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Health Legislation Amendment Bill (No. 3) 1999

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1999

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HEALTH LEGISLATION AMENDMENT BILL (NO. 3) 1999

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Health and Aged Care,

The Hon. Dr Michael Wooldridge, MP)





 

 

HEALTH LEGISLATION AMENDMENT BILL (NO. 3) 1999

 

 

OUTLINE

 

 

This Bill makes a number of amendments to the National Health Act 1953 , the Private Health Insurance Incentives Act 1998 and the Health Insurance Commission Act 1973 .

 

The reforms contained in Schedules 1 and 2 of this Bill amend the National Health Act 1953 and will improve the prudential regulation applied to the private health insurance industry, allowing it to be more flexible and responsive to market changes.  These amendments will also strengthen the financial accountability of those who manage health insurance businesses.  In addition, the day to day regulation of the industry will be simplified through the transfer of key registration, de-registration and merger functions to the Private Health Insurance Administration Council.  Lastly, the Bill introduces a new regime for dealing with registered organizations in difficulty which is focussed on producing outcome that are in the best interests of contributors.

 

Schedule 3 of the Bill amends the Private Health Insurance Incentives Act 1998 , the National Health Act 1953 and the Health Insurance Commission Act 1973 .  In particular, the amendments to the Private Health Insurance Incentives Act 1998 will enable the private health insurance incentives scheme created under that Act to operate more smoothly.  The changes relate to the day to day implementation or operation of the scheme and will assist the Health Insurance Commission to better fulfil its role under the Act.  The amendments set out in Schedule 3 are designed to operate retrospectively so as to ensure the smooth operation of the incentive scheme from 1 January 1999.

 

Schedule 1 - Registration of registered organizations and related matters

 

The main items contained in this Schedule of the Bill will:

-    transfer responsibility for registration, cancellation of registration and merger approval from the Minister to the Council;

-    restrict new registrations to companies whose primary purpose is the operation of a health benefits fund;

-    require any current registered organizations that are unincorporated associations to become incorporated as a company within a time period established by the Minister;

-    require registered organizations, in taking any action relating to the application, investment or management of the assets of the health benefits fund conducted by it, to give priority to the interest of the contributors to the fund;

-    require payments from the health benefits funds to only be used for health insurance business purposes;

-    allow the Court to set aside certain transactions that are manifestly not in the interests of contributors;

-    create a new civil penalty regime that make directors liable for serious contraventions of the Act by registered organizations unless those directors have taken reasonable steps to ensure that the organization would not make such a contravention; and

-    create a part-time Deputy Commissioner position (to be held by a member of Council).



 

Schedule 2 - The prudential regulation of registered organizations

 

The main items contained in this Schedule of the Bill will:

-    repeal the current minimum reserve requirements and replace them with scheme providing for solvency standards and capital adequacy standards;

-    allow both the Minister and the Council to appoint inspectors to examine the affairs of registered organizations where illegal or inappropriate conduct is suspected;

-    repeal the Court ordered judicial management, compulsory transfer and winding up of funds provisions and replace them with a new administration and winding up scheme;

-    allow the Council to appoint an administrator to either a fund or an organization in difficulty, have the administrator operate in the interests of contributors, and require the administrator to make a recommendation to Council as to the most appropriate options for the fund or registered organization;

-    require Court approval before a fund or registered organization in difficulty can be forced to comply with a scheme of arrangement or be wound up;

-    give health benefit fund contributors priority over other unsecured creditors in the distribution of fund assets upon winding up;

-    make directors liable for any loss to the fund if the loss was related to a contravention of the Act and the fund or organization was subsequently wound up, unless those directors can show that they used due diligence in an attempt to prevent such contraventions;

-    allow all funds and all incorporated registered organizations to enter into a solvent voluntary wind up.

 

Schedule 3 - Private health Insurance Incentives

 

The main items contained in this Schedule of the Bill will:

-    allows the HIC 14 days to either grant or refuse a claim for the incentive payment and provide for internal review by the HIC of a decision refusing to pay a claim;

-    enables a person who has paid a premium or whose employer, as a fringe benefit, has paid their premium, to register for the premiums reduction scheme;

-    removes the requirement for annual registration in the premiums reduction scheme for individuals and health funds;

-    introduces a new section that provides that the Minister may revoke the status of a participating fund;

-    requires a health fund, when given notice, to produce a certificate in writing by a registered company auditor as to the correctness of its accounts and records in relation to the 30% Rebate;

-    specifies additional categories that are debts due to the Commonwealth and who the money is recoverable from and allows the HIC to set off debts against amounts that are payable;

-    requires a health fund to provide the HIC, when given notice, information in relation to people who have had a policy issued by the fund or have paid premiums in relation to a policy;

-    introduces a new section that enables the Minister to make principles relating to personal information which a health fund must comply with; and

-    makes consequential amendments to the Health Insurance Commission Act 1973 and National Health Act 1953 .



 

 

 

FINANCIAL IMPACT STATEMENT

 

The Health Legislation Amendment Bill (No 3) 1999 will have no significant impact upon the finances of the Commonwealth.

 

REGULATION IMPACT STATEMENT

 

Health Legislation Amendment Bill (No. 3) 1999

 

This Regulation Impact Statement relates to Schedules 1 and 2 of the above legislation.

 

The Office of Regulation Review has advised that no Regulation Impact Statement is required in relation to Schedule 3.

 

Background

 

In 1989 the Private Health Insurance Administration Council (PHIAC) was established under the National Health Act 1953 (the Act) to assist the Government in the prudential regulation of the private health insurance industry.

 

Problem

 

PHIAC’s powers are limited in that it is essentially an administrative and advisory body and may generally only make recommendations to the Minister for Health and Aged Care. 

 

In February 1997 the Industry Commission delivered its report on Private Health Insurance to the Treasurer (Industry Commission Report No.57).  In this report the Industry Commission raised a number of issues regarding the prudential regulation of private health insurance funds in Australia including concerns that there should be:

 

-    an independent regulator;

-    improved capacity of the regulator to respond in an effective way to health funds in financial difficulty; and

-    a stronger commercial focus to bring prudential regulation of the health insurance industry in line with other prudential bodies.

 

The report also expressed concerns in relation to the current reserve requirements of $1 million or two months contributions (whichever is greater).

 

Objectives

 

This legislation addresses these and a number of the other concerns raised by the Industry Commission Report No. 57.  The changes are the result of the Department’s subsequent investigation into the Industry Commission Report and address Government, consumer and health industry concerns regarding current inefficient regulation and the poor process in regulation.

 

Options

 

In response to the Industry Commission report and as part of the Government’s microeconomic reform objectives to move towards minimum effective regulation, the Department undertook an investigation into the regulatory powers and functions of PHIAC and compared these arrangements with other prudential regulatory schemes.

