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2002-2003
THE PARLIAMENT OF THE
COMMONWEALTH OF
AUSTRALIA
SENATE
HEALTH LEGISLATION
AMENDMENT (PRIVATE HEALTH
INSURANCE REFORM) BILL
2003
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Health and Ageing,
Senator the Hon. Kay Patterson)
The following abbreviations are used in this explanatory memorandum.
AAT – Administrative Appeals Tribunal
DVA - Department of Veterans’ Affairs
HIC - Health Insurance Commission
LHC - Lifetime Health Cover
NHA - National Health Act 1953
PHIAC - Private Health Insurance Administration Council
PHIO - Private Health Insurance Ombudsman
RHBO - Registered health benefits organization (often referred to in the NHA as registered organization)
RIS - Regulation Impact Statement
The Bill - Health Legislation Amendment (Private Health Insurance Reform)
Bill 2003
This Bill amends the National Health Act 1953 (NHA) and the
Private Health Insurance Incentives Act 1998.
On 11 September
2002, the Minister for Health and Ageing announced a package of reforms designed
to streamline the regulation of the private health insurance industry and
provide consumers with better value for money from their private health
insurance. This Bill gives effect to many of the measures contained in that
announcement.
At present, registered health benefits organisations
(RHBOs) are required to submit all rule changes, no matter how insignificant, to
the government for approval. This places a considerable administrative burden
on the health benefits industry. Part 1 of Schedule 1 of this Bill amends
the NHA and the Private Health Insurance Incentives Act 1998 by removing
this rule change assessment process, and replacing it with a system of
monitoring and compliance. This will remove the inefficiencies associated with
the existing rule change process, and allow RHBOs to be more responsive to the
needs of their members.
To make sure that government can effectively
monitor the performance of RHBOs, Part 1 of Schedule 1 of the Bill
also establishes a set of indicators for monitoring the performance of RHBOs.
These indicators will be used to identify RHBOs that breach the NHA, and alert
the Minister for Health and Ageing to practices that may be contrary to health
policy. They will be particularly important for monitoring whether RHBOs
continue to fulfil their community rating obligations, which are designed to
ensure that private health insurance is affordable for all Australians. The
Bill also establishes a broader range of investigatory powers and administrative
sanctions that the Minister may use when a RHBO is found to be in breach of the
NHA or is failing to meet government objectives.
Part 2 of
Schedule 1 of the Bill will amend the NHA to increase consumer protection
within the private health industry. The Bill provides the Private Health
Insurance Ombudsman (PHIO) with increased powers to investigate complaints and
resolve disputes. RHBOs will now have to respond to a request for information
or a recommendation from the PHIO within a specified time frame. The PHIO will
also have the power to report the outcomes of an investigation to the Minister,
and make recommendations on ways of dealing with specific issues arising from an
investigation.
Part 3 of Schedule 1 of this Bill provides for the
production of an annual “State of the Health Funds” report by the
PHIO. The report will contain information on how RHBOs are performing and how
well they are serving their members, and will be an important tool for consumers
when making value for money decisions about their private health insurance.
RHBOs will be required to make information about the report widely available to
members.
Lastly, Part 4 of Schedule 1 of this Bill will amend the NHA to make the a number of minor improvements to the Lifetime Health Cover (LHC) regulations. These amendments will:
• establish a notional annual birth-date of 1 July for the purposes of LHC. People between the age of 30 and 65 who join a health fund before the next notional birth-date will not incur a LHC loading for that year;
• recognise cover provided by the Department of Veterans’ Affairs (DVA) Gold Card as counting towards hospital cover for the purposes of calculating a LHC loading;
• provide new migrants over the age of 30 with 12 months to take out hospital cover without being subject to a LHC loading;
• ensure that Australian citizens who are overseas on their notional
31st birthday have a similar 12 month grace period;
and
• ensure that Australian citizens who have hospital cover and go
overseas for periods of greater than 12 months will not have that time overseas
counted towards any potential LHC loading.
This Bill represents an
important step in reforming the private health insurance industry.
The Health Legislation Amendment (Private Health Insurance Reform) Bill 2003
will have no significant impact upon the finances of the Commonwealth.
The Commonwealth Government has introduced a number of reforms in recent years. These reforms are designed to:
• ensure there is an appropriate balance between the public and private health sectors in Australia;
• address the affordability, stability and attractiveness of private health insurance; and
• encourage consumers to take out private health insurance and decrease
the pressure on the public health system.
Key Government initiatives have included the:
• 30% Rebate;
• Lifetime Health Cover (LHC); and
• No Gap/Known Gap scheme.
The 30% Rebate was introduced in January 1999. The Rebate has directly
reduced the cost of premiums to consumers, by providing Australians with a 30%
rebate on the full cost of their private health insurance premiums.
LHC commenced in July 2000, and changed the way private health insurance operates. LHC is a long-term structural reform designed to encourage people to take out hospital cover earlier in life, and to maintain their cover over their lifetime. LHC is designed to:
• slow the rate of premium increases;
• discourage ‘hit and run’ behaviour (where someone joins a
health fund just before requiring treatment and leaves soon after); and
• improve the overall health profile of private health insurance
membership.
Under LHC, health funds add a fixed loading to premiums based on the age of
each member when he or she first takes out hospital cover with a registered
health fund. People who take out hospital cover with a registered health fund
before they turn 31 years of age, and who maintain that cover over their
lifetime, will pay a lower premium throughout their lives relative to people who
delay joining. The loading applies only to age, regardless of health
status.
The No Gap/Known Gap Scheme provides health fund members with no gap or known gap insurance. That is, a registered health fund either:
• provides insurance to cover the difference between fees charged by
providers of health services (doctors) and the combined health insurance and
Medicare benefits payable for in-hospital medical services; or
• ensures that, where possible, any amount not covered is known
by the patient before treatment.
Prior to this scheme, health funds
were allowed to cover the gap only where a negotiated agreement existed between
the doctor, the hospital and/or the health fund about the price of the
procedure.
Current regulation through the NHA attempts to:
• influence underlying participation factors;
• limit how health funds can generate income; and
• govern how
health funds can use income, in order to minimise risk of premium increases and
health fund collapses.
Health funds generate the vast majority of their
income via member premiums. The premium change process is regulated by
Government and includes the ability for Government to disallow an increase on
public interest grounds. The Government currently has an agreement with
industry that premium changes will occur once a year, across the
industry.
The expenditure side of health fund business - benefit
entitlements for ancillaries, the scope and nature of products, product design
features and conditions for hospital entitlements - is also regulated by
Government.
On 2 April 2002, Senator Patterson, Minister for Health and Ageing, announced
a review of the regulation of the private health insurance industry. The review
was to consider if the current rules and regulations are delivering the best
outcomes for health fund members.
Specifically, the review was tasked with considering several important Government objectives, including:
• private health insurance policy;
• health policies;
• fiscal policy objectives;
• competition policy objectives; and
• industry policy.
The review considered a wide range of issues, including product and premium
regulation, regulation of lifestyle and other ancillaries, health fund
management expenses and some specific policy issues concerning LHC.
The
reforms following from the first stage of the review were announced by Senator
Patterson, Minister for Health and Ageing on 11 September 2002.
This
Regulation Impact Statement (RIS) analyses those reform measures that will be
effected through the introduction of the Health Legislation Amendment (Private
Health Insurance Reform) Bill 2003.
The final stage of the review of the
regulation of the private health insurance industry is due to be completed in
2003 and will make further recommendations relating to the objectives of the
review.
The following types of market failure were identified by the review as
requiring action.
In the March 2002 round, registered health funds sought higher than expected
levels of premium increases. These increases were attributed to the increasing
level of claims and benefit payments being experienced by health funds for the 9
months to 31 March 2002. The request for higher than expected overall levels of
premium increases (averaging 6.9 per cent) raised concerns over the
level of health fund premium increases in the future.
There are some key
cost drivers in the private health industry, which are undercurrents in health
costs both nationally and internationally. These include increasing access to
new technologies and medicines that treat illnesses previously untreatable,
provide better quality of life to patients, and are less invasive. However,
these treatments are often very costly.
In addition, health insurance
affects the market for health care. Once the premium is paid, then prices at
the point of consumption are either zero or heavily subsidised. This can lead
to increased demand for health care.
In an environment where there are
cost pressures across both the public and private health sectors, health funds
have limited ability to influence the major cost drivers of private health
insurance premiums. For this reason, there is a need for the Government to
intervene in the provision of health care services through regulation.
It
is likely that there will be continuing, strong growth in demand for services
that are insured through private health insurance. Accordingly, there is a need
to develop options to minimise pressures for future premium increases.
There is considerable asymmetry in information between the patient and the
health fund. This has the potential to impair the consumer’s ability to
make decisions about private health insurance and its value for money, as they
are dependent on health funds to provide information on the appropriateness of
products. Consumers have little capacity to check on the relative performance
of, or the advice provided by, health funds when determining the best product
for their particular needs.
Although the introduction of portability
arrangements has made it easier for consumers to change their health fund
without disadvantage, industry experience suggests that consumers generally do
not switch funds. This means that the main point of competition between health
funds is in relation to members signing up for private health insurance for the
first time.
