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Private Health Insurance Bill 2007

Part 4-4 Health benefits funds

Division 131 Introduction

131-1   What this Part is about

Private health insurers must have health benefits funds. These funds must be operated in accordance with the requirements of this Part, in particular the requirements relating to solvency and capital adequacy.

Directors of private health insurers may be personally liable if these requirements are contravened.

131-5   The Private Health Insurance (Health Benefits Fund) Rules

                   * Health benefits funds are also dealt with in the Private Health Insurance (Health Benefits Fund Policy) Rules and the Private Health Insurance (Health Benefits Fund Administration) Rules. The provisions of this Part indicate when a particular matter is or may be dealt with in these Rules.

Note:          The Private Health Insurance (Health Benefits Fund Policy) Rules are made by the Minister under section 333-20, and the Private Health Insurance (Health Benefits Fund Administration) Rules are made by the Council under section 333-25.

131-10   Meaning of health benefits fund

                   A health benefits fund is a fund that:

                     (a)  is established in the records of a private health insurer; and

                     (b)  relates solely to:

                              (i)  its * health insurance business, or a particular part of that business; or

                             (ii)  its health insurance business, or a particular part of that business, and some or all of its * health-related businesses, or particular parts of those businesses.

131-15   Meaning of health-related business

             (1)  Health-related business is business that is any one or more of the following:

                     (a)  a business of providing goods or services (or both) in order to manage or prevent diseases, injuries or conditions;

                     (b)  a business of undertaking liability, by way of insurance, to indemnify people who are * ineligible for Medicare for costs associated with providing treatment, goods or services that:

                              (i)  are provided to those people in Australia; and

                             (ii)  are provided to manage or prevent diseases, injuries or conditions;

                     (c)  a business of providing a financial service to assist people insured under * complying health insurance products to meet the costs associated with treatment, goods or services that are provided to manage or prevent diseases, injuries or conditions;

                     (d)  any other business, or business included in a class of businesses, specified in the Private Health Insurance (Health Benefits Fund Policy) Rules for the purposes of this paragraph.

             (2)  Despite subsection (1), neither of the following is health-related business :

                     (a)  business that is * health insurance business; or

                     (b)  any other business, or business included in a class of businesses, specified in the Private Health Insurance (Health Benefits Fund Policy) Rules for the purposes of this paragraph.



 

Division 134 The requirement to have health benefits funds

134-1   Private health insurers must have health benefits funds

             (1)  A private health insurer must at all times have at least one * health benefits fund in respect of:

                     (a)  its * health insurance business; or

                     (b)  its health insurance business and some or all of its * health-related businesses.

             (2)  A private health insurer may have more than one * health benefits fund, but must not have more than one in respect of a particular * risk equalisation jurisdiction.

             (3)  Despite subsection (2), a private health insurer may have more than one * health benefits fund in respect of a particular * risk equalisation jurisdiction if:

                     (a)  each of those funds; or

                     (b)  each of those funds, other than one such fund which was established in connection with a restructure of funds under Division 146;

is a fund that existed at the time this Act commenced, and that, immediately before that commencement, was conducted by a registered organization (within the meaning of the National Health Act 1953 ).

             (4)  Despite subsection (2), a private health insurer may have more than one * health benefits fund in respect of a particular * risk equalisation jurisdiction in the circumstances specified in the Private Health Insurance (Health Benefits Fund Policy) Rules for the purposes of this subsection.

134-5   Notifying the Council when health benefits funds are established

             (1)  If a private health insurer establishes a * health benefits fund, the insurer must give to the Council written notice of:

                     (a)  the establishment of the fund; and

                     (b)  the date on which the fund was established; and

                     (c)  such other matters as are specified in the Private Health Insurance (Health Benefits Fund Administration) Rules for the purposes of this paragraph.

             (2)  The notice must be given in the * approved form.

             (3)  This section does not apply if the fund is established under an approval given under Division 146.

134-10   Inclusion of health-related businesses in health benefits funds

             (1)  If a private health insurer has a * health benefits fund in respect of its * health insurance business and some or all of its * health-related businesses, the dominant purpose of the fund must relate to its health insurance business.

             (2)  If the Council is satisfied that the insurer is contravening subsection (1):

                     (a)  the Council may give to the insurer such directions relating to divesting the fund of * health-related businesses as the Council thinks necessary to ensure the insurer’s compliance with subsection (1); and

                     (b)  the insurer must comply with those directions.



 

Division 137 The operation of health benefits funds

137-1   Assets of health benefits funds

             (1)  A private health insurer must keep * assets of a * health benefits fund distinct and separate from assets of other health benefits funds and from all other money, assets or investments of the insurer.

             (2)  A private health insurer must maintain a separate bank account for each * health benefits fund that it conducts.

             (3)  The assets of a * health benefits fund at a particular time are the following:

                     (a)  the balance of money represented by amounts credited to the fund in accordance with section 137-5;

                     (b)  assets of the insurer obtained as a result of the expenditure or application of money credited to the fund;

                     (c)  investments held by the insurer as a result of the expenditure or application of money credited to the fund;

                     (d)  other money, assets or investments of the insurer transferred to the fund, whether under this Act or otherwise.

