Minister for Health and Aged Care, press conference – 9 December 2024

MARK BUTLER, MINISTER FOR HEALTH AND AGED CARE: Earlier this year, the terrific consumer organisation Choice drew attention, in one of their publications, to a practice within the private health insurance sector known as “phoenixing”. Essentially, this involves an insurance provider shutting down an existing product, for example, a gold product for families in a particular state, and shortly after opening up a new, essentially identical product at a higher price. I remind people that health insurers are only able to increase the price of an existing product with the approval of the Health Minister. That's usually done in an annual round where they submit proposals for increases in prices for every one of their products, which run to many, many thousands of products in different states. The intent of the legislation is clear: the pricing of insurance is subject to the approval of the Health Minister. The funds have admitted that they are conducting this practice, the shutting down of, particularly, gold insurance products and then the opening of a new, essentially identical product at a much higher price.
 
The Commonwealth Ombudsman, who also has the functions of the Private Health Insurance Ombudsman, wrote to me in August, drawing my attention to this practice and raising the potential for further examination. I wrote back to him, asking him to work with my department, the Department of Health and Aged Care, on the extent of this practice within the private health insurance sector and on options for government to address the practice. This morning, the Commonwealth Ombudsman has released his findings around what he describes as the “loopholes” which are being exploited by a number of private health insurance providers. The advice that I've received is that this practice is not strictly against the law. But I do reiterate again, it is clearly against the spirit of the law. It’s an underhanded, largely secret way of health insurers raising their prices outside of the usual approval process.
 
The department advice that I have is that this practice is quite widespread. What happens, for example, is insurers are shutting down gold products, which are particularly important for fund members who might want to access services like maternity care, mental health care – which are only available in gold products – and then reopening them shortly after, with a higher price. The Ombudsman cites one example of one insurer that closed existing gold policies and then opened essentially identical policies in 2023, at a 21 per cent higher price. In 2024 they did exactly the same thing, at a price that was 14 per cent higher than an otherwise identical product.
 
This not only sees new entrants to those products paying significantly more than a person in the next bed, insured by the same provider, might be paying. It also, the Ombudsman points out, substantially restricts the ability of the customers to move from insurer to insurer. If they think that they're essentially going to be ripped off with a new higher price if they move from one product to the other. We want a system where members feel that if they're not getting the right deal from their existing insurer, they're free to move to another insurer, or indeed within that insurer to another product.
 
This practice is, I have to say, quite underhanded and contrary to the spirit of the law, and is simply not able to be tolerated in the future. I've asked the Commonwealth Ombudsman to continue to monitor this practice, particularly as we move through the next premium round – which I'll come to in a second – and if there has not been a really substantial change to the behaviour of insurers who, quite openly, have admitted that they engage in this practice, and up until now, at least, intend to continue engaging in this practice, then I will reserve the right to consider legislative options to outlaw the practice into the future.
 
Before I take questions on that, if there are any, I also want to provide a quick update on the private health insurance premium round, which should be taking place over coming weeks or months. As I said, increases to private health insurance products need to be approved by the Health Minister. They generally take effect on the 1st of April every single year. It will be expected or scheduled for the 1st of April 2025. Insurers, of which there are 29, have submitted their proposals for premium increases to me. They did that last month, in the usual way. I've sought advice from the prudential regulatory authority, or APRA, as well as my department. I've sought advice from APRA, particularly around the capital adequacy of private health insurers to ensure, obviously, that they're sustainable into the future, which is important for the system. But also from the department around things like the benefit–payment ratio – so how much of their revenue insurers are actually paying out to their members for procedures – things like margins and profitability of different funds, and also other payments that funds might be making, for example, in dividends to shareholders or to management. The advice from APRA and the department was received by me over the weekend and essentially recommends that I write back to every single one of the 29 insurers seeking that they sharpen their pencils and present to me a lower increase for their products. And I will be doing precisely that this week. I am determined to arrive at an outcome that is in the interests of fund members themselves. Particularly at a time of considerable pressure on household budgets, it is especially important, now more than ever, that I do the best thing by them and make sure that the increases that take place next year to private health insurance products are the lowest that are necessary to ensure an ongoing, viable and sustainable industry. Happy to take questions.
 
JOURNALIST: So why not legislate now? And do you consider this practice price gouging?
 