The Government has therefore undertaken a range of
initiatives to improve the ability of consumers to make informed choices when
purchasing private health insurance. These include the introduction of Key
Features Statements and Gaps Cover advertising.
The provision of
consumer information and its timing are regulated in some areas (for example,
requirements for member notification of changes to products). In addition, the
Government is actively encouraging industry self-regulation where that is
considered appropriate (eg. development of Industry Codes of Conduct, more
targeted ancillaries cover).
The institution of the PHIO provides a
significant mechanism for health funds to be accountable to their members.
Public confidence in private health insurance is enhanced by this impartial
complaints service which is seen to be independent of health funds, hospitals,
medical and dental professions. In view of the Government’s policy to
make private health insurance more competitive and attractive to consumers, and
to give Australians greater choice in health care, the PHIO’s service will
remain an important part of the private health insurance system in the
future.
A survey of health funds and consumers conducted by Reark
Research Consultants in 1997 found the majority of PHIO complainants
surveyed were satisfied with the service. Complainants found information
provided by PHIO easy to understand or had their concerns dealt with to their
satisfaction. Only thirteen per cent of consumers were identified as not
satisfied with the PHIO outcomes.
Although both complainants and health
funds were generally satisfied with the PHIO service, current legislative
arrangements restrict the PHIO in bringing disputes to the point of resolution.
In particular, complaint resolution can be protracted, as the PHIO has no power
to specify timeframes for the provision of relevant information or to require a
fund’s advice on how it proposes to resolve a complaint. The PHIO’s
recourse to further action where a dispute cannot be resolved is also
limited.
Market failure specific to the private health industry is due primarily to
the need for community rating, rather than the traditional risk-rating used by
other insurers.
Community rating means that a health fund cannot price a
product based on a contributors’ risk (that is, age or medical history).
In the absence of regulation, there are many ways in which a health fund could
violate community rating and, given the different cost structures of high and
low risk members, the incentive is there to do so. Erosion of community rating
can also occur through selective marketing, product design and differences in
pricing between products that are attractive to low-risk and high-risk members.
As such, most of private health regulation seeks to ensure consumer
protection in the area of community rating and product design.
The objective of Government action in reforming the regulation of private health insurance is to:
• make private health insurance more competitive and attractive to consumers; and
• give Australians greater choice in health care;
while ensuring a
sustainable and balanced health system by supporting a viable private health
sector that complements the public health system.
In achieving this objective, private health insurance for Australians is pursued through the following target areas:
• improving the affordability of private health care;
• increasing consumer awareness, confidence and choice;
• regulation that allows for developing innovative products;
• encouraging improved health industry efficiency;
and
• enhancing competition between funds.
This section sets out the various options for each of the key components
contained in the Health Legislation Amendment (Private Health Insurance Reform)
Bill 2003. As numerous components are examined, for ease of reference, an
assessment of the impacts has also been included in this section.
The groups most likely to be significantly affected by these options are:
• health funds;
• consumers; and
• Government.
A health fund’s rules provide a framework for the operation of the
health fund and include the details of each product offered to clients,
entitlement rules and the rates of contribution, as well as governance details.
Some health funds have around 600 individual products, and each product tends to
have its own schedules of rates and benefits in each State.
No change to
a health fund’s rules can be made without a notification in writing being
provided to Government. Thousands of individual rules changes are effected
annually as any change of rule, no matter how insignificant, or semantic, must
be notified to Government. Notifications normally include many changes to
rules, including complete rewrites of the health fund’s rules. Some 100 or
so bundles of rule changes are assessed by the Government annually.
Government assesses proposed rule changes against criteria specified in legislation and may declare a change will not come into operation if these criteria are not satisfied. The change must not:
• be in breach of the NHA or a condition of registration; or
• impose an unreasonable or inequitable condition; or
• adversely affect the financial stability of the health fund. Financial stability is assessed by the Private Health Insurance Administration Council (PHIAC).
There is a range of aspects the Department takes into account when assessing whether a rule change is reasonable and consistent with the NHA. These include whether:
• the rule violates principles of community rating;
• the rule change would cost-shift to the Commonwealth or States;
• it is likely to be detrimental to consumers because it has potential
for being misunderstood; and
• it is grossly inconsistent with the
Government’s health policy directions.
These principles are
supported by legislative references scattered through the NHA, although not
explicitly stated as principles.
Current arrangements where no change to a health fund’s rules can be
made without a notification in writing being provided to Government will
continue. Government will continue to:
• assess each change and all
products (including outreach services) following detailed examination for
consistency with legislation; and
• maintain the 60-day rule (which
means that the change cannot come into effect for 60 days following the
notification).
Redesign the assessment process to require health funds to demonstrate that
the products they offer comply with specified indicators that support basic
Government policy such as community rating.
Health funds will need to
ensure product changes would not breach Government policies as expressed through
the NHA. Where a health fund is consistently or blatantly in breach, the
Government may penalise the health fund. The range of administrative sanctions
in place for breaches include, but are not limited to removing the ability for
health funds to offer members the 30% Rebate by way of a premium reduction.
On health funds – The criteria by which Government assesses a
product are cumbersome. It is therefore difficult for health funds to plan in a
manner that accords with Government expectations. This adds uncertainty for
health funds and a deal of administrative complexity that is unnecessary. It
removes the ability for health funds to respond quickly to changes in the
market, and hence, to compete.
On consumers – Would have
minimal impact on consumers.
On Government – The current
arrangements are administratively complex and burdensome on Government.
On health funds – Will provide greater flexibility and control
over the products that health funds offer. Rather than applying to Government
for rule changes, it will be within a fund’s control whether a rule change
shall occur. Government would have a monitoring role to ensure that funds
continue to abide by the NHA.
This option would increase the level of
competition within the private health insurance market with health funds better
able to introduce innovative products and compete on this basis.
On
consumers – Should lead to better value products. If a health
fund’s actions result in the loss of the ability to provide the Rebate as
a premium reduction, members will be required to claim the 30% Rebate through
the tax system or change health funds (at no loss in terms of waiting periods).
This inconvenience is likely to act as an incentive for health funds to abide by
Government policy, especially in relation to community rating.
On
Government – This option will reduce the administrative burden of the
current arrangements with a monitoring role taking its place. Legislative
change would be required to implement this option.
The options have considered the industry submissions. Health funds and their
representative organisations have maintained that they should be free to design
the products that they sell without unnecessary Government intervention.
Private hospitals and their representative organisations were silent on this
issue.
The recommended option is option 2.
Under this option, health fund
products will be required to be consistent with the Government’s health
policy direction, especially the principles of community rating. Health funds
will need to ensure product changes are consistent with Government policy as
expressed through the NHA.
This option will provide a balanced approach
between reducing administrative and regulatory burden and encouraging
competition between health funds, while at the same time making clear
expectations about how products should interact with the Government’s
health policy direction.
The introduction of option 2 is intended to
encourage improved health industry efficiency while maintaining consumer
awareness, confidence and choice in private health insurance.
At present, there is no regulation (self- or imposed), on marketing of health
fund products. The private health insurance market does not provide current or
potential consumers with detailed information to enable health funds
performance, products and prices to be readily compared. It is difficult for
consumers to obtain appropriate information to help them choose the health
insurance most appropriate to their needs.
The NHA currently contains few provisions in relation to information provided to consumers by health funds. These provisions mainly relate to:
• providing timely advice to members about premium increases and detrimental rule changes;
• providing information to members and the public on agreements with
medical practitioners, hospitals and other practitioners; and
• making
copies of the Private Patients’ Hospital Charter available to the
public.
It is argued that the private health insurance market does not
provide current or potential consumers with sufficient information to enable
health funds, products, prices and performance to be readily compared. It is
difficult for consumers to obtain the information they need to help them choose
the health insurance most appropriate to their circumstances. Improving this
situation, so that consumers find it easier to compare prices and products will
be essential to achieving a higher degree of competition between health
funds.
To assist in understanding their health insurance, a report developed to
enable comparative information on the service provision of health funds will be
made available to consumers. This information would be available on the
Internet and in brochure form, with consideration given to dissemination
strategies to reach groups of consumers unlikely to access the Internet.
The ultimate responsibility for choosing an insurance product will rest
with the consumer, who will still have to deal directly with their fund of
choice. Health Fund brochures will be required to state where consumers can
find the report.
On health funds – In the short term there may be some minimal
administrative burden on health funds in complying with this proposal. The
information to be contained in the Report is already provided by health funds
and only needs to be aggregated. In the longer term it would lead to increased
competition, as consumers are able to compare the performance and products
offered by health funds.
On consumers – Will benefit greatly
through the improved ability to compare the performance and products offered by
health funds.
On Government – In the short term, there may
be some administrative burden due to the establishment of the implementation and
initial information gathering; however, this is expected to reduce over time as
the process becomes bedded in. Legislative change would be necessary to require
health funds to provide consumers with details of how to access the
Report.
Health funds and their representative organisations noted that while health
funds attempt to provide as much consumer information as possible, requirements
add to management expenses that ultimately are borne by
consumers.
Doctors and their representative organisations asserted that
consumer choice should dictate the level of cover that is taken out. Given that
private health insurance is a complex product, regulation is required to ensure
that consumers are fully and properly informed. The PHIO shared these
views.