             (4)  Assets or investments obtained by the application of assets (other than money) of a * health benefits fund are themselves assets of the fund.

             (5)  Despite paragraphs (3)(b) and (c) and subsection (4), * assets or investments obtained by the expenditure of money of, or the application of other assets of, a * health benefits fund are not assets of the fund if:

                     (a)  the private health insurer conducting the fund is * registered as a for profit insurer; and

                     (b)  the expenditure or application was not done for the purposes of the fund.

             (6)  To avoid doubt, nothing in this Act is intended to constitute a private health insurer or its * directors a trustee or trustees of the * assets of the * health benefits funds of the insurer.

137-5   Payments to health benefits funds

             (1)  A private health insurer must credit the following amounts to a * health benefits fund:

                     (a)  premiums payable under policies of insurance that are * referable to the fund;

                     (b)  amounts paid to the insurer in relation to a liability under Division 152 in relation to the fund;

                     (c)  income from the investment of * assets of the fund;

                     (d)  money paid to or by the insurer under a judgment of a court relating to any matter concerning the business of the fund or any failure to comply with this Part in relation to the fund;

                     (e)  any other money received by the insurer in connection with its conduct of the business of the fund;

                      (f)  any other amounts that the Private Health Insurance (Health Benefits Fund Policy) Rules specify.

             (2)  This Act does not prevent a private health insurer from * making a capital payment to a * health benefits fund.

             (3)  A private health insurer makes a capital payment to a * health benefits fund if it credits to the fund an amount that:

                     (a)  is not required to be credited to the fund under subsection (1); and

                     (b)  either:

                              (i)  does not represent any part of the * assets of another health benefits fund; or

                             (ii)  is credited to the fund with the Council’s written approval.

137-10   Expenditure and application of health benefits funds

             (1)  A private health insurer must not apply, or deal with, * assets of a * health benefits fund, whether directly or indirectly, except in accordance with this Division.

             (2)  The * assets of a * health benefits fund must not be applied:

                     (a)  for any purpose other than:

                              (i)  meeting liabilities (including * policy liabilities), or expenses, incurred for the purposes of the business of the fund; or

                             (ii)  making investments in accordance with section 137-20; or

                            (iii)  making a distribution under Division 149; or

                     (b)  for a purpose specified in the Private Health Insurance (Health Benefits Fund Policy) Rules for the purposes of this paragraph.

             (3)  A private health insurer must not mortgage or charge any of the * assets of a * health benefits fund except:

                     (a)  to secure a bank overdraft; or

                     (b)  for such other purposes, and subject to such other conditions, as are specified in the Private Health Insurance (Health Benefits Fund Administration) Rules for the purposes of this paragraph.

             (4)  A private health insurer must not borrow money for the purposes of the business of a * health benefits fund except in accordance with the Private Health Insurance (Health Benefits Fund Administration) Rules.

             (5)  Despite subsection (2), if a private health insurer is * registered as a for profit insurer, the * assets of a * health benefits fund conducted by the insurer may be applied for any purpose, except an application of the assets that is inconsistent with:

                     (a)  the * solvency standard; or

                     (b)  the * capital adequacy standard; or

                     (c)  a * solvency direction or * capital adequacy direction given to the insurer.

             (6)  This section does not apply to the transfer of * assets:

                     (a)  from one * health benefits fund to another in accordance with Division 146; or

                     (b)  in accordance with a direction under subsection 134-10(2).

137-15   Effect of non-compliance with section 137-10

General principle

             (1)  A transaction entered into in contravention of section 137-10 is of no effect unless:

                     (a)  the Federal Court makes an order under subsection (2); or

                     (b)  it is included in a class of transactions specified in the Private Health Insurance (Health Benefits Fund Administration) Rules to be transactions to which this section applies, and the Federal Court has not made an order under subsection (6).

Order declaring the transaction to be effective

             (2)  The Federal Court, on application by a party to the transaction, may make an order declaring that the transaction is effective, and is to be taken always to have been effective, for all purposes.

             (3)  The Federal Court must not make an order under subsection (2) unless it is satisfied that the applicant entered into the transaction in good faith and without knowledge of the contravention.

             (4)  In deciding whether to make an order under subsection (2), the Federal Court may have regard to any hardship that would be caused to the applicant if the order were not made.

             (5)  Subsection (4) is not intended to limit the matters to which the Federal Court may have regard on an application under subsection (2).

Order declaring the transaction to be of no effect

             (6)  The Federal Court, on application by the Council, may make an order declaring that a particular transaction that:

                     (a)  was entered into in contravention of section 137-10; and

                     (b)  is included in a class of transactions of a kind referred to in paragraph (1)(b) of this section;

is, and is to be taken always to have been, of no effect for any purpose.

             (7)  The Federal Court must not make an order under subsection (6) if it is satisfied that the effect of the order (if made) would be to cause hardship to a person who entered into the transaction in good faith and without knowledge of the contravention.