 

After exhaustive investigation, three options were considered:

 

1.       Maintain current arrangements.

 

2.       Transfer all prudential regulatory responsibilities to PHIAC so as to ensure that PHIAC’s responsibilities are consistent with other Australian prudential regulation regimes and to:

 

-                              enable PHIAC to set new, flexible solvency and capital adequacy standards that put private health funds on a more commercial footing;

 

-                              streamline processes so that when a health fund is close to insolvency PHIAC can expediently appoint an Administrator who will work in the interests of the contributors; and

 

-                              introduce new winding up provisions that give greater protection for contributors in the distribution of assets.

 

1.       Transfer all prudential regulatory responsibilities to the Australian Prudential Regulation Authority and ensure that those responsibilities are consistent with other Australian prudential regulation regimes.

 

Impact analysis

 

In considering the impact of these changes three major groups were considered, the private health insurance industry, consumers (i.e. contributors to private health funds), and Government.

 

Option 1 - Maintain current arrangements

 

Impact on industry

 

The current prudential regulation arrangements are ineffectual in relation to small and large health funds. Current arrangements are too inflexible and decision-making in regard to prudential regulation slow.  In cases where there is a threat of insolvency the current arrangements are cumbersome and inefficient.  To maintain and reinforce their confidence in private health funds other industry stakeholders e.g. contributors, are demanding a more responsive and relevant prudential regulation regime.

 

Impact on contributors

 

This option does not provide effective or efficient arrangements for adequate contributor protection as present minimum reserve requirements are not suitable for the wide range of organisations that run health funds.

 

Impact on the Commonwealth Government

 

This option is not supported by the Government because it would perpetuate the currently inefficient prudential regulatory regime.



Option 2 - Transfer all prudential regulatory responsibilities to PHIAC

 

Impact on industry

 

Over time health funds have developed a sound relationship with PHIAC.  They believe that PHIAC is best placed to respond to the prudential regulatory needs of both consumers (contributors), government and the industry.  Further, with an ability to determine meaningful prudential standards, monitor adherence to those standards, and respond quickly and effectively to enforce those standards PHIAC is considered the most appropriate body to take on full regulatory functions. 

 

This option will result in more efficient regulation of health funds no matter what their organisation type or size.  By deleting minimum reserve thresholds and liquidity and diversification of reserve levels from the Act and allowing PHIAC to set new, more appropriate solvency and capital adequacy standards private health funds will be able to operate on a more commercial footing and be more market responsive.  The impact of these changes will be particularly beneficial to small health funds that have customarily been required to seek exemption from the minimum reserve requirements.

 

Under the proposed administration arrangements PHIAC will be able to appoint an Administrator quickly when there is a risk of insolvency.  The process will be more responsive and will better safeguard the interests of both the health funds and the contributors.  Health funds will be able to voluntarily merge or wind up and, where there is a risk of insolvency and an Administrator has been appointed, enter into a voluntary deed of arrangement.  In addition, PHIAC will have to obtain Court approval prior to merging or winding up a fund if the fund opposes such action.

 

There will be minimal change in the cost of compliance and little or no additional administrative burden for health funds.

 

Impact on contributors

 

This option will increase the likelihood that private health funds remain financially sound, more accountable, and able to meet their obligations to contributors.  It will provide grounds for increased contributor confidence as funds will be regulated both under the National Health Act 1953 and Corporations Law.

 

In addition, the existing Judicial Management provisions of the Act will be replaced with a new administration regime that seeks to promote the most optimal outcome for contributors.

 

Impact on the Commonwealth Government

 

This option provides for a move towards minimum effective regulation of the private health insurance industry and will facilitate more efficient essential regulation.

 

Option 3 - Transfer all prudential regulatory responsibilities to the Australian Prudential Regulation Authority

 

Impact on industry

 

There are currently sufficient differences between the health insurance market and general insurance market (eg the non-risk rated nature of health insurance) to make it impractical for a general insurance regulator to take control of the prudential regulation of the private health insurance industry at this time.



Impact on contributors

 

While this option offers the same benefits as option 2 in terms of increased contributor confidence it does not provide for a regulator with specific experience in acting with a comprehensive knowledge of the health industry and to work in the interest of health insurance consumers.

 

Impact on the Commonwealth Government

 

It is the Government’s view that more time is required to allow the private health insurance industry to move to a more commercially oriented regulatory framework. 

 

Consultation

 

The views of all relevant stakeholders were thoroughly canvassed through the inquiry conducted by the Industry Commission.  Further, the Government has closely monitored the response of the industry, consumers (i.e. contributors) and investors to the Industry Commission inquiry.

 

The Government will continue to discuss and account for the views of all relevant parties in its implementation of the proposed arrangements.

 

Conclusion and Recommended Option

 

In view of the Industry Commission’s recommendations and taking into consideration the impact on all stakeholders Option 1 is not considered a viable option.

 

Although Option 3 has merit, given the significant differences between the general insurance and private health insurance industries (i.e. the non-risk rated nature of health insurance), it is not considered immediately viable.

 

Option 2 is the preferred option as it is both viable and the most beneficial for all stakeholders at this time. It ensures essential regulation is flexible and tailored to market and client needs and that the regulator has effective market control.  In addition, when there is a threat that a health fund may become insolvent, this option facilitates expedient action and an outcome that is in the best interest of contributors.

 

Implementation

 

The preferred option will be implemented through amendments to the National Health Act 1953 .  In addition, in the lead up to PHIAC taking on the prudential regulatory role, any necessary additional support will be provided to PHIAC to ensure that it is prepared for its extended role.  Health funds will be informed of new arrangements through consultation and Commonwealth Department of Health and Aged Care circulars.

 

Review

 

The Department of Health and Aged Care will review arrangements five years after the regulatory changes take effect to assess the status of health fund regulatory dependence.

 



 

 

HEALTH LEGISLATION AMENDMENT BILL (NO. 3) 1999

 

 

ABBREVIATIONS USED IN NOTES ON CLAUSES

 

 

Council

Private Health Insurance Administration Council

 

 

fund

health benefits fund

 

 

HIC

Health Insurance Commission

 

 

Minister

Minister for Health and Aged Care

 

 

NHA

National Health Act 1953

 

 

organization

registered health benefits organization

 

 

PHIIA

Private Health Insurance Incentives Act 1998

 

 

registered organization

registered health benefits organization

 

 

 

 

 



 

 

 

 

 



 

 

HEALTH LEGISLATION AMENDMENT BILL (NO. 3) 1999

 

 

NOTES ON CLAUSES

 

 

Section 1: Short Title

 

This section cites the short title of the proposed legislation as the Health Legislation Amendment Act (No. 3) 1999 .