Consumer groups stated that consumers are not always informed
about private health insurance and in particular about utilising their private
patient status in a public hospital. It was asserted that health funds should
ensure there is comprehensive and readily available information for the
community at all stages of the regulatory and marketing process.
Private
hospitals and their representative organisations asserted that it is
particularly important in the context of LHC to ensure members can easily switch
between products to maintain freedom of choice and engender competition between
health funds.
The recommended option is option 1.
Making it simpler for consumers to
compare the relative performance of health funds will enhance competition
between health funds and increase consumer awareness, confidence and choice.
The publishing of performance measures of health funds will encourage improved
health industry efficiency as health funds seek to compete with each
other.
The PHIO is a statutory authority established under section 82ZR of the NHA.
The operations of the PHIO are funded by a levy imposed on health funds by the
Private Health Insurance Complaints Levy Act 1995. The levy is based on
the number of contributors to a health fund and the number of people
covered.
Currently, the powers of the PHIO to deal with a complaint or a
dispute are limited, in relation to obtaining information and reporting on
findings. This can make the process of lodging a complaint ineffectual for a
consumer.
This option would assist the PHIO to take appropriate action to resolve the
situation. It is proposed that the PHIO’s investigatory and reporting
powers be increased to assist in the resolution of complaints.
On health funds – The impact of this proposed change to the
powers of the PHIO are expected to marginally increase the regulatory burden on
the industry through additional compliance costs. Health funds might also be
required to pay an increased levy to fund the PHIO’s additional
activities.
On consumers – This option will assist in
increasing consumer confidence in the private health insurance product and
strengthen consumer protection.
On Government – This option
would have minimal impact on Government. The PHIO is a statutory authority and
its functions are set out in the NHA. As such, it would be necessary for the
Commonwealth to introduce legislation to enable this option.
Consumer groups stated that the regulatory system should be, and be seen to
be, independent of industry and political influence. While industry should be
asked to bear some of the costs involved in assessing products, government
funding must also be provided to enable independent assessment and monitoring
and to enhance the confidence of consumers. It was further stated that there
must be adequate market surveillance, enforcement and appropriate remedies for
breaches of legislation to ensure compliance.
Option 1 is recommended.
This option will enable the PHIO to respond
appropriately to situations, and will increase consumer awareness, confidence
and choice in private health insurance.
LHC commenced on 1 July 2000. The policy requires health funds to charge
additional premiums if a person takes out hospital cover for the first time
after they have turned 31 years of age. The additional premium is
2 per cent of the base premium of a given policy, for each year the
person’s age exceeds 30. For example, a person who takes out hospital
cover for the first time at age 37 will pay an additional premium of 14 per
cent.
A high level of advertising was used to inform the public about
the introduction of LHC. A potential problem may arise as people turning 30 (or
indeed any other age) since the campaign, may forget to consider whether to take
out private health insurance.
Under this option a single date each year would be set where people are
deemed to have a ‘birthday’ for LHC purposes. This will have the
effect of focusing the competition for new members at a single time each
year.
On health funds – Continuation of the current
costs.
On consumers – Lack of comprehensive information
about LHC and comparable fund information.
On Government –
Would have minimal impact on Government.
On health funds – Would create efficiencies for health funds by
allowing more targeted advertising and marketing campaigns.
On
consumers – Consumers would benefit through more concentrated and
targeted advertising campaigns, which would allow them to focus their attention
on health insurance as a product. This option will create a greater awareness
of the existence of LHC, particularly among younger people.
On
Government – This option would complement Government policy by helping
to maintain participation at current levels through increased consumer awareness
of private health insurance, specifically LHC. Legislative change would be
required to enable this option.
Health funds and their representative organisations strongly support the LHC
notional birthday. They suggested that it would overcome the present lack of
focus of LHC. It was further stated that current regulation surrounding LHC
creates an environment where it is difficult to effectively concentrate
information campaigns to make potential members aware of the impact of LHC on
them.
The recommended option is option 2.
The current approach to marketing LHC
is expensive, as health funds may need to run more than one campaign per year.
This option is targeted at encouraging improved health industry efficiency and
enhancing competition between health funds, by allowing health funds to
undertake more targeted advertising campaigns. The heightened promotion of LHC
will also increase consumer awareness, confidence and choice in private health
insurance.
On 17 April 2002, Health wrote to a broad range of private health
industry stakeholders seeking their views on the current regulatory
arrangements. Submissions from interested stakeholders were received by 10 May
2002 and were considered by the Inter-Departmental Committee responsible for the
regulatory review.
These organisations and representatives included
private hospitals and their representative organisations, health funds and their
representative organisations, consumer groups, the PHIO and the PHIAC board. In
all, 25 submissions were received.
Currently the process for changing products is extensively regulated.
Legislation will need to be amended to accommodate the recommended measures to
reduce the regulatory burden on product regulation. Legislative amendments
will also be required to implement the measures associated with LHC
The
recommended options for consumer information and protection, the production of
the State of the Health Funds Report and increasing the powers of the PHIO will
require legislative change prior to implementation.
It is proposed that the options explored in this Regulation Impact Statement
will be reviewed after 2 years. As indicated under the heading conclusion and
recommended option section for several of the issues outlined in this RIS,
Government will review the success of the measures with a view to further
reducing the regulatory framework.
HEALTH LEGISLATION AMENDMENT (PRIVATE HEALTH INSURANCE REFORM) BILL 2003
Upon enactment, the Bill will be known as Health Legislation Amendment
(Private Health Insurance Reform) Act 2003.
This section details the commencement dates of the various amendments
contained within the Bill:
• Sections 1 to 3 of the Bill and all
provisions not covered by the table will commence on the day that the Bill
receives Royal Assent.
• Items 1 to 40 (Part 1) of Schedule 1 of
the Bill may all commence on a single day to be fixed by Proclamation.
- The delayed commencement of these amendments in Part 1 after the
Bill gets Royal Assent will enable industry to put in place the necessary
changes prior to the actual commencement of these provisions.
- Special
commencement arrangements have been included for the amendments in Items 25
to 27. If the amendments in these Items are not proclaimed to commence within
six months of Royal Assent, then they will be repealed: subsection 2(4).
- The remaining amendments in Part 1 (Items 1 to 24 and 28 to 40) will
commence six months after Royal Assent if they are not proclaimed to come into
operation on an earlier date: subsection 2(3).
• Parts 2 and 3 of
Schedule 1 of the Bill will commence on the day that the Bill receives Royal
Assent.
• Part 4 of Schedule 1 of the Bill may have various commencement dates:
- the amendments in Items 59 to 64, 70 and 72 will commence on Royal Assent:
- the amendments in Items 58, 65 and 66 will start on a day to be fixed by Proclamation (described in Item 72 of Schedule 1 as being the mainstream amendment day); and
- the amendments in Items 67 to 69, 71 and 73 will commence on a day to be fixed by Proclamation (described in Item 72 of Schedule 1 as being the special categories amendment day).
- Depending on when the Bill gets Royal Assent, the special categories
amendment day may be sooner than the mainstream amendment day. This
is because RHBOs may require more time to prepare for the amendments that will
commence on the mainstream amendment day.
This section sets out the impact of the amendments contained in Schedule 1
– Amendments of health insurance legislation.
These Items amend section 66 of the NHA to broaden the existing definition of
improper discrimination and to define some common terms that are used
throughout Part VI of the NHA.
Item 1 adds a definition of
breach of the Act, to clarify what constitutes a breach of the NHA for
the purposes of the new regulatory system.
Item 2 adds a
definition of Court, as the Federal Court is referred to in several
places in Part VI of the NHA.
Item 3 will update the
definition of improper discrimination so that the term can be used to clarify
the principles of community rating in the NHA (to be included in proposed new
sections 73AAH to 73AAJ to be added by Item 10). Community rating prohibits
RHBOs from discriminating against contributors in relation to access to private
health insurance and the use of private health insurance products, except in
specified circumstances.
Specifically, Item 3 amends the definition of improper discrimination to consolidate the various discrimination provisions from the NHA within the same term:
• new paragraph (b) of the definition of improper discrimination
relocates the grounds for discrimination that are currently prohibited by
section 73ABA (Item 12 of Schedule 1 will repeal section 73ABA);
and
• new paragraphs (ba) and (bb) of the definition of improper
discrimination relocate grounds for discrimination that are currently
contained in paragraph (m) of Schedule 1 of the NHA (Item 37 of Schedule 1 of
the Bill will repeal paragraph (m) of Schedule 1 of the NHA).
Item 4
adds a definition of officer in relation to a RHBO to section 66.
The new regulatory scheme to be established in Division 5 of Part VI of the
NHA will clarify the responsibilities of officers of RHBOs.
Item
5 adds subsection 66(2) to refer to new location of the principles of
community rating. Prior to this Bill, it has been necessary to read a variety of
provisions in Part VI and Schedule 1 of the NHA in order to understand community
rating. Item 10 will more clearly establish the principles of community rating
as conditions upon which the registration of every RHBO is subject in new
sections 73AAH, 73AAI and 73AAJ.
This Item makes a consequential amendment to subsection 67A(1) (the amendment
in Item 2 establishes a definition of Court for all of Part VI of
the NHA).