137-20   Investment of health benefits funds

             (1)  A private health insurer may invest * assets of a * health benefits fund in any way that is likely to further the business of the fund.

             (2)  However:

                     (a)  nothing in this Act authorises a private health insurer to make an investment the insurer would otherwise be prohibited from making; and

                     (b)  nothing in this Act authorises a private health insurer to make an investment the insurer would not otherwise have power to make; and

                     (c)  a private health insurer must not invest * assets of a * health benefits fund, or keep such assets invested, if the investment, or the retention of the investment, as the case requires, is prohibited by the Private Health Insurance (Health Benefits Fund Administration) Rules.

             (3)  A transaction is not ineffective merely because it involves a contravention of paragraph (2)(c).

137-25   Restriction on restructure, merger, acquisition or termination of health benefits funds

             (1)  A private health insurer must not change the * health benefits fund to which a policy of insurance is * referable unless the change is made in accordance with Division 146.

             (2)  A private health insurer must not terminate a * health benefits fund except in accordance with Division 149.

             (3)  This section does not prevent a liquidator doing anything authorised or required by or under this Act or any other law of the Commonwealth or of a State or Territory.

137-30   Operation of health-related businesses through health benefits funds

                   If a private health insurer has a * health benefits fund in respect of its * health insurance business and some or all of its * health-related businesses, the insurer must comply with any requirements specified in the Private Health Insurance (Health Benefits Fund Policy) Rules relating to how the health-related businesses are to be conducted.



 

Division 140 The solvency standard for health benefits funds

140-1   Purpose of Division

                   The purpose of this Division is to establish, and require private health insurers to comply with, standards of solvency in order to ensure that the * health benefits funds conducted by private health insurers remain solvent.

140-5   Council to establish solvency standard

             (1)  The Private Health Insurance (Health Benefits Fund Administration) Rules may establish a solvency standard for the purposes of this Division.

             (2)  The * solvency standard may be expressed:

                     (a)  to set different standards of solvency:

                              (i)  for * health benefits funds conducted by different private health insurers; or

                             (ii)  for different classes of health benefits funds; or

                     (b)  to apply to a health benefits fund only in circumstances specified in the standard.

140-10   Purpose of solvency standard

                   The purpose of the * solvency standard is to ensure, as far as practicable, that at any time the financial position of a * health benefits fund conducted by a private health insurer is such that the insurer will be able, out of the fund’s * assets, to meet all liabilities that are referable to the fund as those liabilities become due.

140-15   Compliance with solvency standard

Private health insurers to comply with solvency standard

             (1)  Subject to subsection (2), every private health insurer must comply with the * solvency standard as it applies in respect of that insurer.

Declarations that solvency standard does not apply

             (2)  The Council may declare, by notice in writing, that the * solvency standard does not apply to a particular private health insurer. The declaration may be expressed to be limited to particular specified circumstances, or to a particular specified period, or both.

Note:          Refusals to make declarations are reviewable under Part 6-9.

Conditions applying to declarations

             (3)  The Council may:

                     (a)  in a declaration under subsection (2); or

                     (b)  by a separate notice in writing;

impose conditions to be complied with by any private health insurer that is to get the benefit of the declaration.

Note:          Decisions to impose conditions are reviewable under Part 6-9.

             (4)  If a private health insurer fails to comply with a condition referred to in subsection (3), the declaration is taken to cease to apply to the insurer.

Revoking or varying declarations and conditions

             (5)  If the Council is satisfied that a declaration under subsection (2), or a condition referred to in subsection (3), is no longer required or should be varied, the Council must, by notice in writing, revoke or vary the declaration or condition accordingly.

             (6)  If a private health insurer requests the Council, in writing, to revoke or vary a declaration under subsection (2), or a condition referred to in subsection (3), the Council must, within 28 days after receiving the request:

                     (a)  if the Council is satisfied that the declaration or condition is no longer necessary or should be varied—revoke or vary the declaration or condition; or

                     (b)  in any other case—refuse to revoke or vary the declaration or condition.

Note:          Refusals to revoke or vary declarations or conditions are reviewable under Part 6-9.

             (7)  If the Council does not, within the 28 days referred to in subsection (6), either revoke or vary or refuse to revoke or vary the declaration or condition concerned, the Council is to be taken, for the purposes of this Act, to have refused to revoke or vary the declaration or condition at the end of that period.

Note:          Decisions that the Council is taken under this subsection to have made are reviewable under Part 6-9.

             (8)  The Council must give to the private health insurer written notice of a decision made under subsection (6) and, if the Council refuses to revoke or vary the declaration or condition concerned, provide a statement of reasons for so refusing.

Declarations etc. are not legislative instruments

             (9)  A notice under subsection (2), (3), (5) or (8) is not a legislative instrument.

References to declarations etc.

           (10)  A reference in this section to a declaration or condition includes a reference to a declaration or condition as varied.