 

Section 2: Commencement

 

This section provides that, except for the particular commencement dates in this section, the amendments to the National Health Act 1953 (the NHA) commence on the day on which the legislation receives Royal Assent.  Items with commencement dates specified as being other than the day of Royal Assent are as follows:

 

-    Schedule 1 and Part 1 of Schedule 2 commence on a day to be fixed by Proclamation or otherwise on a day six months from the day of Royal Assent.

 

-    Part 2 of Schedule 2 (which removes references to friendly societies from the NHA as amended) will commence on the latter of either:

.     a day that is the transfer day for the purposes of the Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999 ; or

.     immediately after the commencement of Part 1 of Schedule 2.

 

The sole purpose of Part 2 of Schedule 2 is to remove from Part 1 of Schedule 2 any references to friendly societies after the Proclamation of the transfer date in the Financial Sector Reform (Amendments and Transitional Provisions) Bill (No. 1) 1999 .

 

The primary purpose of the Financial Sector Reform (Amendments and Transitional Provisions) Bill (No. 1) 1999 is to transfer regulatory responsibility for State and Territory based financial institutions, including friendly societies, to a Commonwealth regulatory regime.  Upon transfer, friendly societies previously registered or incorporated under State or Territory law will become companies under the Corporations Law and will be dealt with as such by the National Health Act 1953 (as amended).

 

A further consequence of the Financial Sector Reform (Amendments and Transitional Provisions) Bill (No. 1) 1999 will be the amendment of a large number of Commonwealth Acts (including the National Health Act 1953 ) to remove any reference to friendly societies (as entities registered or incorporated under State and Territory law).  However, as the Financial Sector Reform (Amendments and Transitional Provisions) Bill (No. 1) 1999 and this Bill are expected to be in Parliament at the same time, it is desirable that a mechanism be put in place in this Bill to prevent it from operating contrary to the intent of the Financial Sector Reform Bill .

 



 

-    Schedule 3 is taken to have commenced on 1 January 1999.

 

The amendments in Schedule 3 are amendments to the Private Health Insurance Incentives Act 1998 , the Health Insurance Commission Act 1973 and the National Health Act 1953 .  These amendments are retrospective and will be taken to have commenced on the same day as the Private Health Insurance Incentives Act 1998 , ensuring that the Act, as amended, is fully operative as of 1 January 1999. In addition, retrospective operation will offer greater overall effectiveness and efficiencies for the relevant Commonwealth agencies involved in the administration of the Rebate, for the private sector and for the community.  Advantages of the amendments having retrospectivity are as follows:

-    there will be internal review by the Health Insurance Commission of its decision not to pay the incentive payment (item 4: clause 6-25);

-    there will be no annual registration for participants in the premiums reduction scheme or for health funds (items 10 and 29, 30 and 31; subclause 11-5(1) and clause 14-5);

-    a person who pays a premium but is not covered by the policy will be able to participate in the premiums reduction scheme (item 14: clause 11-10);

-    there will be certainty in the notification requirements of the Health Insurance Commission (items 17 and 25: subclauses 11-25(1) and 11-40(3));

-    the Health Insurance Commission will have the ability to set off debts due to the Commonwealth (item 56: clause 18-20); and

-    visitors from countries with whom Australia has entered into a Reciprocal Health Care Agreement will be eligible for the Rebate from 1 January 1999 (item 65: section 20-5).

 

The length of time for the period of retrospectivity will be relatively short.

 

Section 3: Schedules

 

This section notes that each Act that is specified in the Schedules is to be amended as set out in the applicable items in the Schedule concerned.

 

 



 

 

Schedule 1 - Registration of registered organizations and related matters

 

 

National Health Act 1953

 

 

Introduction

 

Schedule 1 of the Bill deals with the registration of registered organizations and related matters such as the role of the Private Health Insurance Administration Council in the registration process.

 

Item 1

 

This item inserts a definition of health fund rules at subsection 4(1) of the National Health Act 1953 (the Act) .  ‘ Rules’ are the principles devised by the health benefits organization that relate to the day to day management of the organization.  They may include policies and decision-making procedures within the management structure of the health benefits organization; any contractual relationships between the organization and hospitals; and, any relationship between the contributors to health benefits funds and the organization that operates the health benefits fund.  Rules usually state the rates of contribution and conditions attached to the rates of contribution, contributor entitlements and benefit levels.  They may include things such as benefit limits, levels of discounts, any excess or front-end deductible payable, extent of ancillary cover etc.

 

Item 2

 

This item repeals section 68 of the NHA and substitutes three new subsections.  The new subsection 68(1) allows organizations to apply to the Private Health Insurance Administration Council (Council) for registration to operate a registered health benefits organization subject to the conditions set out in subsection 68(2).  This registration function was a function previously held by the Minister for Health and Aged Care

 

The conditions for future registration of set out in subsection (2) are that the organization:

-    must be a company limited by shares, guarantee or both, and

-    its constitution and rules must ensure that:

.     the organization is established for the purpose of conducting a health benefits fund and for no other purpose unless that purpose is incidental to the conduct of the fund; and

.     there is to be credited to the fund the whole of the income of the organization arising out of the carrying on by the organization of business as a registered health benefits organization.

 

Subsection (3) clarifies that subsection 68(2) does not exclude from registration, for profit organizations.



 

Item 3

 

This item inserts a new subsection (1A) before subsection 69(1).  The new subsection requires that an application for registration must be lodged with the Council which supports the changes made in item 3 above.

 

Items 4, 5, 6, 7, 8, 9 and 10

 

These items transfer the responsibility for the registration of health benefits organizations from the Minister and the Department of Health and Aged Care to the Council, ensuring that Council can undertake all the responsibilities for registration previously held by the Department and the Minister.

 

Item 11

 

This item inserts a new section after section 72A(c) of the NHA .  The new section requires the Registration Committee and the Council, in considering an application from an organization for registration to operate a health benefits fund, to assess whether that organization will meet and be able to maintain the new solvency standards established under Division 3A and 3B of the NHA .

 

Item 12

 

This item is another machinery provision which substitutes Council for Minister in line with the amendments set out above.

 

Item 13

 

This item is a transitional provision designed to ensure that the Register of Health Benefit Organizations previously maintained under subsection 73(2AA) of the National Health Act 1953 is transferred to the Council so that the Council can maintain it after the commencement of this Schedule.

 

Item 14

 

This item replaces the word r ules with the words constitution or the rules each time rules occurs in subsections 73(2A) and (2B) of the NHA . This wording allows the Council to consider both the constitution and rules of an applicant seeking registration as a registered organization.

 

Item 15

 

This item is a machinery provision giving effect to the transfer of responsibility from the Secretary to the Council.



 

Item 16

 

This item requires the Council to inform the Department of a decision to register or refuse to register a registered organization as soon as practicable and no more than 7 days after the decision has been made.

 

Item 17

 

This item inserts five new sections after section 73.