Item 7 clarifies what constitutes a breach of the NHA by relocating section
74B to a more prominent position in Division 1 of Part VI of the NHA. (Item 1
established a definition breach of the Act which refers to new section
67B (relocated section 74B)).
In relocating section 74B to section 67B,
the terminology has also slightly been changed. New section 67B will require a
RHBO to conduct its health insurance business in accordance with the
regulations, conditions, directions and rules listed in
section 67B.
The clarification of the definition of improper discrimination in subsection
66(1) (Item 3) enables consequential amendments to subsection 73(2A) and (2B) to
clarify when an application for registration as a RHBO should not be granted by
PHIAC.
New subsection 73(2A) will provide that PHIAC shall not register
an organization for the purposes of conducting health insurance business if the
rules of the organization permit improper discrimination.
This Item makes a consequential amendment to remove subsection 73AAE(6), as
the amendment in Item 2 establishes a definition of Court for all of Part
VI of the NHA.
This Item does two things to Division 3 (Conditions of registration) of Part VI of the NHA:
• it establishes the principles of community rating as conditions of registration; and
• it rearranges some existing provisions in Division 3 to clarify the
order of this Division.
Community rating underpins the equitable access
to private health insurance for all Australians. It prohibits RHBOs from
discriminating against contributors in relation to access to private health
insurance and the use of private health insurance products, except in specified
circumstances.
These amendments will clarify the monitoring and
enforcement of the community rating principles. Taken in conjunction with the
changes to the monitoring and enforcement regime, this will provide RHBOs with
increased flexibility in the conduct of their health insurance business, without
requiring Departmental oversight.
New section 73AAF relocates existing subsection 73BA(1) to the start of
Division 3 of Part VI of the NHA. New section 73AAF inserts a
statement to the start of this Division to note the conditions of registration
that a RHBO must comply with. The amendment in Item 16 repeals subsection
73BA.
New section 73AAG consolidates a number of provisions. Specifically,
this section relocates existing subsections 73BA(2A) to (5) to the start of
Division 3 of Part VI of the NHA. These subsections contain matters
ancillary to particular conditions in Schedule 1. The amendment in Item 16
repeals subsection 73BA.
As some disallowable instruments were made under
the existing provisions in subsection 73BA(2A) to (5), a saving provision
has been included in Item 17. The saving provision states that any
determinations made subsection 73BA(2A) or (4) will be deemed to have been made
under the relocated provisions in new section 73AAG.
New section 73AAH enables RHBOs to more readily ascertain their
obligations in relation to the principles of community rating. Previously,
community rating requirements had to be derived from a range of provisions
within the NHA. The amendments in this Bill make it easier for RHBOs to
identify their obligations and to ensure compliance.
New section 73AAI will establish the community rating principles relating
to the admission of persons as contributors and the cancellation of membership.
This section consolidates and clarifies two conditions in existing paragraphs
(b) and (be) of Schedule 1 of the NHA, and will apply to any hospital cover
table (applicable benefits arrangement) or ancillary cover (table of ancillary
health benefits).
The condition will continue to permit RHBOs to permanently close certain products to new members without breaching this condition of registration. The ability to close health insurance products to new or transferring contributors will enable RHBOs to:
• manage their products more effectively, in particular to reduce
losses on products that have low or no returns due to changes in the broader
health industry; and
• enable RHBOs to manage those products without
disadvantaging members who are contributing to them.
New section 73AAJ relocates the fundamental community rating condition
from paragraph (m) of Schedule 1 of the NHA. This condition
establishes the community rating principles in relation to the quantum and
payment of benefits for hospital cover tables.
RHBOs are prohibited
from applying improper discrimination in relation to the quantum and payment of
benefits for hospital cover. This ensures equity between contributors to the
same hospital cover tables at the same RHBO. It is not appropriate for RHBOs to
discriminate between people in relation to the quantum and payment of benefits,
other than as allowed by the NHA (eg. permitted discounts or LHC
loading).
The condition in section 73AAJ does not apply to ancillary
cover tables.
New section 73AAK will recognise an exception to the community rating
conditions in new sections 73AAH and 73AAI in relation to restricted
membership organizations.
Historically, the provision of health
insurance was often one of a range of services provided by a friendly society or
like organization. Access to the range of services was often limited to
geographical, employment or other distinguishing characteristics. The exemption
contained in this provision recognises that there a still a number of RHBOs that
operate on a restricted membership basis. Other than the restriction to
membership, it is important to note that the principles of community rating in
new section 73BAAJ apply to restricted membership RHBOs.
This Item makes a minor amendment to subsection 73A(1) to recognise that it
contains a condition that only relates to refund agreements. The headings to
sections 73A and 73AB will also be replaced to help clarify the conditions
that are contained in these sections.
This Item makes a consequential amendment to remove section 73ABA (RHBO
not to discriminate), because the grounds for discrimination in section 73ABA
will be relocated to the definition of improper discrimination by the amendment
in Item 3.
These Items will confirm the Minister’s power to impose additional
conditions of registrations on more than one health fund. This power will
provide an efficient response mechanism to systemic problems identified in the
industry.
This Item makes a consequential amendment by repealing section 73BA. Other amendments in this Bill will relocate the provisions of section 73BA to other sections of the NHA:
• subsection 73BA(1) will be relocated to new section 73AAF (Item 10);
• the definition of medical practitioner in
subsection 73BA(2) will be relocated in Schedule 1 of the NHA
(Item 39); and.
• subsection 73BA(2A) to (5) will be
relocated to new section 73AAG (Item 10).
The purpose of this Item is to establish savings provisions for
determinations made under subsections 73BA(2A) and (4) of the NHA prior to the
commencement of Item 16 of the Bill. This saving provision will deem the
determinations to have been made under the provisions in new section
73AAG.
These Items make minor procedural amendments to relocate the reinsurance provisions in sections 73BB and 73BC from Division 3 of Part VI of the NHA:
• Item 18 will establish a new Division regarding the Health Benefits
Reinsurance Trust Fund. Sections 73BB and 73BC will become part of this
new Division; and
• Item 19 will make a consequential amendment to
subsection 73BB(4) to remove a condition of registration from this section.
Item 38 will insert that condition of registration in a more appropriate
position in Schedule 1 of the NHA.
The purpose of this Item is to consolidate, clarify and broaden the
enforcement and remedies regime in the NHA.
This Item will substitute a new Division 5 – Enforcement and Remedies in Part VI of the NHA. This new Division is a major reform in the regulation of the private health insurance industry. New Division 5 will result in increased regulatory flexibility by:
• enabling monitoring of RHBO activities via performance indicators, rather than the assessment of rules that currently takes place in accordance with section 78 of the NHA;
• clarifying the Minister’s investigation powers;
and
• establishing a range of responses and sanctions that the Minister
may take to appropriately deal with breaches or potential breaches of the
NHA.
New Division 5 will include the following sections:
• Section 73BEA Performance indicators;
• Section 73BEB Minister may require RHBOs to explain their operations;
• Section 73BEC Consequences of a failure to provide a satisfactory explanation;
• Section 73BED Minister may conduct investigation;
• Section 73BEE Offences relating to requirements under section 73BED;
• Section 73BEF Minister may consult Council;
• Section 73BEG Consequences of investigation;
• Section 73BEH The Minister may accept written undertakings given by a registered organization;
• Section 73BEI Enforcement of undertakings;
• Section 73BEJ Directions given by Minister to registered organizations;
• Section 73BEK Direction requirements;
• Section 73BEL Minister may revoke registered organization’s status as participating fund;
• Section 73BEM Minister may apply to the Court for orders for redressing breach of Act or imposing pecuniary penalties;
• Section 73BEN Imposition and enforcement of orders by the Court;
• Section 73BEO Restrictions relating to payment of pecuniary
penalties; and
• Section 73BEP Jurisdiction.
The direction
making powers in existing Division 5 (sections 73BE, 73BF, 73BFA and 73BFB) will
be consolidated in a single direction making power: new section 73BEJ. The
Minister’s power to direct RHBOs in relation to the provision of services
(section 73D) will be relocated to Division 6 of Part VI: new section 75 (Item
24).
New Section 73BEA will enable the setting of the performance indicators
for monitoring RHBO’s compliance with community rating obligations, via
regulation.
This important new element recognises the evolving nature
of the health industry, and the need to respond to any changes in an expeditious
manner. Given the dynamic nature of the private health industry and government
policy in the area, the power for setting the performance indicators via
regulations means that the performance indicators may be changed to respond to
any new circumstances that arise.
The power will enable the Minister to
raise concerns with industry and to negotiate a non-regulatory solution with the
industry. If a resolution to the particular issue cannot be found, then
consideration will be given to the other options and remedies that will be
consolidated in new Division 5 of Part VI of the NHA.
New section 73BEB describes the process by which the Minister may seek an
explanation from a RHBO in relation to information received by the Minister that
suggests an RHBO may be in breach of its legislative obligations.
New
subsection 73BEB(2) enables the Minister to specify a time in which the RHBO
must respond. If a RHBO does not consider the time given to respond is
sufficient, it may seek an extension of that time: new subsection 73BEB(3). If
the Minister refuses to extend the time, then new subsection 105AB(4) (Item 31)
will enable the RHBO to seek review of that decision in the AAT.