140-20  Solvency directions

Council may give solvency directions

             (1)  The Council may give written directions ( solvency directions ) to a private health insurer if, having regard to:

                     (a)  the nature and value of the * assets of a * health benefits fund conducted by the insurer; or

                     (b)  the nature and extent of the liabilities that are referable to the business of the fund; or

                     (c)  any other matters that the Council considers relevant;

the Council is satisfied that there are reasonable grounds for believing that the insurer might not be able to meet, out of the assets of the fund, all liabilities referable to the business of the fund as they become due.

             (2)  * Solvency directions are directions that, in the Council’s opinion, are reasonably necessary to ensure, as far as practicable, that a private health insurer will be able to meet the liabilities of a * health benefits fund conducted by the insurer out of the * assets of the fund as they become due.

             (3)  The Council may give a * solvency direction to a private health insurer even if, when the direction is given:

                     (a)  the insurer meets the requirements of the * solvency standard applicable to that organisation in respect of the fund; and

                     (b)  there are reasonable grounds to believe that the insurer will meet that standard at all times while the direction is in force.

Compliance with solvency directions

             (4)  A private health insurer must comply with a * solvency direction given to it under subsection (1).

Duration of solvency directions

             (5)  Subject to subsections (7) and (8), a * solvency direction remains in force for a period specified in the direction, not exceeding 3 years, commencing on the day when the direction is given.

             (6)  Subsection (5) does not prevent the Council from issuing a further * solvency direction in the same terms to take effect immediately after the expiry of a previous direction.

Revoking or varying solvency directions

             (7)  If the Council is satisfied that a particular * solvency direction is no longer required or should be varied, the Council must, by written notice given to the private health insurer, revoke or vary the direction accordingly.

             (8)  If a private health insurer to which a * solvency direction has been given requests the Council, in writing, to revoke or vary the direction, the Council must, within 28 days after receiving the request:

                     (a)  if the Council is satisfied that the direction is no longer necessary or should be varied—revoke or vary the direction; or

                     (b)  in any other case—refuse to revoke or vary the direction.

Note:          Refusals to revoke or vary solvency directions are reviewable under Part 6-9.

             (9)  If the Council does not, within the 28 days referred to in subsection (8), either revoke or vary or refuse to revoke or vary the * solvency direction concerned, the Council is to be taken, for the purposes of this Act, to have refused to revoke or vary the direction at the end of that period.

Note:          Decisions that the Council is taken under this subsection to have made are reviewable under Part 6-9.

           (10)  The Council must give to the private health insurer written notice of a decision made under subsection (8) and, if the Council refuses to revoke or vary the * solvency direction concerned, provide a statement of reasons for refusing.



 

Division 143 The capital adequacy standard for health benefits funds

143-1   Purpose of Division

                   The purpose of this Division is to establish, and require private health insurers to comply with, a standard in order to maintain the capital adequacy of the * health benefits funds they conduct.

143-5   Council to establish capital adequacy standard

             (1)  The Private Health Insurance (Health Benefits Fund Administration) Rules may establish a capital adequacy standard for the purposes of this Division.

             (2)  The * capital adequacy standard may be expressed:

                     (a)  to set different standards of capital adequacy:

                              (i)  for * health benefits funds conducted by different private health insurers; or

                             (ii)  for different classes of health benefits funds; or

                     (b)  to apply to a health benefits fund only in circumstances specified in the standard.

143-10   Purpose of capital adequacy standard

                   The purpose of the * capital adequacy standard is to ensure, as far as practicable, that there are sufficient * assets in a * health benefits fund conducted by a private health insurer to provide adequate capital for the conduct of the fund:

                     (a)  in accordance with this Act; and

                     (b)  in the interests of the * policy holders of the fund.

143-15   Compliance with capital adequacy standard

Private health insurers to comply with capital adequacy standard

             (1)  Subject to subsection (2), every private health insurer must comply with the * capital adequacy standard as it applies in respect of that insurer.

Declarations that capital adequacy standard does not apply

             (2)  The Council may declare, by notice in writing, that the * capital adequacy standard does not apply to a particular private health insurer. The declaration may be expressed to be limited to particular specified circumstances, or to a particular specified period, or both.

Note:          Refusals to make declarations are reviewable under Part 6-9.

Conditions applying to declarations

             (3)  The Council may:

                     (a)  in a declaration under subsection (2); or

                     (b)  by a separate notice in writing;

impose conditions to be complied with by any private health insurer that is to get the benefit of the declaration.

Note:          Decisions to impose conditions are reviewable under Part 6-9.

             (4)  If a private health insurer fails to comply with a condition referred to in subsection (3), the declaration is taken to cease to apply to the insurer.

Revoking or varying declarations and conditions

             (5)  If the Council is satisfied that a declaration under subsection (2), or a condition referred to in subsection (3), is no longer required or should be varied, the Council must, by notice in writing, revoke or vary the declaration or condition accordingly.

