The Australian Medical Association (AMA) welcomes proposed amendments to legislation to outlaw the price gouging of new customers.
This tactic involves insurers closing an existing product offering before opening an almost identical one at a higher price outside the regulated premium round process (called ‘phoenixing’), in order to circumvent the requirement for ministerial approval of higher-priced premiums.
In a submission on the proposed amendments, the AMA supports changes that would force insurers to use only the annual premium round to seek approval for the pricing of new products, unless in exceptional circumstances.
The AMA argues ‘exceptional circumstances’ must be clearly defined in legislation to prevent any possibility of insurers finding loopholes to implement product phoenixing.
AMA president Danielle McMullen said private health insurers have enjoyed extraordinary profits for many years with few consequences for poor behaviour.
“Private health insurance premiums have outpaced wages and inflation in recent years, all while insurers’ management expenses and profits continue to soar,” Dr McMullen said.
“The widespread practice of phoenixing is a major factor in consumers struggling to access the level of cover that meets their needs, and it is eroding public confidence in the private health system.
She also said, “Private hospitals play a vital role, especially as more Australians seek care outside the overwhelmed public sector. But unacceptable conduct from insurers threatens the integrity of our entire healthcare landscape.”
Previously in December 2024, health minister Mark Butler described phoenixing as an ‘underhanded’ and ‘sneaky’ practice.
The AMA also calls for serious penalties to apply for insurers that continue product phoenixing once legislative changes are implemented.
“There are just a few insurers that dominate the market in Australia, and given their extraordinary financial resources and profitability, severe penalties must be in place to deter illegal behaviour,” Dr McMullen said.
Dr McMullen said the issue also highlighted the need for a Private Health System Authority to better regulate the sector and drive long-term reform.
“There are multiple bodies involved in regulating the private health sector, and the absence of a coherent approach has clearly been a contributing factor in allowing this practice to go on for far too long,” she said.
The AMA’s submission can be read here.