New subsection 73BEC(1) will enable the Minister to consider an
explanation from a RHBO and take appropriate action. If the Minister is
satisfied with the explanation, the Minister must inform the RHBO.
If
the Minister is not satisfied with the explanation from the RHBO, the Minister
must inform the RHBO that he or she intends to take any of the courses of action
specified in new subsection 73BEC(2). New subsections 73BEC(2) and (3) set
out the options for dealing with a perceived or actual breach of the NHA, after
a RHBO has provided an insufficient or unsatisfactory response.
If the
Minister requires further information regarding the conduct or actions of a
RHBO, the Minister may conduct an investigation in accordance with new
Subdivision B of Division 5: new paragraph 73BEC(2)(a).
Whether or not the Minister is satisfied that the RHBO has breached the NHA, the Minister may:
• request the RHBO commits to an enforceable undertaking in accordance with new Subdivision C: new paragraph 73BEC(2)(b);
• give the RHBO a direction in accordance with new Subdivision D: new
paragraph 73BEC(2)(c); or
• impose a further condition of
registration on the RHBO in accordance with section 73B: new paragraph
73BEC(2)(d);
If the Minister is satisfied that a RHBO has breached the NHA, then new paragraph 73BEC(3)(b) provides further options that the Minister may consider (note that if there is a breach of the NHA the Minister may still rely on one of the options in new paragraphs 73BEC(2)(b) to (d) to resolve the breach):
• if the RHBO has breached the principles of community rating, then the Minister may revoke the status of the RHBO to offer the 30% Rebate as a premium reduction (contributors will have to obtain the 30% reduction as a tax deduction or incentive payment): new paragraph 73BEC(2)(e);
• the Minister may apply to the Federal Court for an order in
accordance with new Subdivision F: new paragraph 73BEC(2)(f);
and
• the Minister may take action to appoint an inspector, place a
RHBO under administration, or seek the winding up of a RHBO in accordance with
Part VIA of the NHA: new paragraph 73BEC(2)(g);
The expanded range
of enforcement options contained in these reforms enables the Minister to have
flexibility and proportionality as to action and outcomes in relation to the
regulation of the private health insurance industry.
New Subdivision B relocates and clarifies the Minister’s existing
investigatory power in section 75. The purpose of this new subdivision is to
grant the Minister sufficient powers to conduct investigations to enable access
to information relevant to potential breaches of legislative requirements by the
RHBOs in conducting health insurance business.
New section 73BED relocates the investigatory powers from
subsections 75(1) to (4) and (6). These provisions describe the various
options and processes available to the Minister to conduct an investigation of a
RHBO.
In particular, this section empowers the Minister to access relevant information in relation to concerns regarding compliance with the NHA:
• new subsections 73BED(2) and (3) enable the Minister to direct that the information to be provided, or the records books accounts and other documents, be examined by a person specified by the Minister. These provisions replace subsections 75(1) and (2), which previously only enabled the Secretary to authorize an officer of the Department to conduct these investigations;
• new subsection 73BED(4) provides that access to the records, books,
accounts and other documents of an RHBO relevant to an investigation, must be
allowed at all reasonable times. A reasonable time includes normal business
hours of the RHBO or any other agreed time; and
• new subsection
73BED(5) relocates the provision from subsection 75(6) which enables the
investigation of a recently deregistered RHBO. It is necessary for the
regulatory regime to be able to be applied to recently deregistered RHBOs to
ensure the on-going protection of consumers and the industry.
New section 73BEE relocates the penalty provisions from
subsection 75(5) and (5A) and establishes a new penalty for providing false
or misleading information.
New subsection 73BEE(4) establishes a
protection against self-incrimination in certain circumstances.
New
subsection 73BEE(5) of the NHA establishes an offence for providing false or
misleading information in relation to an investigation under new
section 73BED of the NHA.
Where a RHBO is required to provide
information for the purpose of an investigation, that information is required
even if the answer to the question, or the production of the document, might
tend to incriminate the person or make the person liable to a penalty. To this
end, to ensure cooperation with an investigation under new section 73BED,
new subsection 73BEE(4) provides that information provided in response to a
request under new subsections 73BED(1) or (2) may not be used in evidence
against the person providing the evidence. This exemption does not apply to an
offence under new subsection 73BEE(5).
The offences of not cooperating
with an investigation in new subsections 73BEE(1) and (2) of the NHA are strict
liability offences (as set out in the Criminal Code Act 1995). The
dollar amount per penalty unit is set out in section 4AA of the Crimes Act
1918.
Section 73BEF establishes a new provision to clarify the link between the
prudential regulation of RHBOs by PHIAC and the broader regulation of the
industry. This amendment does not detract from the independence of the PHIAC.
If an issue identified by the Minister has a prudential element or effect it is
important that it may be handled by the entity which has been specifically
established and empowered to deal with such matters. A referral to PHIAC will
not negate the ability of the Minister to undertake whatever additional action
the Minister considers appropriate.
New section 73BEG establishes regulatory options for the Minister to use
following an investigation (similar to the options in new section 73BEC).
If, following an investigation, the Minister is satisfied with the performance
of a RHBO, he or she must notify the RHBO: new paragraph 73BEG(a).
If, as a result of the investigation, the Minister is satisfied that there is a breach of the NHA, then the Minister must advise the RHBO of the necessary action in accordance with new paragraph 73BEG(b). These options include:
• requesting an enforceable undertaking in accordance with new Subdivision C: new subparagraph 73BEG(b)(i);
• giving a direction to the RHBO in accordance with new Subdivision D: new subparagraph 73BEG(b)(ii);
• imposing a further condition of registration on the RHBO under section 73B: new subparagraph 73BEG(b)(iii);
• revoking the status of the RHBO to offer the 30% Rebate as a premium reduction (contributors will have to obtain the 30% reduction as a tax deduction or incentive payment): new subparagraph 73BEG(b)(iv);
• applying to the Federal Court for an order in accordance with new
Subdivision F: new subparagraph 73BEG(b)(v); or
• taking action to
appoint an inspector, place a RHBO under administration or seek the winding up
of a RHBO in accordance with Part VIA of the NHA: new
subparagraph 73BEG(b)(vi).
If, following the investigation, there is no or insufficient evidence of a breach of the NHA, but the Minister considers the performance of a RHBO can be improved, then the Minister may:
• request an enforceable undertaking in accordance with new Subdivision C: new subparagraph 73BEG(c)(i);
• give a direction to the RHBO in accordance with new Subdivision D:
new subparagraph 73BEG(c)(ii); or
• impose a further condition of
registration on the RHBO under section 73B: new
subparagraph 73BEG(c)(iii).
The purpose of this new Subdivision is to establish an additional option
for the enforcement of the regulatory requirements under the NHA. Enforceable
undertakings are a regulatory tool that will enable the RHBOs to address and
resolve problems or breaches of the Act with the consent and involvement of the
regulator.
New section 73BEH will enable the Minister to accept undertakings from
RHBOs that will improve the performance of RHBOs and/or avoid breaches of the
NHA. The willingness of RHBOs to provide, and comply with, undertakings should
assist in avoiding the need for the application of more severe
sanctions.
New subsection 73BEH(2) will provide some flexibility in the
operation of an undertaking, by enabling a RHBO to withdraw from or vary the
undertaking at any time with the consent of the Minister. If the Minister does
not agree to the variation or withdrawal, then new subsection 105AB(4AAA) will
provide the RHBO with a right of review of the refusal by the AAT (Item
31).
If a RHBO gives an undertaking under section 73BEH but does not
comply with the terms of the undertaking, then the Minister may apply to the
Federal Court for an order under subsection 73BEI(2) of the NHA. To make
such an application the Minister must consider (on reasonable grounds) that the
RHBO that gave the undertaking has breached any of the terms of that
undertaking. In applying to the Court the Minister may seek an order of
compliance and, if there has been a breach of the NHA, any other order that is
appropriate.
The purpose of new Subdivision D is to consolidate the Minister’s
direction making powers in existing Division 5. Section 73B enables the
Minister to impose conditions of registration on RHBOs on any matter (so long as
the condition is consistent with the NHA). The new Subdivision consolidates and
clarifies the Minister’s direction making powers in relation to community
rating.
New section 73BEJ clarifies the situations in which the Minister may
issue a direction to an RHBO. This power increases the flexibility of the
sanctions available to the Minister to address concerns in relation to improper
discrimination. The power to make a direction in relation to day-to-day
operation of the RHBO is an important tool in the protection of the principles
of community rating.
New subsections 73BEJ(1) and (3) will enable the
Minister to impose a direction requiring a RHBO to modify its constitution,
rules or operations to prevent improper discrimination from occurring. New
subsection 73BEJ(1) will apply as the result of an insufficient or
unsatisfactory explanation under new Subdivision A. New subsection 73BEJ(3)
will apply as the result of an investigation under new Subdivision B.
New
subsection 73BEJ(2) will enable the Minister to impose a direction where the
Minister concludes that there appears to be a breach of the NHA.
New
subsections 73BEJ(4) and (5) establish a further level of protection to
contributors or potential contributors. These subsections allow the Minister to
specify the action required including the reconsideration of decisions already
taken in relation to eligibility to become or retain membership or for the use
of a private health insurance product.