             (6)  If a private health insurer requests the Council, in writing, to revoke or vary a declaration under subsection (2), or a condition referred to in subsection (3), the Council must, within 28 days after receiving the request:

                     (a)  if the Council is satisfied that the declaration or condition is no longer necessary or should be varied—revoke or vary the declaration or condition; or

                     (b)  in any other case—refuse to revoke or vary the declaration or condition.

Note:          Refusals to revoke or vary declarations or conditions are reviewable under Part 6-9.

             (7)  If the Council does not, within the 28 days referred to in subsection (6), either revoke or vary or refuse to revoke or vary the declaration or condition concerned, the Council is to be taken, for the purposes of this Act, to have refused to revoke or vary the declaration or condition at the end of that period.

Note:          Decisions that the Council is taken under this subsection to have made are reviewable under Part 6-9.

             (8)  The Council must give to the private health insurer written notice of a decision made under subsection (6) and, if the Council refuses to revoke or vary the declaration or condition concerned, provide a statement of reasons for so refusing.

Declarations etc. are not legislative instruments

             (9)  A notice under subsection (2), (3), (5) or (8) is not a legislative instrument.

References to declarations etc.

           (10)  A reference in this section to a declaration or condition includes a reference to a declaration or condition as varied.

143-20   Capital adequacy directions

Council may give capital adequacy directions

             (1)  The Council may give written directions ( capital adequacy directions ) to a private health insurer if, having regard to:

                     (a)  the nature and value of the * assets of a * health benefits fund conducted by the insurer; or

                     (b)  the nature and extent of the liabilities that are referable to the business of the fund; or

                     (c)  any other matters that the Council considers relevant;

the Council is satisfied that there are reasonable grounds for believing that the assets of the fund will not provide adequate capital for the conduct of the business of the fund in accordance with this Act and in the interests of the * policy holders of the fund.

             (2)  * Capital adequacy directions are directions that, in the Council’s opinion, are reasonably necessary to ensure, as far as practicable, that * assets of a * health benefits fund conducted by a private health insurer will provide adequate capital for the purposes described in subsection (1).

             (3)  The Council may give a * capital adequacy direction to a private health insurer even if, when the direction is given:

                     (a)  the insurer meets the requirements of the * capital adequacy standard applicable to that organisation in respect of the fund; and

                     (b)  there are reasonable grounds to believe that the insurer will meet that standard at all times while the direction is in force.

Compliance with capital adequacy directions

             (4)  A private health insurer must comply with a * capital adequacy direction given to it under subsection (1).

Duration of capital adequacy directions

             (5)  Subject to subsections (7) and (8), a * capital adequacy direction remains in force for a period specified in the direction, not exceeding 3 years, commencing on the day when the direction is given.

             (6)  Subsection (5) does not prevent the Council from issuing a further * capital adequacy direction in the same terms to take effect immediately after the expiry of a previous direction.

Revoking or varying capital adequacy directions

             (7)  If the Council is satisfied that a particular * capital adequacy direction is no longer required or should be varied, the Council must, by written notice given to the private health insurer, revoke or vary the direction accordingly.

             (8)  If a private health insurer to which a * capital adequacy direction has been given requests the Council, in writing, to revoke or vary the direction, the Council must, within 28 days after receiving the request:

                     (a)  if the Council is satisfied that the direction is no longer necessary or should be varied—revoke or vary the direction; or

                     (b)  in any other case—refuse to revoke or vary the direction.

Note:          Refusals to revoke or vary capital adequacy directions are reviewable under Part 6-9.

             (9)  If the Council does not, within the 28 days referred to in subsection (8), either revoke or vary or refuse to revoke or vary the * capital adequacy direction concerned, the Council is to be taken, for the purposes of this Act, to have refused to revoke or vary the direction at the end of that period.

Note:          Decisions that the Council is taken under this subsection to have made are reviewable under Part 6-9.

           (10)  The Council must give to the private health insurer written notice of a decision made under subsection (8) and, if the Council refuses to revoke or vary the * capital adequacy direction concerned, provide a statement of reasons for so refusing.



 

Division 146 Restructure, merger and acquisition of health benefits funds

146-1   Restructure of health benefits funds

             (1)  A private health insurer may restructure its * health benefits funds by making all of the insurance policies that are * referable to a health benefits fund of the insurer, and that belong to a * policy group of that fund, become referable to another health benefits fund or funds of the insurer (whether existing or proposed) if:

                     (a)  the insurer applies to the Council, in the * approved form, for approval of the restructure; and

                     (b)  the Council approves the restructure in writing; and

                     (c)  the insurer complies with any requirements that the Private Health Insurance (Health Benefits Fund Administration) Rules impose on the insurer in relation to the restructure.

             (2)  Subject to subsection (3), the Council must approve the restructure if it is satisfied that:

                     (a)  the proposed division of * assets and liabilities between the funds is reasonable; and

                     (b)  the restructure will not result in any breach of the * solvency standard or the * capital adequacy standard.

