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Chapter 3: Industry overview


The private health insurance industry continued to perform well in 2014-15 and maintained a strong financial position.
A competitive and sustainable PHI market is more able to support the increasing utilisation of health and medical services and complement the public health system.
PHIAC worked to promote an efficient and competitive health insurance market through:
  • the provision of specialist advice on premium applications;
  • assisting the industry in a range of complex corporate transactions; and
  • compiling, analysing and publishing quarterly industry statistics.
The focus for this chapter includes changes to the PHI industry and the provision of information to other agencies in 2014-15.
Changing structure of the PHI industry
Significant changes to the PHI industry in 2014-15 included the sale of Medibank Private Ltd (MPL), the conversion of two restricted access insurers to open access, one industry merger, and the cancellation of the registration of one private health insurer.
Sale of Medibank Private Ltd
MPL was listed on the Australian Securities Exchange on 25 November 2014, following a scoping study in 2013-14 to determine the most appropriate way to progress the sale. The transfer of shares under the MPL Share Offer occurred on 1 December 2014.
As the prudential regulator, PHIAC provided factual information for the IPO and the associated due diligence process. Whilst the IPO represented a significant share offer for the government and the PHI industry, the regulation of MPL by PHIAC remained consistent and effective during this significant change in the PHI sector.
Transport Health Pty Ltd
Transport Health Pty Ltd became an open access private health insurer on 10 November 2014 following the lodgment of a compliant change of registration notification with PHIAC under section 126-40(4) of the PHI Act. Previously, policy holders needed to be employed, previously employed or a contractor to the transport industry or Transport Friendly Society Ltd.
On 1 December Primary Health Care Ltd assumed ownership of Transport Health Pty Ltd.
Phoenix Health Fund Ltd
Phoenix Health Fund Ltd converted to an open access insurer on 18 May 2015 after PHIAC found its notification to be compliant with the requirements of section 126-40(4) of the PHI Act. Prior to this date, membership was restricted to employees and former employees of the steel industry, associated companies and family members.
Merger of HBF Health Ltd and Healthguard Health Benefits Fund Ltd
At its meeting on 15 May 2015, PHIAC approved the application to transfer all health fund assets, liabilities and policies of HealthGuard Health Benefits Fund Ltd (HealthGuard) to HBF Health Ltd (HBF), in accordance with section 146-5 of the PHI Act. The transfer took place on 30 June 2015.
Cancellation of the registration of Healthguard Health Benefits Fund Ltd
PHIAC resolved to cancel the registration of HealthGuard as a registered private health insurer, with effect from 30 June 2015, as HealthGuard would no longer undertake health insurance business following the transfer of its health benefits fund to HBF.
Premium analysis
Insurers made submissions to the Minister for Health for permission to change the premiums they charged for PHI products. Under section 66-10 of the PHI Act, the Minister must approve requests for premium changes unless the Minister is satisfied that to do so would be contrary to the public interest.
In 2014-15, PHIAC was again the lead adviser to the Minister on premium applications. Industry feedback on PHIAC's assessment process was positive, with insurers citing transparency, consistency and timeliness of feedback as key factors behind a well-run process.
Industry circulars
PHIAC regularly issued circulars to communicate information to the PHI industry and other stakeholders on a range of topics which included:
  • changes to prudential standards or legislation;
  • reporting requirements (both quarterly and annual);
  • changes to fund rules;
  • PHI industry transactions;
  • release of publications; and
  • opportunities for industry consultation.
During 2014-15, ten circulars were released by PHIAC.
PHI industry statistics
PHIAC's ongoing statistical analysis provided relevant, timely and accurate data on individual insurers. This data was used by stakeholders and also assisted staff to identify issues across the PHIAC industry.
PHIAC statistics were disseminated to the public to inform policy makers and other stakeholders on industry trends and to enable consumers to make informed choices about PHI.
PHIAC followed international standards to ensure users had confidence in the integrity of the data and that the statistics were made available on an impartial basis.
Data integrity was strengthened in 2014 with the introduction of a new reporting template designed to collect updated financial statistics from insurers consistent with changes to the Capital Standards. Further enhancements to PHIAC's statistical information system were made during the year with the introduction of an automated lodgement system to be used by insurers.
All quarterly statistics were made available in a timely manner and were generally published on the PHIAC website within four weeks of receipt. Significant trends are analysed each year in PHIAC's Operations of Private Health Insurers Annual Report.
One example of how PHIAC data is widely used is the evolution of the PHI industry in Australia shown by the reporting of the number of privately insured people with hospital cover as depicted in Figure 1. The chart provides a historical perspective of the number of people with hospital treatment coverage since 1971 and notes the significant changes in government policy and significant industry events around PHI that have occurred since that time.
Figure 1: Significant changes to the private health insurance industry and the number of people with hospital treatment cover.
Line chart showing significant changes to the private health insurance industry and the number of people with hospital treatment cover from June 1971 to June 2015. In 2015 there were around 11 million people with hospital treatment cover. This number increased the most quickly by more than 2 million people when Life Time Health Cover was introduced from 1 July 2000.
Click on the above image to view the figure 1 in a larger size.