New section 73BEK establishes the requirements for a Ministerial
direction made under the NHA. This new section relocates
section 73BH.
This new Subdivision establishes a penalty for RHBOs that breach the
principles of community rating or a direction issued under new
section 73BEJ.
New section 73BEL provides that the Minister may remove the
eligibility for a RHBO to offer the Federal Government 30% Rebate on private
health insurance to contributors as a premium reduction. This new sanction will
be a major disincentive for non-compliance with the principles of community
rating. While the 30% Rebate may be removed as a premium reduction from a
particular RHBO, the 30% Rebate will still payable to contributors via the
taxation system or the HIC.
Section 14A-1 of the Private Health
Insurance Incentives Act 1998 must be used to effect the removal of
eligibility of a RHBO to offer the 30% Rebate as a premium reduction.
Item 40 of Schedule 1 will amend section 14A-1 of that Act to
broaden the reasons for having status removed to offer the 30% Rebate as a
premium reduction.
New Subdivision F consolidates and expands the powers of the Minister to
apply to the Federal Court to impose sanctions. The existing power to seek a
court order imposing fines on officers of a RHBO from sections 74 and 74BA will
be relocated to this Subdivision.
New subsection 73BEM(1) will enable the Minister to apply to the Court
for an appropriate order. In addition to an application to impose a pecuniary
penalty on an officer of a RHBO which is currently available under sections 74
and 74A, the Minister may seek any other order that is appropriate to redress a
breach of the NHA.
Two such orders are listed in new
paragraphs 73BEM(1)(a) and (c): an order to pay compensation to an
affected individual and an adverse publicity order (defined in new
subsection 73BEM(2)). However, this is not an exhaustive list and
paragraph 73BEM(1)(d) recognises that the Minister may apply for any other
appropriate orders. The Court in considering whether to grant an order shall
have recourse to any information it considers reasonable and relevant. The
Court may vary any order as it sees fit.
New section 73BEN of the NHA relocates the procedural provisions from section 74A which specify how the Court may make an order sought under section 73BEM of the NHA:
• new subsection 73BEN(1) enables the Court to make an appropriate order to redress a breach of the Act;
• new subsection 73BEN(2) enables the Court to impose a fine of up to $10,000 on an officer of a RHBO that has failed to take reasonable steps to prevent the breach of the Act;
• new subsection 73BEN(3) relocates existing subsection 74A(3) to ensure that there is no duplication in relation to the application of sanctions for specified matters;
• new subsection 73BEN(4) establishes that in hearing and determining
an application for an order under subsections 73BEN(1) or (2) the Court is to
apply the rules of evidence and procedure that it applies in hearing and
determining civil matters (ie. where the Court needs to be satisfied of a matter
it must be satisfied on the balance of probabilities); and
• new
subsection 73BEN(5) relocates the provision in subsection 74A(7), to
clarify that an order under new subsections 73BEN(1) or (2) may be enforced as a
judgement of the Federal Court. This functions to enable the additional
application of sanctions for non-compliance with a Federal Court order.
New section 73BEO relocates subsection 74A(8) to prohibit RHBOs from
using contributor’s funds to cover pecuniary penalties imposed on officers
under new section 73BEN. The penalty is imposed on the relevant officer
and should be paid by the officer, not by the RHBO or the health benefits fund
that the RHBO manages.
This new section makes it clear that the Federal Court has jurisdiction
to hear and determine applications under new Division 5 of Part VI of the NHA,
and to make any orders as considered appropriate by the Court in respect of
those applications.
These Items make consequential amendments to remove subsections 74(5), (5AA)
and (5A) and amend subsection 74(10). The power to impose fines on the public
officer has been relocated to new Subdivision F of Division 5 (new
sections 73BEM, 73BEN and73BEO - Item 20). It is no longer necessary to
have a separate power to impose fines on the public officer.
Item 23 makes a consequential amendment to remove two sections that have been relocated elsewhere in the NHA:
• the power to impose pecuniary penalties on officers of a RHBO in
section 74A has been replaced by the new sections 73BEM, 73BEN and73BEO
(Item 20); and
• the provision relating to how RHBOs should conduct
their health insurance business in section 74B has been relocated to new
section 67B (Item 7).
This Item contains a consequential amendment to relocate section 73D
(power to give RHBOs directions in relation to services) to section 75.
Section 75 will be repealed because the investigation powers have been
relocated to new sections 73BED and 73BEE (Item 20).
These Items amend the rule change requirements in section 78 to reduce the
regulatory burden on RHBOs.
Item 25 amends subsection 78(1) so
that RHBOs only have to notify the Secretary of the Department of Health and
Ageing of changes of the rules of the RHBO (not changes to the constitution or
articles of association). This amendment will reduce the regulatory burden on
the RHBOs, it will not remove the limitations placed on the constitution or
articles of association of an RHBO by the operation of sections 68 and 73AAB of
the NHA.
Item 26 amends paragraph 78(1A)(b) to reduce the
notification requirements so that RHBO will only have to provide detailed
advanced notification of rule changes that involve changes to
premiums/contributions. The Secretary can be informed of all other rules
changes before the changes come into effect. This will result in the RHBOs
having increased flexibility in the timing and range of non-contribution rule
changes, and in product design.
Item 27 amends subsections 78(1C)
and (2) to reduce the notification requirements for RHBOs. This may include but
is not limited to the provision of the notification in writing or in an
electronic format.
If these changes come into effect, (note the special
commencement arrangements in Section 2 of the Bill) section 78 will only be
appropriate for assessing and potentially disallowing rule changes that involve
changes to premiums. This power will no longer be appropriate for disallowing
other rule changes. In those circumstances, the Minister will have to impose a
condition under section 73B or give a RHBO a direction under new
section 73BEJ to vary or remove certain rules.
This Item amends subsection 78(7) to clarify the obligations of RHBOs to
inform their contributors of rule changes. The new requirement should be less
burdensome to industry as it only requires RHBOs to inform contributors of
detrimental, and not all, changes of rules.
These Items make consequential amendments to paragraphs 82XF(2)(c) and
82YO(2)(c) to correct cross references to new section 73BEJ.
This Item makes consequential amendments to section 105AB to identify the new
administrative decisions to be included in the NHA by this Bill that will be
subject to review by the AAT.
This Item makes consequential amendments to paragraphs 105AB(4A)(a) and (b)
to correct cross references to relocated new section 75 (Items 20 and
24).
These Items make consequential amendments to repeal paragraphs (b) and (be)
from Schedule 1 of the NHA. The conditions in these paragraphs have been
clarified and established as one of the principles of community rating in new
section 73AAI (Item 10).
This Item makes a minor amendment to add a statement at the start of Schedule
1 of the NHA to clarify the reading and operation of that Schedule.
This Item makes a consequential amendment to subparagraph (lb)(ii) of
Schedule 1 to correct a cross reference to relocated new section 75 (Items 20
and 24).
This Item makes a consequential amendment to repeal paragraph (m) from
Schedule 1 of the NHA. The community rating condition in this paragraph has
been clarified and established as one of the principles of community rating in
new section 73AAJ (Item 10).
This Item contains a consequential amendment to repeal paragraph (w) of
Schedule 1 of the NHA and relocate the condition from subsection 73BB(4)
which was repealed by Item 19 (ie. the condition from subsection 73BB(4) is
being put in a more appropriate location). The existing condition in
paragraph (w) is not necessary because new subsection 67B will require a
RHBO to comply with any direction of the Minister.
This Item makes a minor amendment to relocate the definition of medical
practitioner from former section 73BA to Schedule 1 of the NHA.
This Item amends the Private Health Insurance Incentives Act 1998 to
enable the Minister to remove the ability of a RHBO to offer the 30% Rebate as a
premium reduction if the RHBO fails to comply with a direction given by the
Minister under new section 73BEJ of the NHA or the community rating conditions
in sections 73AAH to 73AAI. The amendment is necessary to give effect to the
new enforcement provisions that will be set out in new Subdivision E of Division
5 of Part VI of the NHA to be added by Item 20.
If action is taken
in accordance with this amendment, the 30% Rebate will still be payable to
contributors in relation to health insurance products offered by the particular
RHBO, but the 30% Rebate will only be available via the taxation system or
HIC.
The purpose of this Part is to amend the NHA to expand the powers of the
PHIO in order to allow the PHIO to deal more effectively with
complaints.
Item 41 inserts a definition of records in
subsection 82ZQ(1) for the purposes of Part VIC of the NHA. The amendment
clarifies the types of documents that the PHIO may require a RHBO to provide in
order to deal with a complaint under Division 3 of Part VIC or an
investigation under Division 4 of Part VIC the NHA.
This Item amends section 82ZRC to expand the functions of the PHIO. The
functions of the PHIO will now include the power to report and make
recommendations to the Minister following the investigation of a complaint or an
investigation of the practices and/or procedures of RHBOs.
Paragraph
82ZRC(d) has been retained to allow the PHIO to make recommendations to the
Minister and/or the Department about more general industry practices.
