A proposal by the federal opposition for a 2-per-cent cap on health insurance premium increases in the event of it winning office would lead to eight insurers operating at a loss in the first year and put three on the brink of insolvency in the second year, according to an industry analysis.
The biggest health policy from Bill Shorten to date — capping premium increases at roughly half the current rate for two years to allow for another inquiry — would also put the more dominant health funds at a competitive advantage.
The Australian newspaper also reports slashing premium revenue would likely prompt insurers to reduce benefits and payments, undermining several years of reforms before a Labor government would even be in a position to respond to an inquiry by the Productivity Commission.
Industry body Private Healthcare Australia commissioned an analysis of data on the sector and the potential impact of the proposed cap. The analysis suggests eight insurers would be in deficit at their current level of expenditure growth in year one of such a cap. In year two, 15 funds would be in deficit — three on the brink of insolvency if hit with growth in costs or claims.