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Health insurers using ‘underhanded, secret’ tactics to hike prices, ombudsman finds

Private health insurers have been warned they will be named and shamed unless the industry cleans up its act and stops using secret, “dirty” tactics to raise premiums. The federal ombudsman found insurers routinely engaged in so-called “phoenix resurfacing” – a practice whereby a product is discontinued using a loophole only to be replaced a short time later with an almost identical service at a much higher price. In one case, premiums rose by 21 per cent in the year following a “phoenix resurfacing” which Health Minister Mark Butler said amounted to price gouging.

Ombudsman finds health insurers used 'dirty, secretive' tactics to jack up prices

Private health insurers often use ‘phoenixing’ to secretly raise prices, the federal ombudsman has found. (Isabella Porras) “If two members of the same fund are offered essentially the same product but because of this phoenixing practice the price they pay can differ by 20 per cent or more, then you have to describe it as price gouging,” he said. The ombudsman launched an investigation after consumer group Choice first reported the practice in February and found some insurers had increased prices by 47 per cent over three years. Any private health insurance price increase must be approved by a minister, and while phoenixing is not illegal, Butler said it was “clearly a violation of the spirit of the law”.

Ombudsman finds health insurers used 'dirty, secretive' tactics to jack up prices

Mark Butler has threatened to name and shame insurers unless they clean up their act. (Alex Ellinghausen) “This is a dishonourable and largely secretive way for health insurers to increase prices outside of the usual approval process,” he told reporters. Butler said the practice was widespread across the industry, particularly in relation to “gold” products, which are the only option for Australians to get products such as maternity and major surgery cover. He said unless the industry stopped the practice, the government would change the law to make phoenixing illegal and name and shame insurers. “In the absence of a real substantive change in the insurers’ behaviour, where they publicly acknowledge that they have engaged in this practice and, at least to date, intend to continue to engage in it, then I would reserve the right to consider legislative options to outlaw it in the future,” he said. “All options are on the table as far as I am concerned, and that includes naming insurers that we know are engaging in this practice,” he added. It comes after Australia’s 29 private health insurers submitted proposals for price increases next year in November. Butler said he rejected the proposals after receiving advice from regulators and health authorities and would write to all insurers telling them to “grind up their teeth” with proposals to reduce price increases.

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