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2002-2003
THE PARLIAMENT OF
THE COMMONWEALTH OF AUSTRALIA
HOUSE OF
REPRESENTATIVES
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Health and Ageing,
Senator the Hon. Kay Patterson)
PRIVATE HEALTH
INSURANCE
(COLLAPSED ORGANIZATION LEVY) BILL 2003
The Australian National Audit Office Audit Report No. 32 1999-2000:
“Management of Commonwealth Non-Primary Industry Levies”, identified
issues with the Private Health Insurance Administration Council (Council)
administration levy (established via subparagraph 82G(1)(h)(i) of the
National Health Act 1953) having regard to the operation of section 55 of
the Commonwealth of Australia Constitution (the Constitution).
Section
55 provides that laws imposing taxation shall deal only with the imposition of
taxation, and any provision therein dealing with any other matter shall be of no
effect.
This Bill, together with three other Bills, reimposes four health
insurance industry levies (and validates previous impositions of the levies)
having regard to section 55 of the Constitution with a view to removing any
doubt regarding the technical validity of the levies.
The four private
health insurance industry levies being reimposed
are:
§ the Private Health Insurance
Administration Council administration levy (subparagraph 82G(1)(h)(i)
National Health Act 1953);
§ the collapsed organization levy (paragraph
82G(1)(j) National Health Act 1953);
§ the Acute Care Advisory Committee (ACAC)
review levy (subparagraph 82G(1)(h)(ii) National Health Act 1953);
and
§ the
Reinsurance Trust Fund levy (section 73BC National Health Act
1953).
These levies are to be reimposed via the following
Bills:
§ Private Health Insurance (Council
Administration Levy) Bill 2003;
§ Private Health Insurance (Collapsed
Organization Levy) Bill 2003;
§ Private Health Insurance (ACAC Review
Levy) Bill 2003; and
§ Private Health Insurance (Reinsurance
Trust Fund Levy) Bill 2003.
The National Health Amendment (Private Health
Insurance Levies) Bill 2003 amends the National Health Act 1953 making
changes ancillary to, or consequential to, the reimposition of four private
health insurance industry levies.
The reimposition effects a technical
change in process. The changes effectively repeal the existing levy mechanisms
replacing them having regard to section 55 of the Constitution. While the
levies will still be administered by the Council, the money collected under the
levies will be placed into the consolidated revenue fund and then appropriated
for the purposes of those levies.
These levies only apply to the private
health insurance industry. Only registered health benefits organizations are
required to meet liabilities imposed via the levies. The purpose of the
reimposition of the levies is not to increase the financial burden on the
private health insurance industry. This proposal does not involve a change in
policy but rather corrects a technical defect to ensure that the legislation
functions as intended.
Doubt in relation to the validity of the levies
has the potential to substantially reduce or impede Council in undertaking its
functions including the prudential regulation of the private health insurance
industry. Given the role of Council its financial basis should not be
compromised by doubt in relation to section 55 of the Constitution.
The collapsed organization levy is reimposed by this Bill. The purpose
of the reimposed collapsed organization levy is the same as in the current
provision in paragraph 82G(1)(j) of the National Health Act 1953. A
collapsed organization levy may be imposed to help meet a collapsed
organization’s liabilities to its contributors that it is unable to meet
itself.
Significantly, the purpose of the collapsed organization levy
does not extend to assisting a collapsed organization to meet other
(non-contributor) liabilities. The collapsed organization levy is not designed
to bail out a registered health benefits organization. Rather, it is designed
to protect contributors from liabilities that should have been covered by their
registered health benefits organization. Liabilities to contributors will
invariably be health care related.
A collapsed organization is a
registered health benefits organization that is subject to actions under
Division 3 or 4 of Part VIA of the National Health Act 1953.
The
collapsed organization levy as set out in paragraph 82G(1)(j) of the National
Health Act 1953 has not previously been used. In the event that this levy
is used, it is expected that it will need to be used expeditiously and in a
manner which is flexible.
Before the Minister may make a determination to
impose the collapsed organization levy, or to exempt an organization from its
application, the Minister must obtain Council’s advice in relation to the
following matters:
§ whether to make a determination imposing
the levy (including a justification as to why the levy should be
imposed);
§ whether to exempt an organization from the
application of the levy (including why the imposition would have a adverse
affect on the finances of that organization);
§ the day (or days) to be specified as
Collapsed Organization Levy day(s);
§ the proposed rate of the collapsed
organization levy; and
§ the total value of the collapsed
organization’s liabilities to its contributors.
The power to exempt
an organization from the application of the collapsed organization levy is
required to ensure that the application of the collapsed organization levy will
not of itself adversely affect the financial stability of any fund.
Any
advice provided to the Minister from Council in relation to the collapsed
organization levy must be tabled in both Houses of Parliament. This enables the
Parliament to scrutinise the imposition of this levy on the industry.
The original intent of the collapsed organization levy has not changed.
