“Against this background, I regret to inform you the Australian Private Hospitals Association has no confidence in Mr Summerhayes capacity to act effectively as a regulator of private health insurance.”
Mr Summerhayes could not be reached for comment before deadline.
Mr Summerhayes said on Tuesday the exodus of young members and rocketing hospital costs meant all but three of Australia’s health funds would be unviable within two years, and would have to “merge or fold”.
Matthew Koce saiys his organisation, which represents 27 not-for-profit insurers, has not taken this extraordinary decision lightly. Jesse Marlow
“Hospital coverage has declined further. The younger, healthier cohort that financially underpins our community-rated system continues to abandon or shun private cover,” Mr Summerhayes said.
“Claims costs are rising faster than premium growth, cutting insurers profit margins.
“The Grattan Institutes description of a death spiral may be dramatic, but it’s also pretty accurate: on current trends, APRA predicts were only a few years away from seeing private health insurers forced to merge or fold, with the smaller insurers, represented in this room, likely to be the most vulnerable.”
He also said APRA would support a review of the industry, and such a review should look at the community rating system which ensures all members pay the same premium regardless of age or health and the inclusion of mental health care in private cover.
‘Weve had staff in tears’
Mr Koce told AFR Weekendhis organisation, which represents 27 not-for-profit insurers, had not taken this extraordinary decision lightly. However, after speaking with Mr Summerhayes following Tuesday’s speech, he said he had lost all confidence in him.
I spoke to Geoff Summerhayes the day after he delivered the speech to express my disappointment to him in the strongest possible terms, and I was not pleased with the response I got, so I wrote this letter to the Treasurer,” he said.
“I’ve never done anything like this. But this is an exceptional set of circumstances,” he said.
The letter rejected Mr Summerhayes’ concerns about the sustainability of smaller funds.
Perhaps if he talked to a few more people in the industry he might have had a better understanding of it.
Matthew Koce, Members Health Fund Alliance chief executive
“All health funds are prudently run and have strong capital reserves well in excess of the required minimum. Mr Summerhayes’ comments are staggering given that all health fund premium applications were approved by APRA in late 2019 and contained three-year projections out to 2023,” the letter said. It also focused on the the impact on communities of closing small regional funds.
“Weve had staff in tears because theyre concerned about their jobs. Weve had customers who have been with us since 1960s who love their fund and are worried their fund will be wound up,” Mr Koce told the AFR Weekend.
He said he did not understand how Mr Summerhayes could claim all but three funds were on track to fail, saying he had not shared the data with the industry. “This model is a complete mystery for us,” he said.
Mr Koce said he had been talking to other industry bodies, including the Australian Medical Association, the Consumer Health Forum, the Australian Dental Association and the peak body for Australia’s private hospitals, APHA.
‘Consolidation agenda’
APHA chief executive Mr Roff told AFR Weekend Mr Summerhayes had been “driving towards this consolidation agenda for a long time”.
It stems from a lack of knowledge or misunderstanding about the sector and the way it operates, and perhaps if he talked to a few more people in the industry he might have had a better understanding of it,” he said.
He was particularly critical of the suggestion that community rating and including mental health should be reviewed.
“Community rating is a longstanding policy that has bipartisan support, and it’s what differentiates our system from the US system, where if you are old and unwell you are effectively priced out of the market,” he said.