 

73AA - Unincorporated registered organizations must become incorporated

 

Subsection 73AA(1) requires that registered health benefit organizations not incorporated prior to the commencement of Schedule 1 must arrange to transfer their health insurance business to a company that is eligible to apply for registration under section 68 within a time period specified by the Minister.

 

Where a registered organization does not comply with subsection 73AA(1), under subsection 73AA(2), the registration of that organization to operate a health benefits fund will expire on the date at which the Minister specified the transfer was to have been made.

 

When the health insurance business is transferred the Council is to issue a written certificate under subsection 73AA(3) that the organization has met the requirements of subsection 73AA(1).  Upon issue of the certificate the new registered organization (ie the company) will, for all purposes relating to the health insurance business, be the successor in title to the original registered organization.

 

The time period specified in a notice from the Minister to the registered organization under paragraphs 73AA(1)(a) or (b) is reviewable by the Administrative Appeals Tribunal.

 

73AAB - Registered organizations to maintain eligibility status

 

Section 73AAB states that a health benefit organization’s registration will cease to be effective if at any time, if it ceases to be a company incorporated under Corporations Law , if it otherwise becomes unincorporated or if it changes it constitution or rules so that a health benefits fund cannot be conducted by it.

 

73AAC - Certain Duties of a registered organization regarding assets of its health benefits fund

 

Subsection 73AAC(1) requires that registered organizations that operate a health benefits fund, give priority to the interests of its health benefits fund contributors when making decisions about the application, investment or management of its assets from health benefits funds.



 

Subsection (2) exempts a registered organization from contravention of subsection (1) where, having regard to the circumstances existing at the time of the act or decision, it is reasonable to believe that the act or decision give priority to the interests of the contributors to its health benefits fund.

 

Subsection (3) clarifies that subsection (1) does not prevent a registered organization doing anything that it is permitted or required to do under the National Health Act 1953.   Thus, for example, it is still lawful for a “for profit” registered organization to pay a dividend to its shareholders because such a payment is lawful under paragraph 73AAD(2)(d).

 

73AAD - Payments from health benefits fund

 

Section 73AAD ensures that assets of the fund are managed appropriately by restricting payments that can be made from health benefits funds to:

-    liabilities incurred in covering contributors;

-    payments to the Health Benefits Reinsurance Trust Fund;

-    investments for the health insurance business;

-    if the organization has been established for profit-distributing profits to shareholders;

-    any other purpose that is directly related to the health insurance business.

 

73AAE - Restrictions that are imposed on certain financial transactions by registered organizations

 

Section 73AAE provides a mechanism to invalidate or vary a financial transaction that directly and detrimentally affects the assets of the health benefits fund where it is clear that the transaction was manifestly or unmistakably not in the interests of contributors.

 

Subsections 73AAE(1) and (2) allow the Council, an administrator or a liquidator to apply to the Court to set aside or vary the terms of borrowings, contracts of guarantee or charges over fund assets where the Court is satisfied that the transaction is manifestly not in the interests of the contributors.

 

The Court, under subsection (3), may consider a number of circumstances that would tend to imply that the transaction was not manifestly in the interests of contributors.  Thus, in the case of a loan, the Court should consider if it was for the benefit of any other person than the contributor and whether the amount of the loan was excessive.  Further, in the case of a contract of guarantee, the Court should consider whether the contract was entered into solely for the benefit of the fund.  Also, if the transaction involves the giving of a charge over assets, the Court should consider whether the charge secures other liabilities than those of the health insurance business and whether it exceeds the sum borrowed for the purpose of the health insurance business.  Lastly, the Court can consider whether or not the transaction had an impact on the organization’s ability to comply with the solvency and capital adequacy standards or their own constitution and rules.

 

Subsection (4) protects the other party from having the transaction set aside if they entered into the transaction in good faith and without the knowledge of conditions in subsection (3), and if setting aside or varying the transaction would cause substantial hardship to the party.



 

Subsection (5) makes it clear that the Federal Court is the Court with jurisdiction in relation to these matters.

 

Item 18

 

This item inserts a new subsection 73A(1) that clarifies that the Minister will no longer be imposing conditions of registration upon registered organizations relating to refund agreements.

 

Item 19

 

This item inserts a new section 73ABD.

 

73ABD - Further conditions and revocation or variation of conditions - Council’s powers

 

Section 73ABD sets out the Council’s powers with respect to the imposition of further conditions of registration as well as Council’s power to vary conditions made either under subsection 73(1) or paragraph 73ABD(1)(a).

 

Subsection (1) permits the Council to impose a further condition or revoke or vary an existing condition after consultation with the Minister.

 

Subsection (2) requires the Council to give written notice of any change in conditions that it decides and requires that the notice be served upon the public officer of the organization.

 

Subsection (3) requires the Council, within 1 month of making a decision about the imposition, revocation or variance of a condition , to publish that decision in the Gazette in a particular form.

 

Subsection (4) simply expands the definition of condition to include a term .

 

Item 20

 

This section repeals subsection 73B(1) and replaces it with a new subsection that requires the Minister to consult with council prior to imposing or revoking a further condition of registration made under paragraph 73B(1)(b).

 

Item 21

 

This item is a savings and transitional provision.  Subsection (1) will ensure that any term or condition of registration imposed by the Minister prior to the commencement of this legislation will have the same effect as a term or condition imposed under this legislation.  However, this item makes it clear that subsections 73B(1A) and (2) do not apply to the imposition of a term or condition originally imposed under section 73.

 

Subsection (2) permits the continuation of the form of record used by the Secretary under the National Health Act 1953 prior to the commencement of these provisions to have effect as though it were a form of record approved by the Council.



 

Items 22

 

This item simply adds the words “and to the Council” after “Secretary” in the legislation to accurately reflect the roles of the respective parties under these amendments.

 

Item 23

 

This item makes subsection 74(5) subject to a new subsection 74(5AA).

 

Item 24

 

This item inserts a new subsection (5AA) into section 74.  Section 74 deals with the responsibilities of the public officer of a registered organization.  Subsection 74(5) creates a penalty for a public officer if the organization contravenes or fails to comply with the NHA .

 

The new subsection 74(5AA) prevents the public officer from being made liable for a penalty under subsection 74(5) (due to a contravention of the NHA by the organization) if the public officer has already been required to pay a pecuniary penalty under new subsection 74A(1) in relation to the same contravention of the NHA by the organization.

 

Item 25

 

This item simply adds the words “and to the Council” after “Secretary” in the legislation to accurately reflect the roles of the respective parties under these amendments.

 

Item 26

 

This item repeals section 74A and replaces it with a new section.

 

74A - Officers liable for non-compliance of registered organizations

 

The National Health Act 1953 has traditionally made the public officer liable for any failings of a registered organization to comply with this Act.

