FOI 5068 - document 1.1
PRIVATE HEALTH INSURANCE PREMIUM CHANGE FORMULAS
Average insurer premium change
The
Average insurer premium change is calculated according to the following formula.
(FCI with premium changes – FCI without premium changes) x 100
FCI without premium changes
Where FCI is the forecast contribution income for the insurer for the 12 month period
following the implementation of the changes, excluding forecast changes in
membership, and including rate protection. FCI is calculated by Monthly Premium *
Total
number of policies.
For example:
An insurer has two products and has one customer per product:
Product A – ambulance product price change from $50 to $55 (10% increase)
Product B – combined product price change from $3,000 to $3,060 (2% increase)
The average insurer premium increase in this example is around 2% (as the cheap
ambulance product has almost no weighting).
ACT 1982 (CTH)
Average industry premium change
The
Average industry premium change is the average change in premiums for each
product (the percentage change) offered by every private health insurer, weighted
HEALTH AND AGED CARE
according to the
number of people covered. It also includes rate protection (pre-
payment of premium in advance of new approved i
INFORMATION ncrease commencing) and the age-
based discount1 (available to people aged 18-29 years) and therefore understates the
increase that will be experienced by some policyholders.
This is the formula as set out in Section 5A of the
Private Health Insurance (Incentives)
Rules 2012 (No. 2). The rationale for
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Minister is agreein
Tg to
HE as part of the premium process which feeds into the rebate
adjustment factor, which adjusts the rebate perce
BY THE DEPARTMENT OF
ntages to ensure that the overall
Rebate expenditure does not increase at a higher rate than the Consumer Price Index.
For example:
An insurer has two products and has one customer per product:
Product A – ambulance product price change from $50 to $55 (10% increase)
Product B – combined product price change from $3,000 to $3,060 (2% increase)
The average premium increase in this example using the above methodology is 6%.
1
Age-based Discount (privatehealth.gov.au)
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FOI 5068 - document 1.1
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ACT 1982 (CTH)
HEALTH AND AGED CARE
INFORMATION
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THEBY THE DEPARTMENT OF
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FOI 5068 - document 5.1
The Hon Mark Butler MP
Minister for Health and Aged Care
Ref No: MS24-000053
«Prefix»«First_Name»«Last_Name»
«Position»
«Insurer»
«Email»
Cc:
Dear «Prefix»«Last_Name»
Thank you for your application for the 2024 Private Health Insurance Premium Round to request
approval of proposed premium changes for complying health insurance products offered by
«Insurer».
As the Minister for Health and Aged Care, and acting under subsection 66-10 (3) of the
Private
Health Insurance Act 2007, I approve the proposed changed amounts for the complying health
insurance products which «Insurer» has applied for in Template A of the ap
ACT 1982 (CTH) plication received in
*November 2023/January 2024*. I note that your average premium increase is
«Average_percent» per cent. This will be the figure which is displayed on the department’s
website. As many of your customers will experience different price changes, it is your
HEALTH AND AGED CARE
responsibility to clearly explain to each customer the specific change to their premium, the
reasons why you have made this decision and their optio
INFORMATION ns.
As communicated by the Department of Health and Aged Care, premium deferrals are no longer
permitted, and this approval is subject to the premium change being implemented on 1 April
2024.
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It is important you note that in approving the proposed premium price changes, I have not
THE
necessarily endorsed all the approaches that have b
BY THE DEPARTMENT OF een undertaken or foreshadowed to support
policyholders. The department, working closely with the Australian Prudential Regulation
Authority and the Australian Competition and Consumer Commission, will continue to actively
monitor the performance of the sector and commitments made to support policyholders.
I thank you for your cooperation with my Office, the department and Australian Prudential
Regulation Authority during this premium approval process.
Yours sincerely
Mark Butler
/ /2024
Parliament House Canberra ACT 2600 | xxxxxxxx.xxxxxx@xxxxxx.xxx.xx
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FOI 5068 - document 5.2
Attachment H
An outline of the concept of the public interest and its application to the approval of private health
insurance premium increases
Subsection 66-10(3) of the
Private Health Insurance Act 2007 (PHI Act) provides that:
“The Minister must, by written instrument, approve the proposed changed amount or amounts,
unless the Minister is satisfied that a change that would increase the amount or amounts would
be contrary to the ‘public interest’.”
In making a decision to approve or refuse a premium increase for a complying health insurance product,
the Minister must assess each application upon its individual merits, and make a decision as to whether
to approve the particular insurer’s proposed increase:
• in relation to particular products offered by the insurer that are the subject of the application
made under section 66-10 of the PHI Act; or
• in relation to all the products offered by the insurer that are the subject of the application made
under section 66-10 of the PHI Act.
The PHI Act does not define public interest nor set out matters to be taken into account in determining
what is in the public interest for the purposes of subsection 66-10(3). Where no such definition is
provided in the statute, judicial authority indicates that the scope of the term public interest is indicative
of a broad discretion, but must also be determined within the context of the relevant statutory scheme.
ACT 1982 (CTH)
The public interest is not merely the interest of an individual or group. Determining the public interest
involves a discretionary value judgment, confined by the subject matter, scope and purpose of the PHI
Act.1 Decisions relating to the public interest for the purposes of subsection 66-10
HEALTH AND AGED CARE (3) may take into
account different factual matters presented by the applicant in support of an increase in premium
INFORMATION
amount or amounts. However, the Minister may also take into account other matters that are relevant
to the decision being made, such as the potential impact of the increases on fund members, the overall
impact on Australia’s fund members, and the public at large. Section 66-10 does not appear to limit the
kinds and sources of information that the Minister can consider in making his decision. Where the public
interest lies in a particular decision making wi
FREEDOM OF ll depend on a balancing of interests.
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THE
Broader policy considerations may also be relevant to the exercise of power under subsection 66-10(3).
BY THE DEPARTMENT OF
The impact of the refusal is relevant to the extent that any refusal may affect members of the public,
including the policy holders of that particular insurer.
There is a legal risk with any decision to refuse approval because the private health insurer may
challenge that decision in court. Ultimately it is a matter for the Minister whether he or she considers it
would be contrary to the public interest to approve the increase.
In addition, if the Minister refuses to approve the proposed changed amount or amounts, the Minister
must table the reasons for refusal in each House of the Parliament, no later than 15 sitting days of that
House after the refusal decision is made.
1
O’Sullivan v Farrer (1989) 168 CLR 210. Judgment of majority at 13.
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FOI 5068 - document 9.1
Attachment A
Dates of the media release announcing approval of the premium increases since 2000.
Date of Media Release
Year
Announcing Approval
2000 - 2001
16 February 2000
2001 - 2002
8 March 2001
2002 - 2003
25 February 2002
2003 - 2004
14 March 2003
2004 - 2005
27 February 2004
2005 - 2006
2 March 2005
2006 - 2007
24 February 2006
2007 - 2008
23 February 2007
2008 - 2009
6 March 2008
2009 -2010
2 March 2009
2010 -2011
23 February 2010
2011 -2012
25 February 2011
2012 -2013
28 February 2012
ACT 1982 (CTH)
2013 - 2014
8 February 2013
2014 - 2015
24 December 2013
2015 - 2016
27 February 2015
HEALTH AND AGED CARE
2016 - 2017
2 March 2016
INFORMATION
2017 - 2018
10 February 2017
2018 -2019
25 January 2018
2019 -2020
19 December 2018
2020 - 2021
7 December 2019
2021-2022
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23 December 2020
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2022-2023
23 December 2021
THE 2023-2024
BY THE DEPARTMENT OF
6 February 2023
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Document Outline