             (3)  The Council must not approve the application if:

                     (a)  it considers that the restructure will result in unfairness to the * policy holders of a * health benefits fund of the insurer as that fund exists immediately before the restructure (a transferring fund ), when those policy holders are viewed as a group; or

                     (b)  it considers that the restructure will result in unfairness to the persons who would be policy holders of a health benefits fund of the insurer as that fund would exist immediately after the restructure (a receiving fund ), when those persons are viewed as a group; or

                     (c)  the insurer is being wound up when the application is made.

Note:          Refusals to approve restructures are reviewable under Part 6-9.

             (4)  The Private Health Insurance (Health Benefits Fund Administration) Rules may provide for the following:

                     (a)  criteria for approving or refusing to approve applications under subsection (1);

                     (b)  requirements to notify interested persons of the outcomes of such applications;

                     (c)  matters connected with how restructures take place, including the following:

                              (i)  insurance policies becoming * referable to a receiving fund or funds;

                             (ii)  * policy liabilities and other liabilities becoming referable to a receiving fund or funds;

                            (iii)  * assets of a transferring fund becoming assets of a receiving fund or funds;

                            (iv)  the timing of restructures;

                             (v)  if a receiving fund is a proposed new * health benefits fund—the establishment of that fund;

                     (d)  requirements for private health insurers to give the Council information following restructures.

             (5)  A policy group , of a * health benefits fund, is all of the insurance policies:

                     (a)  that are * referable to the fund; and

                     (b)  the addresses of the * holders of which, as known to the private health insurer conducting the fund, are located in the same * risk equalisation jurisdiction.

The Private Health Insurance (Health Benefits Fund Administration) Rules may provide for how to work out the policy group for a policy that has 2 or more holders whose addresses are not all located in the same risk equalisation jurisdiction.

             (6)  An area is a risk equalisation jurisdiction if the Private Health Insurance (Health Benefits Fund Administration) Rules so provide.

146-5   Merger and acquisition of health benefits funds

             (1)  Two or more private health insurers may:

                     (a)  transfer to a * health benefits fund or funds of one of the insurers (the transferee insurer ) the health benefits fund or funds of the other insurer; or

                     (b)  transfer to a health benefits fund or funds of one of the insurers (the transferee insurer ) the health benefits fund or funds of the other insurers;

by making the insurance policies that are * referable to a health benefits fund or funds of the other insurer, or other insurers, become referable to the health benefits fund or funds of the transferee insurer.

             (2)  However, the transfer must not take place without the Council’s written approval if one or more of the following apply:

                     (a)  the transfer involves the establishment of a new * health benefits fund or funds;

                     (b)  a * solvency direction is in force in relation to the other insurer, or one or more of the other insurers;

                     (c)  a * capital adequacy direction is in force in relation to the other insurer, or one or more of the other insurers.

             (3)  The Council must approve the transfer if, and only if:

                     (a)  the insurers referred to in subsection (1) apply jointly to the Council, in the * approved form, for approval of the transfer; and

                     (b)  if paragraph (2)(a) applies—the Council is satisfied that the allocation of * assets and liabilities to the new * health benefits fund or funds is reasonable; and

                     (c)  if paragraph (2)(b) or (c) applies—the Council is satisfied that the transferee insurer will be able to take action that will allow the direction, or directions, to be revoked.

Note:          Refusals to approve transfers are reviewable under Part 6-9.

             (4)  The Private Health Insurance (Health Benefits Fund Administration) Rules may provide for the following:

                     (a)  criteria for approving or refusing to approve applications under subsection (3);

                     (b)  requirements to notify interested persons of the outcomes of such applications;

                     (c)  matters connected with how restructures take place, including the following:

                              (i)  insurance policies becoming * referable to a * health benefits fund or funds of the transferee insurer;

                             (ii)  * policy liabilities and other liabilities becoming referable to such a fund or funds;

                            (iii)  * assets of a transferring fund becoming assets of such a fund or funds;

                            (iv)  the timing of restructures;

                             (v)  if any such fund is a proposed new health benefits fund—the establishment of that fund;

                     (d)  requirements for private health insurers to give the Council information following transfers.

             (5)  The transferee insurer must, within 28 days after the transfer takes place, notify the Council of the transfer. The notice must comply with any requirements specified in the Private Health Insurance (Health Benefits Fund Administration) Rules.



 

Division 149 Termination of health benefits funds

Subdivision 149-A Approving the termination of health benefits funds

149-1   Applying for termination

                   A private health insurer may apply to the Council, in the * approved form, for approval of the termination of each of its * health benefits funds.

149-5   Requesting further information

                   The Council may, within 28 days after the application is made, give the applicant written notice requiring the applicant to give the Council such further information relating to the application as is specified in the notice.

149-10   Deciding the application

             (1)  The Council must approve the termination if it is satisfied that:

                     (a)  the insurer is not in the process of being wound up; and

                     (b)  each of its * health benefits funds meets the * solvency standard; and

                     (c)  in relation to each of the funds, termination of the fund will not result in unfairness to the * policy holders of the fund, when those policy holders are viewed as a group;

and is satisfied as to such other matters are specified in the Private Health Insurance (Health Benefits Fund Policy) Rules.