BUTLER: This is underhanded. This is sneaky. It's conducted largely in secret. Policy holders or potential policy holders aren’t made aware of this. I want to pay credit to Choice for drawing attention to it and for the work of the Commonwealth Ombudsman, in conjunction with my department, in really getting a sense of the extent of the practice. You can describe it as price gouging. If 2 members of an existing fund, of the same fund with essentially the same product, are paying prices that might be 20 or more per cent different, because of this phoenixing practice, we'd have to describe that as price gouging.
 
JOURNALIST: On a different but related note, you mentioned before mental health, the life expectancy gap of those with severe mental illness in Australia is 17 years and it hasn't shifted this century. Supported housing, wrapping in health and social supports is the only way forward and cost far less than acute treatment. What will you do to progress these proven reforms, and will you commit to put supported housing on the table at your next January meeting with mental health ministers?
 
BUTLER: I want to thank the writers of the series that you're talking about in The Australian newspaper. They're drawing attention frankly, to some issues in our community that haven't got as much attention as I think they should have over the last few years. I've said as much at some forums recently. That around one per cent of the population who experience severe and complex mental illness, usually psychotic disorders, but some other types of disorder beyond those, are getting a really raw deal in our community. And that's been the case consistently, really, over the 30 years since de-institutionalisation – which was a positive step from a human rights perspective in this country and many others around the world that happened at the same time, where patients with complex and severe mental illness might have faced really lifetimes of institutionalisation. But the sorry fact is that de-institutionalisation wasn't followed up with the sorts of community-based investments that were needed to give proper support to those people.
 
Now, health ministers have only, over the last several weeks, received a comprehensive analysis of the unmet need in the community for that population. There's probably 230,000 Australians or so who are not getting the supports that they need. Health ministers have met, considered that, tasked officials with doing some more work, which they will report back to us at our first meeting next year, which will likely be in February. Now, this is a cohort who are largely outside of the NDIS. There's maybe 60,000, or a little more than 60,000 Australians, with that level of mental illness who are being supported by the NDIS. But vast numbers who are not. I think that the attention that The Australian series is drawing to that cohort is welcomed, because this has been kept in the shadows for far too long, I think. And the country needs to do better.
 
JOURNALIST: Will you have time before the election to address this issue if insurers are bringing out their new premiums in April, will they not just sit back and wait for the election to come and fall by the wayside?
 
BUTLER: The Ombudsman's report – I encourage people to look at it, it blessedly is only a few pages long. It's not hundreds of pages, it's pretty easy reading, and it's a really well-conducted piece of research by the Ombudsman. He makes it clear that he's calling on insurers to do the right thing, to stop this practice. Obviously passing legislation is not a quick process in this Parliament. But I want to make it clear to insurers that if they're if they're not going to take this seriously and recognise the degree to which it might be in their interest, but it's certainly not in the interests of patients, then we as a responsible government, of course, would reserve the right to take action in legislation.
 
JOURNALIST: Just on the premium rises, can you give us an idea of what sort of increases the insurers have requested, and separately, what sort of increase would you be comfortable with?
 
BUTLER: The relevant legislation doesn't permit me to disclose the material that the insurers have put to me, or the advice of APRA or the department, in this respect. That's a clear reflection of the law and has been for a very long time. There's been some media commentary around what insurers have been seeking, you'll be across that. Suffice it to say that my view, and the advice I received from APRA and from the department, is that those claims have not taken in sufficient account at a number of factors.
 
For example, we want to understand a bit better the benefit–payment ratios of a number of the funds that are paying less than others, in terms of the percentage of their revenue being paid out to members for procedures; shareholder payments; the degree to which some funds don't appear to have passed through the savings that have been achieved through changes to the Prostheses List, which is essentially the pricing for medical devices that private hospitals use; as well as the impact of a recent decision taken by the New South Wales Government. There is very significant scope there for insurers to sharpen their pencils. And I'll be writing to them over the course of the next day or two, to urge them to do that.
 
JOURNALIST: Insurers argue that when they cancel products, they're making a loss, and that the more expensive policies reflect the underlying cost of healthcare. We know there's questions about the viability of the private healthcare sector. How do you as Minister balance that with making sure that people aren't charged too much?
 
BUTLER: That's really why I asked the department and the Ombudsman to look at this. Their conclusions is essentially a profit-making exercise by funds. The very clear advice and evidence that the Ombudsman has put before me, and the department has as well, frankly reflects the conclusions that Choice drew attention to earlier this year.
 
JOURNALIST: You recently went to the opening of Moderna vaccine facility in Melbourne. Can I clarify please, who owns that facility? Does the Government have an ownership stake in it, and do you have any view of the Moderna deal that you inherited under the Morrison Government?
 
