agreed to stop insurers from offering benefits for a range of natural therapies.

•

The Improved Models of Care Working Group will consider how to better support privately insured people's access to efficient and clinically appropriate mental health and rehabilitation services.

•

The Ministerial Advisory Committee on Out-of-pocket costs will provide options to improve the transparency of medical out-of-pocket costs.

•

The second tier default benefit, providing a safety net for consumers attending non-contracted hospitals, will continue, but the administration of eligibility will be transferred to the Department of Health.

4 - Policy options

In light of the Government's announcement of the private health insurance reform package (outlined in Section 3 above), two options have been considered:

1. Implement private health reform package; and

2. Maintain current arrangements (status quo).

1. Implement private health reform package

This consists of a suite of reform options, which must be implemented as a whole, to achieve the above objectives include:

2. Maintain current arrangements (status quo)

Maintaining the status quo would not impose additional regulatory burden on insurers or consumers as the existing arrangements would continue. While maintaining the current arrangements was considered, this option was not preferred as it would not meet the objective to improve the affordability of private health insurance and increase the information available to consumers. The continued decline in private health insurance participation would also be likely to continue. This would place pressure on the public health system, and increase costs to governments.

5 - What is the likely net benefit of each option?

1. Implement private health reform package

Implementing a suite of reforms would improve private health insurance and participation, and the information available to consumers in the short to medium term.

Benefit

Implemented in full, these reforms aim to:

•

increase affordability of private health insurance;

•

improve information available to consumers to allow them to more easily compare products and choose the most appropriate product for their needs/circumstances; and

•

maintain the sustainability of the private health system to ease the burden on the public health system.

The impacts of each reform are outlined in the table below:

Regulatory Costs

There are regulatory costs associated with some of the options (Reforms 1, 2, 4, 6 and 11). Regulatory costs for these options are one-off costs, which primarily involve system changes and changes to information provided to consumers (both verbal and written) (e.g. labelling of products as "Gold, Silver, Bronze or Basic" and updating information to use standard clinical definitions).

There are regulatory savings associated with Reform 6 as there will be savings from making the provision of information to consumers technology neutral and allowing insurers to transmit information via email.

Other options do not have regulatory impacts as:

•

they are voluntary for insurers to participate in:

o

introducing travel and accommodation benefits into hospital treatment policies (Reform 5); and

o

discounts for 18-29 year olds (Reform 8);

•

are changes to currently existing arrangements with no additional regulatory burden:

o

changing maximum excess level amounts (Reform 10); and

o

moving second tier assessment to the Department from industry (Reform 12); or

•

are wholly government funded with no regulatory impact

o

options which establish committees (Reform 3 and 7).

In relation to Prostheses List benefit reductions (Reform 9), the department has a RIS exemption for making and amending the Prostheses Rules (OBPR RIS reference number 12116).

Detailed information about estimated regulatory costs is at Attachment A.

In summary:

•

Consumers will experience no regulatory cost.

•

Doctors will experience no regulatory cost.

•

Brokers will have a regulatory cost of $1.88 million annually over 10 years.

•

Insurers will have a regulatory cost of $3.27 million annually over 10 years.

The regulatory burden to business, community organisations and individuals has been quantified using the Regulatory Burden Measurement framework. Offsets will be found through identified regulatory savings and the portfolio's net regulatory objective will be met at the end of year reporting period.

2. Maintain current arrangements (status quo)

While under this option arrangements would be the same and there would be no additional regulatory burden on industry, it is also likely that there will be a continued decline in participation and continued consumer complaints about information provision arrangements.

Assessment

If the current arrangements are maintained there is a risk that private health insurance participation will decrease, putting pressure on premiums for remaining private health insurance customers and increasing pressure on the public health system.

In order to be successful at achieving the objectives to ensure affordable and simpler private health insurance, the reforms need to be implemented as a complete package. Taken as a complete package, these reforms will have the greatest impact as they are complementary, with some reforms focused on increasing affordability and product value, while other reforms are focused on making information simpler and more transparent for consumers. Through implementing Reforms 1-12, there would be changes to the current private health insurance arrangements to contribute to the ongoing viability of the system. If successful, it will help to mitigate the recent trend of a decline in private health insurance participation, assist in reducing private health insurance premium rises, compared with what they would have been without the reforms, and also result in improved access to information by consumers.

6 - Consultation and implementation

Establishment of the Private Health Ministerial Advisory Committee

Extensive consultation has been undertaken in the development of the reforms outlined in this RIS.

One of the key mechanisms for consultation with the sector has been through the PHMAC. PHMAC was established to bring together key groups in the private health sector to work in partnership on the development and implementation of possible reforms to private health insurance.

PHMAC agreed to the establishment of working groups on a number of topics including standard clinical definitions, information provision and second-tier and default benefits. Additionally, PHMAC agreed to hold a rural private health insurance workshop that was attended by some 32 participants from a range of stakeholder groups, including consumers, doctors, hospitals and insurers, to discuss improving the value of private health for regional and rural consumers.

Sector views

In general, the main concern of service providers is that people are covered for (i.e. receive a benefit for) more services. Insurers are concerned with product price and consumers are concerned with product affordability and transparency of information. The reform package strikes a balance between these objectives.

While there are diverse sector views, the package is broadly supported by stakeholders, who have been, and continue to be, consulted throughout the process. The table below lists the consultation undertaken to date.

Consultation to date

Implementation

During the implementation phase, there will be continued consultation with affected parties through the PHMAC, other committees (e.g. the Ministerial Advisory Committee on Out-of-pocket Costs and Improved Models of Care Working Group and its sub-groups) and focus groups/consumer testing.

The table ^[8] below provides a guide to when the reforms will be implemented.

Implementation timetable

Evaluation

These reforms aim to:

•

mitigate the recent trend of a decline in private health insurance participation. This will be measured from quarterly reports by the Australian Prudential Regulation Authority;

•

reduce private health premium rises, compared with what they would have been without the reforms. The reforms aim to keep average premium increases below 4.0 per cent in each year between 2018 and 2020, maintain membership levels at 55 per cent and above. Data from the yearly premium rounds will demonstrate the success of this. For example, in the recent 2018 premium round, there was the lowest average weighted premium increase in almost 17 years, at 3.95 percent; and

•

improve access to information by consumers. This will be measured by a reduction in complaints to the Private Health Insurance Ombudsman about complexity and costs of insurance.