This Item adds new section 82ZSAA to enable the PHIO to notify a RHBO that a
complaint has been received and conduct a preliminary investigation to determine
how best to deal with a complaint. Currently, the PHIO does not have power to
request information in order to evaluate or investigate a complaint, and must
rely on information provided voluntarily by the complainant and/or the
RHBO.
New subsection 82ZSAA(1) will enable the PHIO to make a preliminary request for records from a RHBO relating to a complaint. New subsections 82ZSAA(1) and (2) clarify the powers of the PHIO to request further records from a RHBO if the PHIO:
• decides to settle the complaint by mediation under paragraph 82ZSB(1)(a),
• refers the matter to the RHBO to resolve under paragraph 82ZSB(1)(b),
or
• conducts a more detailed investigation in accordance with
subsection 82ZSB(2).
New subsection 82ZSAA(7) protects the privacy of individual complainants by
requiring the complainant to agree to the production of records by the RHBO that
relate to the complainant.
When the PHIO requests the provision of
records he or she must specify when the records are to be provided: new
subsection 82ZSAA(4). New subsections 82ZSAA(5) and (6) enable a RHBO
to seek a longer time to provide the records, and apply to the AAT for review if
the PHIO does not agree to extend the time (Item 53: new
subsection 105AB(6AC)).
New subsections 82ZSAA(8), (9) and (11)
establish offences for not complying with a request to provide information, or
for providing false and misleading information. To ensure cooperation with a
request for records, new subsection 82ZSAA(10) provides that records
produced in response to a request may not be used against the officer who
provided the records (other than where the offence is against new
subsection 82ZSAA(11)).
This Item makes a minor amendment to subparagraph 82ZSB(1)(b)(ii) to enable
the PHIO to require a RHBO to report to the PHIO on any action that the RHBO
proposes to take following the internal investigation of a complaint, within the
period specified by the PHIO.
This Item will add new subsections 82ZSB(1A) and (1B) to enable an RHBO to
seek an extension of time if it cannot conduct an internal investigation and
report to the PHIO within the period specified by the PHIO under amended
paragraph 82ZSB(1)(b).
New subsection 105AB(6C) will enable
the RHBO to apply to the AAT for review if the PHIO refuses to extend the period
(Item 53).
This Item will enable the PHIO to request that a RHBO, hospital, day hospital
facility or medical practitioner advises him or her of the action(s) that it
intends to take in relation to a recommendation made by the PHIO.
New
subsections 82ZSD(4) to (6) create new offences for the public officers of RHBOs
that fail to report to the PHIO.
This Item adds new section 82ZSDA to enable the PHIO to report and make recommendations to the Minister where:
• he or she has made a recommendation to the RHBO in respect of a
complaint; and
• the RHBO refuses to comply with the recommendation, or
fails to report on the action that it intends to take in relation to a
recommendation.
New subsection 82ZSDA(2) requires the PHIO to consult
with the RHBO prior to reporting to the Minister, to enable the organization to
comment on criticisms to be made in the report.
The Minister will then be
able to consider the PHIO’s report and recommendations, and any comments
provided by the organization, and determine whether any further action is
required.
This Item makes a minor consequential amendment to paragraph 82ZSE(1)(a) to
recognise the addition of new section 82ZSAA to the NHA by Item 43.
This Item makes a consequential amendment to remove the requirement in
subsection 82ZTA(3) for the PHIO to report to the Minister. This power
will be dealt with in new section 82ZTCA (Item 52).
This Item repeals and replaces section 82ZTB to expands the power of the PHIO
to obtain information from a RHBO in relation to an investigation under sections
82ZT or 82ZTA. New section 82ZTB will ensure that the PHIO has the power to
access appropriate information in undertaking the functions of the
Office.
This Item amends section 82ZTC to strengthen the PHIO’s power to make a
recommendation to a RHBO and request notification of action taken in relation to
the request.
New subsection 82ZTC(2) will require the public officer of
the RHBO, before the RHBO takes any action or changes its rules to give effect
to a recommendation of the PHIO to report to the PHIO on the action proposed to
be taken or the rule change proposed to be made.
New subsection 82ZTC(3)
will enable the PHIO to require a hospital, day hospital or medical practitioner
to report on the action proposed to be taken in response from a recommendation
of the PHIO.
New subsections 82ZTC(4) to (6) establish offences for
non-compliance with a request under new subsection 82ZTC(2) by the public
officer of the RHBO.
Item 52 adds new section 82ZTCA to enable the PHIO to report to the Minister
on the outcome of investigations or recommendations. The report function will
keep the Minister abreast of developments within the industry and may highlight
any need for further action.
Before the PHIO can make a report to the
Minister, new subsection 82ZTCA(2) will require him or her to inform the RHBO of
the nature of the report and provide the RHBO with the opportunity to
respond.
This Item makes consequential changes to section 105AB to enable RHBOs to
apply to the AAT for review of certain decisions by the PHIO under the new
powers to be added by this Bill.
This Item establishes the transitional arrangements for any complaints that
have been lodged with the PHIO or are being considered when the amendments in
Part 2 of Schedule 1 of the Bill take effect.
Part 3 amends the NHA to enable the PHIO to produce an annual State of the Health Funds Report (the Report).
Item 55 amends subsection 82G(1) to give PHIAC an extra function, to provide
information relevant to the production of the Report to the PHIO.
This Item amends section 82ZRC to give PHIO an extra function to produce an
annual State of the Health Funds Report.
The Report is to be published in
written form and on the PHIO’s website, as soon as practicable after the
end of each financial year. The Report will provide comparative information on
the performance and service delivery of all RHBOs during that financial
year.
This Item adds paragraph (hac) to Schedule 1 to impose a new condition on RHBOs to require them to publicise the existence of the Report and to advise where copies of the Report will be available.
Part 4 makes the following minor amendments to the LHC provisions in Schedule 2 of the NHA:
• to establish a fixed annual date on which Australian residents over the age of 31 must have hospital cover if they want to avoid paying a LHC loading for taking out hospital cover after turning 31 (Items 58, 65 to 68 and 72);
• to enable periods overseas of more than one year to be counted as “permitted days without hospital cover” (Items 60 to 62);
• to recognise health cover provided by a DVA gold card as counting towards hospital cover for the purposes of calculating any LHC loading (Items 63 and 64);
• to provide Australian citizens who are overseas on their 31st birthday a grace period of 12 months to take out hospital cover when they return to Australia without being subject to a LHC loading (Items 69, 72 and 73); and
• to provide new migrants to Australia over the age of 31 with a grace
period of 12 months to take out hospital cover without being subject to a LHC
loading (Items 68, 70 to 73).
Schedule 2 of the NHA currently requires an individual to take out
hospital cover before his/her Schedule 2 application day to avoid
having to pay a LHC loading for hospital cover.
A person’s Schedule 2 application day is determined by clause 5 of Schedule 2. The general rule in paragraph 5(1)(b) is that a person must have hospital cover before he or she turns 31 years of age. If a person takes out hospital cover after that time, they will be required to pay a LHC loading. Other paragraphs in subclause 5(1) establish different Schedule 2 application days for people who satisfy other criteria, for example:
• refugees arriving in Australia on refugee or humanitarian (migrant)
(class BA) visas; or
• Australian citizens who were overseas when LHC
was introduced on 1 July 2000.
The purpose of the amendments in
Items 58 and 65 to 68, is to establish a common annual date by which time all
Australian citizens and permanent visa holders over the age of 31 years should
have hospital cover to avoid paying a LHC loading later. The annual date will
be the 1 July following the person’s actual 31st birthday.
Item 58 amends the method for calculating the LHC loading for people who are
late taking out hospital cover in subclause 1(2) of Schedule 2. The
loading will no longer be calculated based on the person’s actual age.
Instead it will be calculated on the basis of the person’s age on the
previous 1 July. The new subclause sets out the details of how the LHC age will
be calculated and contains two examples.
Item 59 contains a saving
provision to note that the amendment to subclause 1(2) in Item 58 will not
affect any LHC loading determinations made under the previous formula in
subclause 1(2).
Item 65 will amend paragraph 5(1)(b) of Schedule 2 so that the current
method for calculating a person’s Schedule 2 application day
(ie. the day he or she turns 31 years of age) will only apply until the
new method for calculating a person’s Schedule 2 application day
comes into effect (to be established by the amendment in
Item 66).
Item 66 inserts new paragraph 5(1)(ba) in Schedule 2.
This paragraph establishes that, after the mainstream amendment day (ie. the
date that this amendment comes into effect), a person’s Schedule 2
application day will be the 1 July immediately following the day he
or she turned 31 years of age.
The general rule will be that a person
will have until the 1 July immediately after his or her 31st
birthday to take out hospital cover to avoid having to pay a LHC
loading.
Paragraph 5(1)(c) of Schedule 2 of the NHA sets out the current method for
calculating a refugee’s Schedule 2 application day. Item 67
amends Paragraph 5(1)(c) so that it will only apply until new paragraph 5(1)(ca)
is inserted by Item 68.
Item 68 will insert new paragraph 5(1)(ca) in Schedule 2 to establish that after the date that this amendment comes into effect, a refugee’s Schedule 2 application day will be whichever is the later of:
• the 1 July following the day he or she turned 31 years of age;
or
• the first anniversary of the day he or she became eligible for
Medicare benefits.
