Perspectives

The future of private health insurance premium-setting

Seeking integrative solutions

Medibank Private Limited engaged Deloitte Access Economics to review the appropriateness, effectiveness and efficiency of the regulatory framework governing PHI premium-setting in Australia, and to sketch out a possible pathway to regulatory and policy reform.

Our report, The Future of Private Health Insurance Premium-Setting: Seeking Integrative Solutions, finds that while the current regulatory arrangements produce a number of benefits for Australia, particularly with respect to supporting the prudential soundness of funds, more could be done to bring the premium-setting process into line with regulatory best practice, in terms of accountability, transparency, predictability and timeliness.

The future of private health insurance premium-setting

Deloitte Access Economics recommends a four-stage process that Government should consider in moving to a more deregulated industry.

  • Horizon 1: Implement short term process solutions – we outline a number of process changes that could be implemented to address weaknesses of the current approach
  • Horizon 2: Adopt a continuous, asynchronous approvals process – this would allow funds to apply for an increase at any time during the year, independent of competitor applications
  • Horizon 3: Move prudential and premium regulation to an independent regulator – we recommend merging the PHIAC with the Australian Prudential Regulation Authority
  • Horizon 4: Move to price monitoring regulation – the independent regulator, after observing fund behaviour under the continuous, asynchronous approvals process, would also be able to review and make a recommendation for moving to a price monitoring arrangement, which would further increase competition in the industry.

To gain a broader understanding of how the PHI premium-setting framework functions and how it could be reformed to promote competition and lower costs for consumers, download the report now.

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