A warning by APRA member Geoff Summerhayes the private health insurance (PHI) industry needs to change its business model or it will enter a “death spiral”, was this morning described as “incredible alarmist” by HCF CEO Sheena Jack.

Summerhayes said in a speech last Tuesday (February 4) if the industry did nothing, it would in two years be left with only three funds, of which none would be not-for-profit (NFP), as the growing gap between rising claim costs and premiums continued to threaten sustainability in the industry.

Jack told ABC Radio National Breakfast program: “There are challenges (in) the industry but they are well known and there is a lot of activity (to) resolve those issues – but to say there will be only three funds within two years is irresponsible … creating panic.”

She said the PHI industry was “very well capitalised” and HCF, the third biggest of the PHI funds, had been growing “far better than all of the rest of the industry put together”.

But Jack admitted there were “extreme challenges” in the industry. “We are working with the government tackling policy issues”.

In particular, the PHI industry wanted to restore the PHI rebate for under 40-year olds back to 30%.