 

However, in the modern corporate world it is also appropriate that those persons who take up appointments on the Boards of health insurance businesses are also held accountable for the efforts they make to ensure that the business complies with the relevant law, in this case, the National Health Act 1953 .

 

Thus, subsection 74A(1) makes directors (as defined) and other officers of the organization liable to a (civil) pecuniary penalty if the organization contravenes the NHA and it can be demonstrated that the officer in question failed to take reasonable steps to ensure that such a contravention would not occur.



 

Consequently, subsection 74A(1) imports two fundamental notions of corporate responsibility.  Firstly, regardless of the size and structure of the health insurance business, there are always reasonable steps officers can take to prevent contravention of the NHA .  It is for the Court to determine whether or not the steps an officer has taken are below those reasonably required.  Note, however, that before a Court may determine that an officer is liable for a penalty it must be satisfied that the organization contravened the NHA and that the officer in question failed to take reasonable steps.  The onus, therefore, is upon the plaintiff to prove that the defendant failed to take reasonable steps.

 

Secondly, the penalty for failing to take such steps is a civil one; there is nothing to be gained in making such conduct criminal.  Further, in terms of a maximum penalty there is no distinction between the penalty that may be imposed upon a public officer under subsection 74(5) (ie a fine of $10,000) and the pecuniary penalty that may be imposed upon an officer.

 

Subsection 74A(2) confirms that, in demonstrating that the officer took reasonable steps, all that may need to be shown is that the officer took reasonable steps in respect of a class of such contraventions (thus saving the officer from having to show that they have taken reasonable steps in relation to each and every possible contravention of the NHA ).

 

Subsection (3) confirms that if the officer in question is also the public officer of the organization they will not be made liable under subsection (1), in respect of a particular contravention by the organization, if they have already been penalised under subsection 74(5) for the same contravention by the organization.  In other words, there is no possibility that a public officer may be made liable for the same contravention twice.

 

Subsection (4) states that the Minister may authorise a person to institute proceedings in the Federal Court of Australia under this section.  Such authorisations may relate to a specified person or to a class of persons and may also relate to all applications, a class of applications or a single application.  Thus, for example, the Minister may choose to authorise the Australian Government Solicitor to institute all applications that are made under this section in the Federal Court and on behalf of the Commonwealth.

 

There will be a time limit of 6 years in relation to such applications (subsection (5)).

 

Any application under this section is a civil matter.  Thus, the matter must be decided by the Court on the balance of probabilities (subsection (6)).

 

Subsection (7) ensures that any orders of the Court made under subsection (1) may be enforced as a judgement; that is, the Court may use its judgement enforcement mechanisms to ensure compliance with its orders.

 

Subsection (8) confirms that, just as is the case with the public officer, the registered organization shall not reimburse or otherwise pay the penalty on the officer’s behalf.

 

Subsection (9) declares that the Federal Court of Australia has jurisdiction to hear applications made under this section.



 

Subsection (10) defines the Court and officers for the purposes of the section.  Note that the definition of officers is not exhaustive.  Thus, if it were appropriate, it would be possible to take action against, for example, a General Manager, company secretary, liquidator, or any other person who had a senior role in the organization and who was clearly in a position to take steps to prevent contravention of the NHA .

 

Item 27

 

This item removes the word Minister where it occurs in subsections 79(3) and (4) (dealing with cancellation of registration of organizations) and substitutes the word Council in keeping with their changed roles.

 

Items 28 and 29

 

These items are designed to reflect the changed role of the Minister and the Council.  They substitute the word Council for Minister wherever occurring in these two subsections with deal with when cancellation of the registration of a registered organization can occur.

 

Item 30

 

This item adds 3 new subsections into section 79.

 

Subsection 79(7) stipulates conditions under which the Council can cancel the registration of an organization previously registered to operate a health benefits fund.  The Council must be satisfied that:

-    the organization has repeatedly contravened or contravened a number of obligations of the  NHA ; or

-    there has been a contravention by the organization that has serious implications for contributors.

 

Subsection (8) states that, for the purpose of subsection (7), contraventions associated with the non-discriminatory nature of health benefits funds or the financial management of the organization would be considered as having serious implications for contributors.

 

Subsection (9) requires the Council to notify the Secretary about the cancellation of registration within 7 days of it having taken place.

 

Item 31

 

This item replaces the word Secretary with Council in subsection 81(1), a provision that deals with notification of registration by way of an annual list in the Gazette.

 

Item 32

 

This item replaces the word Minister with Council in subsection 81(2) thereby requiring the Council to publish details of the registration, or cancellation of registration, of an organization in the Gazette .



 

Item 33

 

This item repeals the definition of deputy (that is, a person who is a deputy of a member of the Council) in section 82A (which is the interpretation section for the Part VIAA of the NHA , that is, the Part of the NHA dealing with the Private Health Insurance Administration Council).

 

This provision has been repealed because there is no further need for deputies of Council members now that the Council consists of persons who have all been appointed in their own right rather than having been appointed as representatives of registered organizations or industry bodies.

 

Item 34

 

This item creates a new subsection that provides that the Minister may appoint one of the members of Council as a Deputy Commissioner of the Council.  A Deputy Commissioner is required so that the Council can ensure that there is a person available to perform the powers of the Commissioner at any time.  The Deputy Commissioner may perform the powers and functions of the Commissioner at any time when the Commissioner (or a person who is acting as Commissioner) is unavailable.

 

Item 35

 

This item provides that the Deputy Commissioner is appointed on a part-time basis.

 

Item 36

 

This item amends the paragraph 82F(1)(a), a provision which allows the Minister to make guidelines in relation to the appointment of the Commissioner and members, to allow such guidelines to be made with respect to the appointment of a member as Deputy Commissioner.

 

Items 37

 

This item inserts two new sections as a consequence of the creation of a Deputy Commissioner.

 

82PCA - Deputy Commissioner to act as Commissioner in certain circumstances

 

Subsection 82PCA(1) notes that the Deputy Commissioner is to act as Commissioner:

-    during a vacancy in the officer of Commissioner (ie if no Commissioner has been appointed and no acting Commissioner has been appointed); or

-    during any period when the Commissioner (or a person acting as Commissioner) is unable to perform their duties.

 

Subsection (2) declares that a Deputy Commissioner may not act in the role of Commissioner for a period greater than 12 months.



 

Subsection (3) confirms that any technical failure in meeting the requirements in subsection (1) will not cause any act or exercise of power by the Deputy Commissioner to be made invalid or void.

 

82PCB - Powers and duties of persons acting as Commissioner

 

Subsection 82PCB(1) declares that, subject to any direction by the Commissioner, an acting Commissioner or Deputy Commissioner (when they are performing the role of Commissioner) have all the powers of the Commissioner.