             (2)  If the Council grants the application, the Council:

                     (a)  may appoint a person other than the applicant as the * terminating manager of the funds; and

                     (b)  must notify the insurer in writing:

                              (i)  that it approves the termination; and

                             (ii)  if paragraph (a) applies—of the appointment of the terminating manager.

             (3)  If the Council refuses the application, the Council must notify the insurer in writing of the refusal.

Note:          Refusals to approve terminations are reviewable under Part 6-9.

149-15   Council can be taken to refuse application

                   The Council is taken, for the purposes of Part 6-9, to have refused the application if the Council does not notify the applicant of its decision on the application:

                     (a)  within 90 days after the application was made; or

                     (b)  if the Council had given the applicant a notice under section 149-5 requiring the applicant to give further information relating to the application—within 90 days after the applicant gives that information to the Council;

whichever is later.

Subdivision 149-B Conducting the termination of health benefits funds

149-20   Conduct of funds during termination process

             (1)  A private health insurer must not, after being notified under subsection 149-10(2) that termination of its * health benefits funds has been approved:

                     (a)  enter into an insurance policy that is * referable to any of its funds with a person who is not already a * holder of such a policy; or

                     (b)  if the insurer is * registered as a for profit insurer—apply the * assets of any of the funds except in accordance with subsection 137-10(2) (unless this paragraph has ceased to apply to the insurer because of section 149-45); or

                     (c)  if the insurer is not registered as a for profit insurer—become registered as a for profit insurer.

             (2)  The insurer must, within 60 days after being notified under subsection 149-10(2) that termination of its * health benefits funds has been approved:

                     (a)  give a written notice, stating the day (the termination day ) from which it will not renew insurance policies that are * referable to any of its funds, to:

                              (i)  each * policy holder of any of its funds; and

                             (ii)  the Council; and

                     (b)  notify the termination day in a national newspaper, or in a newspaper circulating in each jurisdiction where the insurer has its registered office or carries on business.

The termination day must not be earlier than 90 days after the insurer finishes giving notices under this subsection.

             (3)  The insurer must not, on or after the * termination day, renew any insurance policies that are * referable to any of those funds.

             (4)  The insurer must accept any valid claim for benefits under an insurance policy that is or was * referable to any of those funds if the claim is made before the end of the period of 12 months following the expiry of the last policy that was referable to any of those funds.

149-25   Insurers etc. to give reports to Council

                   If the Council has approved the termination of the * health benefits funds of a private health insurer:

                     (a)  the insurer; or

                     (b)  if a * terminating manager of the funds has been appointed—the terminating manager;

must, within 28 days after the end of the * termination day, make a written report to the Council setting out details of the * assets and liabilities of each of the funds as at that day.

149-30   Terminating managers displace management of funds

                   If a * terminating manager of the * health benefits funds of a private health insurer has been appointed, then, for so long as the appointment is in force and until the termination is completed:

                     (a)  the management of the fund vests in the terminating manager; and

                     (b)  any * officer of the * responsible insurer for the fund who was vested with the management of the fund immediately before the appointment is, by force of this section, divested of that management.

Subdivision 149-C Ending the termination of health benefits funds

149-35   Power to end termination

             (1)  At any time during the termination of the * health benefits funds of a private health insurer, the Federal Court may, on application, make an order ending the termination on a day specified in the order.

             (2)  An application may be made by:

                     (a)  the Council; or

                     (b)  the * terminating manager.

             (3)  On such an application, the Federal Court may, before making an order, direct the * terminating manager to give a report with respect to a relevant fact or matter.

             (4)  If the Federal Court has made an order ending the termination, the Court may give such directions as it thinks fit for the resumption of the management and control of the * health benefits funds of the private health insurer by its * officers.

Subdivision 149-D Completing the termination of health benefits funds

149-40   Completion of the termination process

                   The termination of the * health benefits funds of a private health insurer is completed if:

                     (a)  the period of 12 months referred to in subsection 149-20(4) has come to an end; and

                     (b)  so far as possible having regard to the extent of the * assets of the funds:

                              (i)  the liabilities of the funds to the * policy holders of the funds have been discharged; and

                             (ii)  any amounts of * collapsed insurer levy that the Council has paid, for the purposes of any of the funds, to the insurer or to the person appointed to administer the termination of the funds have been repaid to the Council; and

                            (iii)  any other liabilities of the funds have been discharged.

149-45   Distribution of remaining assets after completion of the termination process

                   If the termination of the funds is completed and, on the completion, there are * assets of those funds, then:

                     (a)  if the insurer is * registered as a for profit insurer—paragraph 149-20(1)(b) ceases to apply to the insurer; or

                     (b)  if the insurer is not registered as a for profit insurer—the insurer is liable to pay to the Council an amount equal to the amount of those assets.