Item 68 will also insert two other paragraphs in subclause 5(1) of
Schedule 2 for the purposes of establishing a 12 month grace period for new
arrivals in Australia who are not refugees (‘migrants’). The grace
period for new migrants is explained in more detail below.
This Item adds:
• a definition of mainstream amendment day in new
subclause 5(3) for the purposes of the amendments in Items 58, 65 and 66. The
mainstream amendment day is the day on which these amendments will
commence, being a day to be fixed by proclamation; and
• a definition
of special categories amendment day in new subclause 5(3) for the
purposes of the amendment in Items 67 and 68. The special categories
amendment day is the day on which these amendments will commence, being
a day to be fixed by proclamation.
This item adds new paragraph 3(1)(ab) to Schedule 2 to provide that:
• where an adult beneficiary is overseas for a continuous period of more than one year; and
• the period he or she is overseas occurs after he or she has ceased to
have hospital cover,
the period he or she is overseas will be
“permitted days without hospital cover”.
If such a person
returns to Australia and resumes hospital cover, the period overseas will not be
considered when assessing whether the person has incurred a LHC loading.
This Item makes a minor consequential amendment to
subparagraph 3(2)(a)(i) to ensure that the 730 permitted days allowed in
paragraph 3(1)(a) without hospital cover will not include any permitted days
accessed through new paragraph 3(1)(ab).
This Item adds new subclauses 3(3) and (4) to clarify that:
• the NHA does not apply to residents of Norfolk Island, so a person
will be taken to be overseas while they are residing there; and
• any
period during which an adult beneficiary returns to Australia for less than 90
days, counts as part of the period overseas.
Items 63 and 64 make minor amendments to Schedule 2 of the NHA to recognise that cover provided by a DVA gold card will count towards hospital cover for the purposes of calculating any LHC loading.
This Item repeals and substitutes subclause 4(2) of Schedule 2 and inserts a definition of gold card in new subclause 4(3):
• new paragraph 4(2)(a) will provide that a person will be deemed to have hospital cover for so long as they are the holder of a gold card under the Veterans’ Entitlements Act 1986 at any time after 30 June 1999.
A person who takes out hospital cover after losing his or her eligibility for the gold card will then have any LHC loading calculated according to clause 2 (People who cease to have hospital cover after 1 July 2000) of Schedule 2 rather than clause 1 (People who are late taking out hospital cover) of Schedule 2. The person will have 730 days to take out hospital cover without incurring a LHC loading. If the person waits longer than 2 years, then under clause 2 of Schedule 2 the person will incur a 2% loading for every 365 days that he/she did not have hospital cover;
• new paragraph 4(2)(b) restates the provision in existing subclause 4(2), that the regulations may specify a class of person who is taken to have hospital cover; and
• new subclause 4(3) notes that for the purposes of clause 4, a
gold card is a card that evidences a person’s entitlement to
be provided with treatment in accordance with the Treatment Principles issued
under section 90 of the Veterans’ Entitlements Act
1986.
This Items establishes two saving provisions in relation to the changes in Item 63:
• Clause (1) preserves any regulations made under subclause 4(2) of Schedule 2 immediately before the commencement of Item 63. These regulations will be deemed to continue in force, on and after that commencement day, as if the regulations had been made under new paragraph 4(2)(b).
• Clause (2) establishes specific arrangements for people who lost their eligibility for the gold card between 1 July 2000 and the commencement of Item 63.
These people will be deemed to have had hospital cover while they held the gold card and any LHC loading will be calculated as if they ceased to have hospital cover after 1 July 2000 (clause 2, Schedule 2), rather than on the basis that they are late taking out hospital cover (clause 1, Schedule 2).
This provision:
- will not require RHBOs to repay any LHC loading that has been incurred before the commencement of Item 63; and
- only requires the re-calculation of a former gold card holder’s LHC loading (based on clause 2 of Schedule 2) from the commencement of the amendments in Items 63 and 64.
• Clause (3) notes that for the purposes of this saving provision, gold card has the same meaning as in new subclause 4(3) of Schedule 2 of the NHA.
This Item adds new paragraph 5(1)(e) to clarify the Schedule 2 application day of an adult beneficiary returning to Australia. If the person:
• is an Australian citizen or the holder of a permanent visa within the meaning of the Migration Act 1958; and
• is absent from Australia on the day, occurring after 1 January 2000, on which he or she turned 31 years of age; and
• has not returned to Australia since turning 31 years of age;
and
• is not an adult beneficiary to whom paragraph (d)
applies;
then the Schedule 2 application day will be whichever day is later of:
• the first anniversary of the day the person returned to Australia; or
• the first anniversary of the day that this amendment comes into
effect (ie. the special categories amendment day).
This Item adds a definition of special categories amendment day
in new subclause 5(3) for the purposes of the amendments in Items 69 and 73.
The special categories amendment day is the day on which these
amendments will commence, being a day to be fixed by proclamation.
Subclause (2) of this Item will assist Australian citizens who:
• returned to Australia after turning 31 years of age, but before these
amendments take effect; and
• took out hospital cover after the
introduction of LHC, thereby incurring a LHC loading.
From the date
that this Item comes into effect, this group of adult beneficiaries will be
deemed to have obtained hospital cover before they turned 31 years of age, and
will no longer be required to pay any LHC loading.
This provision will
not require RHBOs to repay LHC loading that has been incurred before the
commencement of Item 73.
Subclause (3) of Item 73 notes that the terms
adult beneficiary, base rate, hospital
cover and special categories amendment day all have the
same meaning as in the NHA.
Subclause (4) provides that the provisions
in clause 5 of Schedule 2, relating to the return to Australia of an
adult beneficiary, shall have the same meaning in this transitional
provision.
Item 68 adds paragraphs 5(1)(cb) and (cc) to Schedule 2 to establish a 12
month grace period for new arrivals to Australia (other than refugees) to take
out hospital cover without incurring a LHC loading.
Under new paragraph 5(1)(cb), the Schedule 2 application day of a migrant who became eligible for Medicare benefits after 30 September 1999 but before the commencement of this amendment will be whichever is the latest of:
• the 1 July next following the day on which he or she turned 31 years of age;
• the first anniversary of the day that this amendment comes into
effect (ie. the special categories amendment day); or
• if the person
was a citizen of New Zealand before entering Australia—the first
anniversary of the day that the HIC makes the determination that the person is
eligible for Medicare benefits.
Under new paragraph 5(1)(cc) the Schedule 2 application day of a migrant who became eligible for Medicare benefits after the commencement of this amendment will be whichever is the latest of:
• the 1 July next following the day on which he or she turned 31 years of age; and
• the first anniversary of the day he or she became eligible for
Medicare benefits; and
• if the person was a citizen of New Zealand
before entering Australia—the first anniversary of the day that the HIC
makes the determination that the person is eligible for Medicare
benefits.
This Item makes a minor amendment to subclause 5(2) of Schedule 2. The
amendment clarifies that, where a person’s Schedule 2 application
day is based on the day that the person becomes eligible for Medicare
benefits, that day will be calculated from when he or she becomes an eligible
person within the meaning of section 3 of the Health Insurance Act
1973.
This Item removes the alternate eligibility arrangements that
were in subclause 5(2), that a person could be eligible for Medicare benefits in
accordance with sections 6 or 7 of the Health Insurance Act 1973, and
which provide for temporary eligibility for Medicare benefits.
This Item inserts a new subclause 5(2A) after subclause 5(2) of Schedule 2 to clarify who will be a new arrival for the purposes of new paragraphs 5(1)(cc) and (cb).
A person will be taken to have entered Australia as a new arrival if, at the time of the person’s entry into Australia, the person:
• is the holder of a permanent visa within the meaning of the Migration Act 1958; or
• is a New Zealand citizen who is lawfully present in Australia; or
• is a person:
- who is the holder of a temporary visa within the
meaning of the Migration Act 1958; and
- who has made application for
a permanent visa under the Migration Act 1958 and the application has not
been withdrawn or otherwise finally determined; and
- in respect of whom
either an authority to work in Australia is in force, or another person (being
the person’s spouse, parent or child) is an Australian or the holder of a
permanent visa under the Migration Act 1958.
Item 70 will also
insert a new subclause 5(2B) to clarify when a person who is overseas is taken
to have returned to Australia. If the person returns for a period of at least 90
days, he or she will be deemed to have returned to Australia.
This Item adds a definition of special categories amendment day
in new subclause 5(3) for the purposes of the amendments in Items 69 and 73.
The special categories amendment day is the day on which these
amendments will commence, being a day to be fixed by proclamation.
Subclause (1) of this Item will assist recent arrivals who arrived in
Australia after 1 January 2000 and took out hospital cover after the
introduction of LHC on 1 July 2000 but before the commencement of these
amendments, thereby incurring a LHC loading. From the date that this Item comes
into effect, this group of recent arrivals will be deemed to have obtained
hospital cover before they turned 31 and will no longer be required to pay any
LHC loading.
This provision will not require RHBOs to repay LHC loading
that has been incurred before the commencement of Item 73.
Subclause (3)
of Item 73 notes that the terms adult beneficiary, base
rate, hospital cover and special categories
amendment day all have the same meaning as in the NHA.