 

Any act lawfully done by an acting Commissioner or Deputy Commissioner (when they are performing the role of Commissioner) is to be deemed to be a valid act of the Commissioner under the NHA and any other Act (subsection (2)).

 

Action by an acting Commissioner or Deputy Commissioner does not prevent the exercise of the power or the performance of the function by the Commissioner (subsection (3)).

 

Where the exercise of a power or performance of a function of the Commissioner requires that person to form a particular opinion, to hold a particular belief or to have a particular state of mind, both the acting Commissioner and Deputy Commissioner (when they are performing the role of Commissioner) are deemed to fulfil those requirements where they have formed that requisite opinion, held the requisite belief or possess the requisite state of mind (subsection (4)).

 

Item 38

 

This item repeals section 82PD, which previously dealt with deputies of members and is redundant as a result of the above amendments.

 

Item 39, 40 and 41

 

These items all remove references to deputy in keeping with the above amendments that abolished the position of deputy member of Council.

 

Item 42

 

This item simply replaces the word Minister with the word Council in section 82ZP which deals with the necessary approval for the merger of funds.

 

Item 43

 

This item replaces the existing subsection 82ZP(1A) to provide that, with respect to the voluntary merger of a fund, the Council has a discretion to approve the merger unless action is being taken in relation to all or any of the organizations under Part VIA of the NHA.



 

Item 44 and 45

 

These items remove the reference to Minister and substitute the word Council in subsections 105AB(1A) and (2); these subsections deal with Administrative Appeals Tribunal review of a decision to refuse to register an organization under subsection 73(1) and the imposition of conditions of registration under that subsection.

 

Item 46

 

This item inserts two new subsections into section 105AB, which deals with appeals to the Administrative Appeals Tribunal.

 

Subsection (2A) allows an application to be made to the Tribunal for a review of a decision of the Minister to specify a particular time, or a particular further time, for the transfer of the health insurance business of an unincorporated association to be transferred to a company capable of applying for registration under the amended section 68 of the NHA .

 

Subsection (2B) allows an application to be made to the Tribunal for review of a decision by Council under the new section 73ABD to impose a further condition of registration (or vary such a condition) upon a registered organization.

 

Item 47

 

This item removes the words “or a further term or condition” from paragraph 105AB(3)(b) as these words are unnecessary for the new application of this paragraph.

 

Item 48

 

This item inserts savings and transitional provisions which ensure the key matters associated with registration remain effective after the commencement of this Act and apply as they did previously.

 

Subsections (2) and (3) provide that where, before the commencement of Schedule 1, an application for registration as a registered health benefits organization has been lodged with the Secretary of the Department but not referred to the Registration Committee or the application has been referred to the old Registration Committee but the Committee has not made a report, then the Secretary of the Department must refer the application to the newly constituted Registration Committee (see Item 5 above).

 

Subsection (4) provides that where a report, in relation to registration, has been made to the Minister by the old Registration Committee, and the Minister has not considered the report, he or she must refer it to the Council.

 

Subsection (5) defines the old Registration Committee as the Registration Committee operating under the National Health Act 1953 prior to the commencement of Schedule 1 and the reconstituted Registration Committee as the Registration Committee that will operate when the Council assumes responsibility for health fund registration.

 



 

 

 



 

 

Schedule 2 - The prudential regulation of registered organizations

 

 

Part 1 - Main amendments

 

 

National Health Act 1953

 

 

Introduction

 

Part 1 of Schedule 2 contains substantial new measures providing for the prudential regulation of registered organizations and deals with the appointment of administrators to funds and organizations and the winding up of funds and registered organizations.  The general purpose of the new provisions is to provide greater protection for the assets of the health benefits fund and the interests of the contributors to those funds.

 

Item 1

 

This item inserts a new section 7 into the Act.

 

7 - Application of provisions of Corporations Law - general matters

 

The new section explains how an applied provision of the Corporations Law is to be treated, in relation to general matters, for the purposes of the NHA .  Subsection 7(1) creates two new terms ( application provision and applied the Corporations Law provision ) for use in the section.

 

Subsection (2) provides that, where a provision of the NHA applies a provision of the Corporations Law , any regulations or instruments made for the purposes of that particular Corporations Law provision will also apply in relation to that Corporations Law provision as it is applied under the NHA .

 

Subsection (3) states that where a provision of the NHA allows regulations to modify a Corporations Law provision applied under the Act, that power to modify the Corporations Law is also a power to modify regulations or instruments made for the purposes of the applied provision of the Corporations Law .

 

Subsection (4) confirms that, if there is a power in the NHA that allows the regulations to modify an applied provision of the Corporations Law , that power is not hindered merely because there has also been a modification of the relevant Corporations Law provision by the NHA ; so long as any regulations are consistent with the modification of the Law made by the NHA .



 

Subsection (5) states that a Corporations Law provision that is applied under the NHA , including any regulation or instrument created for the purposes of such a Corporations Law provision, is to be interpreted in accordance with the definitions and principles contained in the Corporations Law unless a contrary intention is evident in the NHA or relevant regulations.

 

Subsection (6) confirms that, where a provision of the Corporations Law is applied by the NHA and that provision allows something to be done in or by regulation, regulations may be made under this Act for that purpose.  If such regulations are made under the NHA , those regulations override any regulations or instruments made for the purposes of the Corporations Law that may otherwise apply because of new subsection (2) (to the extent that they are inconsistent with each other).

 

Item 2

 

This item repeals sections 73BAB and 73BAC of the NHA .  The repealed sections specify the requirements for minimum financial reserves that registered health benefits organizations must maintain and how an exemption from those requirements can be made.

 

Item 3

 

This item inserts two new Divisions in place of 73BAB and 73BAC.  These two new Divisions institute a new regime, consistent with those applicable to other segments of the insurance industry, which seeks to provide a more flexible and responsive regulatory scheme.

 

Division 3A - The solvency standard for registered organizations

 

Division 3A details the solvency standards for registered organizations and related matters.

 

73BCA - Purpose of Division

 

Section 73BCA specifies that the purpose of Division 3A is to establish solvency standards and ensure that registered organizations that operate health benefits funds comply with those standards in order to remain solvent.

 

73BCB - Council to establish solvency standards

 

Subsection 73BCB(1) requires the Council to establish written solvency standards.

 

Subsection (2) allows the Council to set different standards for particular funds, for different types of funds, or apply standards in certain circumstances.

 

Subsection (3) requires the Council to consult with the Australian Government Actuary before establishing a solvency standard.

 

Subsection (4) declares that a solvency standard established by the Council for the purposes of this Division is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901 .



 

73BCC - Purpose of solvency standard

 

Section 73BCC explains that the purpose of the solvency standard is to ensure that registered organizations that operate health benefits funds will at all times, as far as practicable, have sufficient assets to be able to meet their liabilities as they become due.

