Federal Health Minister Sussan Ley has demanded private health insurance companies provide more information to justify premium increases.

The Health Department has ordered funds to reduce their proposed fee hikes or provide evidence of any extenuating circumstances as to why the proposed increases should be given the green light.

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Ms Ley said consumers have concerns about the affordability of their premiums, with fees rising by about 6 per cent per year over the past five years.

“I have held increasing concerns the current process used to assess and approve premium increases does not allow Government a rigorous assessment of an insurer’s full financial position,” she said.

“It is important I am armed with the full picture before approving any premium increase, particularly as consumers are telling me they are finding it increasingly difficult to simply ‘shop around’ for a better deal.”

Opposition Leader Bill Shorten accused the Government of presiding over “out-of-control” premium increases and exacerbating the problem with cuts to the public health system.

“In the last two years Australian families have paid the largest increases in premiums, the rate of increase, that we’ve seen in a very large time,” he said.

“The Liberals are now realising that the horse has bolted and they’ve got to do something about it. It’s pretty ineffectual, their response.

“And at the same time as the health premiums are out of control in terms of increases of above 6 per cent, we see them cutting $650 million over Christmas to Medicare.”

Consumers shunning insurance amid increasing premiums

Half a million Australians dropped or downgraded their private health insurance in the last financial year.

In response the Minister last year launched an online survey asking consumers for their views on what services should be covered by policies and how they can deliver better value for money.

The consultation — the results of which have not been made public — asked voters whether premiums should be charged according to a person’s smoking status, age, gender or “health risk factors”.

Ms Ley said if rising premiums forced people to abandon private health insurance, it could also lead to unnecessary pressure on the public health system.

However, Ms Ley last month would not rule out approving an increase to premiums.

In its annual report on the industry issued earlier last year, the ACCC said there were a number of market failures in private health insurance that impeded consumers’ ability to make choices that are likely to be in their best interests.

A report by APRA last year showed 500,000 Australians who prepaid their health insurance premiums for two years to avoid Labor’s means test had downgraded their cover with many buying “junk” policies of little benefit.

The APRA figures showed the number of non-exclusionary —or “all inclusive” — private health insurance policies with hospital cover fell by 500,471 to 3.5 million in 2014-15.

In contrast, there was a 558,619 increase in the number of health policies with hospital cover that exclude certain medical services and also require patients pay an excess and co-payment, or gap.