149-50   Liability of officers of insurers for loss to terminated funds

             (1)  If:

                     (a)  a private health insurer contravenes this Act in relation to a * health benefits fund that it conducts; and

                     (b)  the contravention results in a loss to the fund; and

                     (c)  the termination of the fund is completed;

the persons who were * officers of the insurer when the contravention occurred are jointly and severally liable to pay to the Council, for payment to the * Risk Equalisation Trust Fund, an amount equal to the amount of the loss.

             (2)  A person is not liable under subsection (1) if the person proves that he or she used due diligence to prevent the occurrence of such a contravention.

             (3)  On application by the Council, the Federal Court may order any person liable under subsection (1) to pay to the Council, for payment to the * Risk Equalisation Trust Fund, the whole or any part of the loss.

149-55   Report of terminating manager

             (1)  As soon as practicable after the termination of the * health benefits funds of a private health insurer is completed, the * terminating manager must make a written report to the Council on the termination of the funds.

             (2)  If, in the * terminating manager’s opinion, the private health insurer is not carrying on any business after the termination of the funds, the report may include a recommendation that an application be made under section 149-60 for the winding up of the insurer.

149-60   Applying for winding up

             (1)  If:

                     (a)  the termination of the * health benefits funds of a private health insurer is completed; and

                     (b)  the * terminating manager’s report under section 149-55 includes a recommendation that an application be made under this section for the winding up of the insurer; and

                     (c)  the insurer is not carrying on any business after the termination of the funds;

the Council, or the terminating manager, may apply to the Federal Court for an order that a private health insurer be wound up.

             (2)  However, the * terminating manager must not apply unless directed by the Council to apply.

             (3)  The winding up of the insurer is to be conducted in accordance with the Corporations Act 2001 .



 

Division 152 Duties and liabilities of directors etc.

152-1   Duty and liability of directors in relation to health benefits funds

             (1)  A * director of a private health insurer has a duty to the * policy holders of a * health benefits fund conducted by the insurer.

             (2)  The * director’s duty is a duty to take reasonable care, and use due diligence to see, that in the investment, administration and management of the * assets of the fund, the insurer complies with this Part.

             (3)  The * director is not guilty of a breach of the duty imposed by subsection (1) if the director has taken reasonable steps to ensure that systems are in place to ensure that the insurer complies with this Part.

             (4)  If:

                     (a)  in respect of any act or omission of a private health insurer, a * director of the insurer is guilty of a breach of the duty imposed by subsection (1); and

                     (b)  the act or omission of the insurer results in a loss to a * health benefits fund conducted by the insurer;

the director is liable to pay the insurer an amount equal to the amount of the loss.

             (5)  If 2 or more persons are liable under subsection (4) in relation to the same act or omission, their liability is joint and several.

             (6)  An action to recover an amount for which a * director is liable under subsection (4) may be brought:

                     (a)  by the insurer; or

                     (b)  with the written approval of the Council, by a * policy holder of the * health benefits fund involved.

             (7)  An approval under subsection (6) may be given subject to conditions relating to the persons, or the number of persons, who may join in the action as plaintiffs.

             (8)  Nothing in this section affects duties imposed on a * director under the Corporations Act 2001 .

152-5   Notices to remedy contraventions

             (1)  If a private health insurer has contravened this Part, the Council may give the insurer a written notice requiring the insurer, within a specified period, to take such action as is specified in the notice to remedy the contravention.

             (2)  The period specified in the notice must be a period ending not earlier than one month after the giving of the notice.

             (3)  The action to be specified in the notice is such action as the Council thinks appropriate and reasonable to overcome the effects of the contravention.

             (4)  At any time before the end of the period specified in the notice, the Council may extend the period by such further period as the Council thinks fit.

             (5)  The insurer must comply with the notice.

152-10   Liability of directors in relation to non-compliance with notices

             (1)  If:

                     (a)  the Council has given a notice to a private health insurer under section 152-5 in respect of a contravention of this Part; and

                     (b)  the contravention has resulted in a loss to a * health benefits fund; and

                     (c)  the insurer has failed to comply with the notice within the period specified in it or within that period as extended under subsection 152-5(4);

the persons who were the * directors of the insurer when the contravention occurred are jointly and severally liable to pay the insurer an amount equal to the amount of the loss.

             (2)  A person is not liable under subsection (1) if the person proves that he or she used due diligence to ensure that the insurer complied with the notice.

             (3)  An action to recover an amount for which a person is liable under subsection (1) may be brought:

                     (a)  by the insurer; or

                     (b)  with the written approval of the Council, by a * policy holder of the * health benefits fund involved.

             (4)  An approval under subsection (3) may be given subject to conditions relating to the persons, or the number of persons, who may join in the action as plaintiffs.

152-15   Council may sue in the name of private health insurers

                   If the Council thinks that it is in the interests of the * policy holders of a * health benefits fund to do so, the Council may bring an action against a person in the name, and for the benefit, of a private health insurer for the recovery of an amount that the insurer is entitled to recover under this Division.

152-20   Directors cannot be liable twice for the same act etc.

                   A person cannot be made liable both under section 152-1 and under section 152-10 in respect of the same act or omission of a private health insurer.