 

73BCD - Registered organizations to comply with solvency standards

 

Subsection 73BCD(1) stipulates that, subject to subsection (2), each registered organizations that operates a health benefits fund must comply with the solvency standards set by the Council.

 

Subsection (2) allows the Council to declare, by notice in writing, that the solvency standard does not apply to a particular registered organization, does not apply in particular circumstances or does not apply for a particular period.

 

Subsection (3) states that, in making a declaration under subsection (2), the Council may impose conditions upon any registered organization affected by the declaration.

 

Subsection (4) states that, if an organization fails to comply with any conditions referred to in subsection (3), the declaration made under subsection (2) is taken to cease to apply.

 

Subsection (5) states that, if the Council is satisfied that a declaration made under subsection (2) or a condition imposed under subsection (3), no longer applies to a registered organization the declaration or the condition should be revoked or varied, as is appropriate.

 

Where a registered organization requests that a declaration made under subsection (2), or a condition referred to in subsection (3), be varied or revoked the Council must determine, within 28 days, whether it wishes to revoke or vary the declaration or the condition (subsection (6)).  If the Council does not vary or revoke the direction within 28 days, subsection (7) states that declaration or condition remains valid.

 

Under subsection (8) the Council must give the registered organization written notice of its decision to revoke or vary a declaration or condition under subsection (6) and, where it refuses to vary or revoke, the Council must provide the reasons for its decision.

 

Subsection (9) ensures that a reference to a declaration or condition in this section includes a declaration or condition as varied.

 

A decision by the Council to refuse to revoke or vary a declaration, or refuse to revoke or vary a condition applying in relation to a declaration, is reviewable by the Administrative Appeals Tribunal.

 

73BCE - Council may give solvency directions

 

Subsection 73BCE(1) allows the Council to give written directions ( solvency directions ) to a registered organization that operates a health benefits fund where it is satisfied there are reasonable grounds to believe that a registered health benefits fund may be insolvent.



 

Subsection (2) defines solvency directions as those the Council determines to be reasonably necessary to ensure that a registered organization that operates a health benefits fund will have adequate assets to meet its health benefits fund liabilities as they become due.

 

To allow the Council to prevent a currently solvent fund from becoming insolvent subsection (3) allows the Council to give solvency directions to a registered organization even when it is satisfied that the health benefits fund meets the solvency standard at the time the direction is given.

 

Subsection (4) requires a registered organization that operates a health benefits fund to comply with a solvency direction given to it by the Council under subsection (1).

 

Subsection (5) provides that, subject to subsections (6) and (7), a solvency direction will remain in force for the period specified in the direction (but not a period exceeding 3 years from the date the direction is given).  Council is allowed to issue a further direction when the previous direction has expired.

 

Subsection (6) requires the Council to revoke or vary a solvency direction, in writing, should it no longer be needed.

 

Where a registered organization requests that a direction be varied or revoked, subsection (7), requires that the Council must determine, within 28 days whether it wishes to revoke or vary it.  If the Council does not vary or revoke the direction within 28 days, subsection (8) ensures that the direction continues in force.

 

Under subsection (9) the Council must give the registered organization written notice of its decision under subsection (7) and, if it refuses to revoke or vary a direction, the reasons for its decision.

 

Subsection (10) ensures that a reference to a solvency direction in this section includes a reference to solvency direction as varied.

 

Division 3B - The capital adequacy standard for registered organizations

 

Division 3B details the capital adequacy standards for registered organizations and related matters.

 

73BCF - Purpose of Division

 

Section 73BCF states that the purpose of Division 3B is to establish capital adequacy standards and ensure that registered organizations that operate health benefits funds comply with those standards in order to maintain sufficient assets to conduct the business.

 

73BCG - Council to establish capital adequacy standards

 

Subsection 73BCB(1) requires the Council to establish written capital adequacy standards.

 

Subsection (2) allows the Council to set different standards for particular funds, for different types of funds, or apply standards in certain circumstances.



 

Subsection (3) requires the Council to consult with the Australian Government Actuary before establishing a capital adequacy standard.

 

Subsection (4) declares that a capital adequacy standard established by the Council for the purposes of this Division is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901 .

 

73BCH - Purpose of capital adequacy standard

 

The purpose of the capital adequacy standard, as defined in section 73BCH, is to ensure that there are sufficient assets in the health benefits fund of each registered organization to provide adequate capital to conduct the health insurance in accordance with the NHA and in the interests of contributors.

 

73BCI - Registered organizations to comply with capital adequacy standard

 

Subsection 73BCI(1) stipulates that, subject to subsection (2), each registered organization that operates a health benefits fund must comply with the capital adequacy standards set by the Council.

 

Subsection (2) allows the Council to declare, by notice in writing, that the capital adequacy standard does not apply to a particular registered organization, does not apply in particular circumstances or does not apply for a particular period.

 

Subsection (3) states that, in making a declaration under subsection (2), the Council may impose conditions upon any registered organization affected by the declaration.

 

Subsection (4) states that, if an organization fails to comply with any conditions referred to in subsection (3), the declaration made under subsection (2) is taken to cease to apply.

 

Subsection (5) states that, if the Council is satisfied that a declaration made under subsection (2) or a condition imposed under subsection (3), no longer applies to a registered organization the declaration or the condition should be revoked or varied, as is appropriate.

 

Where a registered organization requests that a declaration made under subsection (2), or a condition referred to in subsection (3), be varied or revoked the Council must determine, within 28 days, whether it wishes to revoke or vary the declaration or the condition (subsection (6)).  If the Council does not vary or revoke the direction within 28 days, subsection (7) states that declaration or condition remains valid.

 

Under subsection (8) the Council must give the registered organization written notice of its decision to revoke or vary a declaration or condition under subsection (6) and, where it refuses to vary or revoke, the Council must provide the reasons for its decision.

 

Subsection (9) ensures that a reference to a declaration or condition in this section includes a declaration or condition as varied.



 

A decision by the Council to refuse to revoke or vary a declaration, or refuse to revoke or vary a condition applying in relation to a declaration, is reviewable by the Administrative Appeals Tribunal.

 

73BCJ - Council may give capital adequacy directions

 

Subsection 73BCJ(1) allows the Council to give written directions ( capital adequacy directions ) to a registered organization that operates a health benefits fund where it is satisfied there are reasonable grounds to believe that the assets of the fund will not provide adequate capital for the conduct of the health insurance business in accordance with the NHA and in the interests of the contributors to the fund.

 

Subsection (2) defines capital adequacy directions as those directions the Council determines to be reasonably necessary to ensure, as far as practicable, that the assets of the health benefits fund conducted by the organization will provide adequate capital for the purposes described in subsection (1).

 

Subsection (3) allows the Council to give capital adequacy directions to a registered organization that operates a health benefits fund even when it is satisfied that the health benefits fund meets the capital adequacy standard at the time the direction is given.

