Labor plans to cap private health insurance rate increases to 2% for two years, which could save a families an average of $340.

In a statement on Sunday Bill Shorten and the shadow health minister, Catherine King, said Australians were being “ripped off” by premium rises that had averaged 5.5% over the past 10 years.

In addition to the two-year cap Labor, if elected, will ask the Productivity Commission to review private healthcare focusing on its value, quality and affordability.

Malcolm Turnbull has accused Shorten of “desperately making up policy on the run” and said Labor “wants to destroy private health insurance”.

The announcement follows Shorten’s warning to private health insurers at the National Press Club on Tuesday that “business as usual is not cutting it” and that premium increases were “out of control”.

In January the federal health minister, Greg Hunt, announced the government had approved an average increase in private health premiums of 3.95%.

Although the government heralded the rise as the lowest since 2001, Labor has used private health costs increasing at more than double the rate of inflation to argue the rising cost of living is out of control at a time when wages are stagnating.

Some 13 million Australians have private health insurance – many who earn more than $90,000 take out insurance to avoid the Medicare levy surcharge.

The sector has been subject to a rise in complaints. Customers are concerned about the large out-of-pocket costs and the difficulty in comparing policies. In 2016-17 customers paid $4bn more in premiums than they received in benefits.

Private health insurers make $1.8bn in profit before tax and receive $6bn in public subsidies through the private health rebate.

Labor estimates that the two-year 2% cap will save singles an average of $143, a young couple with no children $290, a single parent $264, a family $344 and an older couple $347.

Turnbull noted that Shorten had first “floated the idea of rolling back or abolishing the private health insurance rebate” before ruling it out this week. He said the tough talk on private health had become “rolling embarrassment” for the opposition leader.

Turnbull told ABC’s Insiders that insurers were “private companies” that operate “in a very competitive market”. He said Labor “hates” private health insurance but that it supplemented and supported the public system.

The chief executive of private health insurer nib, Mark Fitzgibbon, said Labor’s plan was an overreaction and an attack on the free market.

“That a future government would seek to set prices in any highly competitive market is absurd,” he said. “This may be politically popular but it’s an affront to how the free market operates. What next? Food, clothing, car insurance, school fees and petrol?”

Earlier in a statement Shorten and King denied the charge that Labor wanted to “destroy” private health insurance, saying that it “plays an important role in Australia’s world-class health system”.

“But under Malcolm Turnbull, Australians are questioning the cost and value of private health more than ever,” they said.

“The Turnbull government is failing to address this crisis and help Australians with the affordability of private health insurance, and as a result, people are walking away from private health altogether”.



“Labor is choosing to put Australian families first, instead of the interests of the multibillion-dollar private health industry.”