This legislation addresses a technical concern identified by the Australian
National Audit Office. While the power has not been used, if it is used prior
to 1 July 2004 this Bill validates purported impositions of the collapsed
organisation levy by Council prior to 1 July 2004.
The Private Health Insurance (Collapsed Organization Levy) Bill 2003
is not expected to have any significant impact upon the finances of the
Commonwealth.
NOTES ON CLAUSES
This clause provides that upon enactment this Act may be cited as the
Private Health Insurance (Collapsed Organization Levy) Act 2003.
This clause provides for the commencement of the Act on 1 July 2004 to
enable a seamless transition in the reimposition of the collapsed organization
levy between financial years.
This clause provides that this Act binds the Crown in each of its
capacities.
This clause provides that this Act extends in its application to the
Territory of Cocos (Keeling) Islands and to the Territory of Christmas
Island.
This clause establishes a range of definitions for the purposes of the
Act.
In particular the clause defines a collapsed organization as a
registered health benefits organization in relation to
which:
§ a person is appointed as an administrator
under section 82XD of the National Health Act 1953;
or
§ a
winding up application is made under section 82YT of the National Health Act
1953.
This clause specifies that the purpose of the collapsed organization levy
is to help meet a collapsed organization’s liabilities to its contributors
that it is unable to meet itself.
This clause provides that if a registered health benefits organization is
a collapsed organization and the Minister determines in writing that this clause
applies to the collapsed organization, the collapsed organization levy is then
imposed on each registered health benefits organization (other than an exempt
organization) on each collapsed organization levy day.
Subclause 2 of
this clause provides that the Minister may determine in writing the day (or
days) that are to be collapsed organization levy day(s).
Subclause 3 of this clause provides that any determination made by the
Minister under this section is a disallowable instrument for the purposes of
section 46A of the Acts Interpretation Act 1901.
Clause 8:
Exempt organizations
This clause provides that a registered health benefits organization is exempt from the imposition of the collapsed organization levy if:
§ it is the
collapsed organization; or
§ the Minister determines in writing that
the organization is an exempt organization.
The exemptions are important
from a prudential regulation perspective.
Subclause 2 of this clause
provides that the Minister may determine an exempt organization in relation to
the levy determination if the Minister is satisfied that the imposition would
have a significant adverse impact on the organizations ability to comply with
its solvency requirements or capital adequacy requirements as defined in clause
5.
Subclause 3 of this clause provides that a determination made by the
Minister exempting an organization from the application of the collapsed
organization levy is a disallowable instrument for the purposes of section 46A
of the Acts Interpretation Act 1901.
Clause 9: Rate of
collapsed organization levy
This clause enables the Minister to
determine the rate of the collapsed organization levy and when it will be
imposed.
Subclause 2 of this clause provides that in determining the rate
of the collapsed organization levy the Minister must have regard to the total
value of the collapsed organization’s liabilities to its contributors.
Subclause 3 provides that the rate of
levy:
§ must be based on the number of
contributors who contribute to the health benefits fund conducted by the
registered health benefits organization on the day determined in writing by the
Minister as the census day for the levy day; and
§ may be different for contributors who
contribute to the health benefits fund in respect of one person as opposed to
contributors who contribute to the health benefits fund in respect of more than
one person.
In addition subclause 3 of this clause provides that the rate
of the levy may be set at zero. The Minister is not bound to set a levy rate
which meets all (or any) of a collapsed organizations liabilities to its
contributors.
Subclause 4 of this clause provides that a
determination made by the Minister determining the rate of the collapsed
organization levy is a disallowable instrument for the purposes of section 46A
of the Acts Interpretation Act 1901.
The maximum rate for this
levy is not set in the legislation. It is not possible to determine
prospectively an appropriate maximum for this levy. The Bill provides for
Parliamentary scrutiny of the various stages involved in imposing the collapsed
organization levy.
Clause 10: Minister to obtain advice from
Council
Before the Minister may make determinations in relation to
the collapsed organization levy the Minister must obtain and take into account
advice from Council in relation to the
following:
• whether to make a determination
imposing the collapsed organization levy, including a justification as to why
the levy is required;
• whether to make a
determination exempting a registered health benefits organization from the
imposition of the collapsed organization levy, including a justification as to
why the exemption is appropriate;
• the day or
days to be specified as the collapsed organization levy day or
days;
• the proposed rate of the collapsed
organization levy;
• the day or days proposed to
be specified for the census day or days;
and
• the total value of the collapsed
organization’s liabilities to its contributors.
Subclause 2
provides that advice provided to the Minister under subclause 1 must be laid
before each House of Parliament with the determination to which the advice
relates. This enables Parliament to be aware of the background and
justification to the invoking of the levy.
This clause validates all previous payments of the collapsed organization
levy.
This clause provides for the Governor-General to make regulations
prescribing matters:
§ required or permitted by this Act to be
prescribed; or
§ necessary or convenient to be prescribed
for carrying out or giving effect to this Act.
Subclause 2 of this clause
provides that prior to the Governor-General making regulations under the
previous sub-section the Minister must take into consideration any relevant
recommendations made to the Minister by the Council.