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Regulation of Health Insurance

Increases to the cost of health insurance is afforded a great deal of attention by policy makers and health fund members.

Throughout the 1980s and early 1990s Private Health Insurance premium increases were commonly in excess of 10% per annum. The premium pressure was driven by the fact that overall participation in health insurance was in steady decline, magnifying the concentration of remaining members with high health care needs.

The solution, it was argued, was for the Government to develop policies that increased overall membership and discouraged 'hit & run' exploitation of private health insurance. In response, the Commonwealth Government developed a series of initiatives designed to not only increase membership of health insurance (which would in turn help to take pressure off public hospitals) but would also, it was argued, lead to long-term premium stability. These include the introduction of:

  • the Private Health Insurance Rebate,

  • Lifetime Health Cover, and

  • a Medicare Levy Surcharge for high-income earners without private health insurance.

Subsequently, health (hospital) insurance membership in Australia increased nearly 14% from a low of 30.2% in the December quarter 1998 to 44.0% of the Australian population for the December quarter 2002.

When Health Funds change their rules and/or premiums

The National Health Act 1953 defines a premium change as a change to the health fund rules. At present, a fund that proposes to change its rules (including premiums) is required to notify the Department of Health and Ageing at least 60 days before the proposed date of implementation.

The Minister does not approve rule changes as such, but rather, is empowered to disallow changes to rules where the Minister considers the proposed change could:

  • breach a condition of registration or other section of the National Health Act 1953.

  • impose an unreasonable or inequitable condition affecting the rights of any contributor.

  • adversely affect a fund's stability,

  • be contrary to the public interest.

If the proposed change to rules are not disallowed, funds are required to tell their members, in writing, at least than 7 days prior to the date of implementation about any change that;

  • adversely affects the scope, level or nature of benefits, or

  • increases the cost of premiums.

On 11 September 2002 the Minister announced a new set of procedures for increasing private health insurance premiums - the first changes resulting from an Inter Departmental committee review of the rules and regulations governing private health insurance announced on 2 April 2002.

Under the new procedures, funds will continue to notify the Department of any intention to increase their health insurance premiums, however, when seeking an increase of less than the CPI benchmark, health funds “can expect a greater degree of certainty that the increase will not be disallowed by the Minister”.

Any fund seeking a premium rise larger than the CPI benchmark is required to provide the independent regulator, the Private Health Insurance Administration Council (PHIAC), with detailed information justifying a larger increase.

Private Health Insurance Administration Council (PHIAC)

The Private Health Insurance Administration Council is an independent Statutory Authority that regulates the health insurance industry.  The Private Health Insurance Administration Council also collects and disseminates financial and statistical data regarding health funds. The Council's website can be accessed at

The Private Health Insurance Ombudsman (PHIO)

The Private Health Insurance Ombudsman is an independent body established to resolve complaints about a private health fund, a broker, a hospital, a medical practitioner, a dentist or other practitioners (as long as the complaint relates to private health insurance) and to be the umpire in dispute resolution at all levels within the private health insurance industry.  The Ombudsman's services are available to health fund members, hospitals, medical practitioners (including some dentists) as well as health funds. You can access the Ombudsman's website at