BUTLER: To your second question, Josh, we have a very clear practice – as the Coalition does – of honouring contracts entered into by a previous government. We had made it clear we thought there needed to be more sovereign manufacturing of vaccines when we were in Opposition. And so, as a broad principle, supported the process the Government went through. If anything, we probably think it was a little later than was ideal. It was a process that sought expressions of interest from industry. Moderna was one who indicated interest. Other significant players in the sector didn't indicate an interest in shifting manufacturing operations or opening up manufacturing operations in Australia. In the broader sense, we supported this. And although we weren't across the commercial terms of the contract for very obvious reasons, at the time, we indicated an intention to honour that contract, as we do so many other contracts that happens by government that endure beyond the change of government, potentially. As to the ownership, my understanding is Moderna owns that facility. But I'll come back to you, if there's any difference of that. It’s on the precinct of the Monash Technology Precinct, which is essentially Monash University land. I'm not, off the top of my head, aware of the precise details of any lease arrangements between Moderna and Monash. But this is a significant addition to sovereign capability here in Australia. We will be able to make a hundred million doses of pandemic vaccines. It will also be able to make a whole range of other respiratory vaccines that will be available to government and to the community, covering things like RSV and others as well.
 
JOURNALIST: Police have confirmed the Melbourne synagogue attack is being treated as a terror attack. Can I just get your response to that?
 
BUTLER: As an individual, I welcome it. This is not a matter for the Health Minister to determine obviously. This is a matter that we expect our policing and security authorities to determine carefully, and they've done that. This, as I understand it, follows discussions between the Victorian Police and the AFP, the Australian Federal Police. The fact that they have determined this to be a terrorist act means that the full resources of the AFP, ASIO, as well as Victorian Police can come together to bring those perpetrators to justice, and that is critically important. I said that on Saturday.
 
This is an appalling act of anti-Semitism. I've spoken on a number of occasions over the last 13 or 14 months, since October 7, about how appalled I am at the steep, steep rise in anti-Semitism in this country, that's taken place since the terrorist attacks by Hamas on Israel on October 7 last year. Really only Jewish families have to worry about taking their kids to schools and having them schooled behind really high security fences with barbed wire, security guards and, sometimes, police stationed. I don't hear of other communities that have their elders housed in nursing homes, sometimes holocaust survivors housed in Jewish nursing homes, that have to have security stationed there because of the threats of violence that have been made against nursing home residents, of all people.
 
This has just been a shocking period in our history I think. The steepness, the ferocity of the rise in anti-Semitism is something we must all be determined to stamp out. This latest act – an act of particular hatefulness, given it was directed at a place of worship – I think should appal every reasonable-thinking Australian. As an individual, I welcome the fact that this has been recognised as a terrorist act. Obviously, our agencies were activated by this as soon as it happened, the AFP, our security agencies, as well. But the determination or declaration of this as a terrorist act, effectively creates a level of formality about the way in which Commonwealth agencies will work with the Victorian Police.
 
JOURNALIST: There's been a growing disillusionment with health insurers across the world. We've seen what's happened in America. Obviously, our system is very different to America, but there's still this sense that, you know, all health insurers are motivated by a profit. So how can you trust that health insurers will self-correct on these premium issues? And why not just get ahead of it now, by legislating it now?
 
BUTLER: We're calling very clearly on the industry to do the right thing. I've said in other contexts over the last few weeks, that health insurers and private hospitals, for that matter, operate with very significant support from taxpayers. Not just health insurance members through their hard-earned contributions, but taxpayers underwrite private health insurance through the rebate to the tune of billions of dollars, every single year. They must take account of the fact that they are not just private operators. They are private operators, operating as part of a public health system that receive billions of dollars in contributions from taxpayers, as well as private health insurance members. They need to respect that social license that they have. This sort of practice damages that social license. Now I want to give them a chance to do the right thing, but that chance won't be open forever, and if there's not some very clear indications soon of a change of practice by insurance companies, then I will take legislative action.
 
JOURNALIST: Would you consider naming and shaming the worst offenders in the public interest? So the public know which insurers are ripping them off more?
 
BUTLER: The first thing to say is that the department tells me this is widespread, this is quite common. This is an industry-wide challenge, I think. I'm not saying every insurer does it, in every state and territory, but this is widespread. The insurance industry – as a whole – needs to recognise they need to sharpen up their act and stop this practice. As I said, though, if there's not a good indication of behavioural change by insurers, all options, as far as I'm concerned, are on the table. And that will include naming insurance providers that we know are conducting this practice, through the work of the Ombudsman, the department and others. Thanks everyone.