Today the Commonwealth Ombudsman released a report into the "loophole" tactics that private health insurers have been using to charge millions of Australians more for private health cover.
The Commonwealth Ombudsman has found that insurers are charging new customers more, with secret premium increases above what is allowed under the annual premium review process.
The secret premium increase occurs when an insurer closes a policy to new customers and then launches a new, almost identical policy at a higher cost - a practice known as 'product phoenixing'.
This means new customers taking out gold tier policies are paying hundreds of dollars more than existing customers each year, and hundreds more in excess fees if they ever need to go to hospital.
Analysis by the Department of Health and Aged Care suggests 'product phoenixing' is widespread. An investigation by consumer group Choice this year found that insurers had increased the price of their gold tier policies by more than 30 per cent, on average, over a three-year period.
The Actuaries Institute also analysed a range of singles-only policies in Victoria and found that over four years from July 2020, the number of gold tier products on offer fell by a third, from 112 products down to 73 products, with just 29 policies available online to the general public by mid-2024.
The available products were more expensive, with the average new customer paying $38 more each month in premiums and $184 more in excess fees, than the average gold policy.
As the Commonwealth Ombudsman report found, these practices "may be circumventing premium approval processes, but they are also restricting consumer choice", by ensuring that when customers shop around for a better deal and a cheaper policy, they are unlikely to find one.
It also undermines the fairness principle in private health: that two people should pay the same price for the same policy, regardless of age or background.
Quotes attributable to Minister Butler:
"I share the Commonwealth Ombudsman's concerns that this practice may be circumventing the premium approval processes and restricting consumer choice."
"This 'loophole' tactic is a sleight of hand that makes the best value policies disappear and forces customers to take out more expensive policies.
"Insurers are putting a new name on the same policy, with a higher price tag. It's a cheap trick that makes your health insurance more expensive, and it's got to stop.
"Let me be clear: we will be monitoring this closely. If insurers don't stop this practice immediately, then I will force them to stop."