 

Subsection (4) requires a registered organization that operates a health benefits fund to comply with a capital adequacy direction given to it by the Council under subsection (1).

 

Subsection (5) provides that, subject to subsections (6) and (7), a capital adequacy direction will remain in force for the period specified in the direction (but not a period exceeding 3 years from the date the direction is given).  Council is allowed to issue a further direction when the previous direction has expired.

 

Subsection (6) requires the Council to revoke or vary a capital adequacy direction, in writing, should it no longer be needed.

 

Where a registered organization requests that a direction be varied or revoked, subsection (7), requires that the Council must determine, within 28 days whether it wishes to revoke or vary it.  If the Council does not vary or revoke the direction within 28 days, subsection (8) ensures that the direction continues in force.

 

Under subsection (9) the Council must give the registered organization written notice of its decision under subsection (7) and, if it refuses to revoke or vary a direction, the reasons for its decision.

 

Subsection (10) ensures that a reference to a capital adequacy direction in this section includes a reference to capital adequacy direction as varied.

 

Item 4

 

This item omits the words “or served under subsection 73BAC(2)”, from subsection 73BEB(1).  Note that Item 2 repeals section 73BAC.



 

Item 5

 

This item repeals the previous paragraph 82G(1)(c) and substitutes a new paragraph that incorporates some additional functions of Council with respect to registered organizations including:

-    establishing solvency standards;

-    establishing capital adequacy standards;

-    establishing uniform standards for reporting to Council.

 

Item 6

 

This item inserts a new paragraph which allows the Council to appoint inspectors under section 82R to investigate the affairs of registered organizations and exercise the other related powers and functions listed under Part VIA.

 

Item 7

 

This item repeals two paragraphs 82G(1)(f) and (g) and replaces them with four new paragraphs (f), (g), (ga) and (gb) that expand the functions and powers of Council.

 

Paragraph (f) specifies that an additional role of the Council will be to appoint an administrator to a health benefits fund or a registered organization.

 

Paragraph (g) specifies that another role of Council will be to receive the reports of the administrator and to deal with the reports of the administrator.

 

Paragraph (ga) extends the role of the Council to approve the voluntary winding up of health funds or registered organizations.

 

Paragraph (gb) extends Council’s role to being able to apply to the Court for the winding up of a health benefits fund or a registered organization.

 

Item 8

 

This item repeals paragraph 82G(1)(q) rescinding the previous obligation on the Council to make recommendations to the Minister in relation to applications from registered organizations for exemption from the minimum reserve conditions.

 

Item 9

 

This item provides the insertion of a new paragraph into subsection 82G(1) that gives Council a function to cooperate with other regulatory agencies on matters affecting registered organizations and the private health insurance industry generally.



 

Item 10

 

This item inserts a new Division before section 82Q of Part VIA of the NHA.  Part VIA of the NHA deals with the conduct and supervision of the affairs of registered organizations.

 

Division 1 - Preliminary

 

Division 1 adds 3 new sections which outline the Part, the purpose of the Part and outline the limitations on administration and winding up of health benefit funds and registered organizations.

 

82QA - Outline of Part

 

Section 82QA outlines the Part.  Subsection (1) notes that Division 1 sets out the purpose and defines concepts for the Part.  Subsection (2) notes that under Division 2 the Minister or Council may appoint inspectors to investigate and report on health benefit fund affairs.  Subsection (3) notes that under Division 3 the circumstances and legal basis upon which a fund can be placed under administration are described.  Subsection (4) notes that under Division 4 the circumstances and legal basis under which a fund or a registered organization can be wound up are set out.

 

82QB - Purpose of the Part

 

Section 82QB explains that the purpose of the part is to ensure that supervision of the business, affairs and property of funds and registered organizations in all activities provide for the best interests of contributors to health benefits funds.

 

82QC - Limitations on administration and winding up of health benefits funds and registered organizations

 

Subsection (1) declares that, despite the provisions of any other law of the Commonwealth or of any law of a State or Territory, the fund conducted by a registered organization, or the registered organization itself, can only be placed under administration, or dealt with as a fund under administration, in accordance with Division 3.

 

Subsection (2) declares that, despite the provisions of any other law of the Commonwealth or of any law of a State or Territory, the fund conducted by a registered organization, or the registered organization itself, can only be wound up in accordance with Division 4.

 

Item 11

 

This item repeals the definition of affairs which was previously contained in the NHA .  The definition was repealed because, as previously defined, it had a narrow application which was limited to the fund conducted by the registered organization.  Now that Part VIA covers the winding up of registered organizations also the expression affairs must have a broader application.  Thus, it is appropriate to leave the concept undefined, thus allowing it to be interpreted according to its tenor in the broadest possible way.



 

Items 12, 13, 14, 15, 16, 17, 18, 19, 20, 21 and 22

 

These items insert additional definitions, necessary for the Part, into subsection 82Q(1).  The definitions are of the following words and phrases:

-    appointing authority ;

-    assets ;

-    conducting organization ;

-    contributor ;

-    Court ;

-    friendly society ;

-    fund ;

-    fund under administration ;

-    liabilities ;

-    organization under administration ; and

-    voluntary deed of arrangement .

 

Item 23

 

This item inserts a new heading.

 

Division 2 - Investigations into affairs of registered organizations

 

Items 24 and 25

 

These item omit various words to ensure that the Council or the Minister (in Division 2 both are referred to as the appointing authority ) will be able to appoint an inspector under Division 2 to a registered organization if they have reason to suspect that:

-    the affairs of a registered organization are being, or are about to be, carried on in a manner that is not in the best interests of the contributors to the fund conducted by the organization; or

-    a registered organization has contravened, or failed to comply with, a provision of this NHA or the regulations, a term or condition of registration imposed on it by or under this NHA or a direction under this NHA served on it; or

-    having regard to an auditor’s statement under subsection 82L(4), a registered organization has not complied with the provisions of the Private Health Insurance Incentives Act 1997 or the Private Health Insurance Incentives Act 1998 .

 

The “show cause” procedure has been removed and provision has been made for the direct appointment of an inspector, upon the Minister or Council giving reasons to that organization for appointing that inspector.

 

Item 26

 

This item replaces subsection 82R(2) and requires a notice of appointment of an inspector by the Minister to be signed by the Minister and a notice of appointment of an inspector by the Council to be signed by the Commissioner.



 

Items 27, 28 and 29

 

These items omit the word Minister replacing it with authority or appointing authority , so as to ensure that the Council or the Minister can appoint an inspector and deal with the report of the inspector.

 

Item 30

 

This item inserts a new subsection 82W(1A) that provides that an inspector who makes a report must send a copy of that report to either the Minister or the Council (that is, the inspector must send a copy of the report to the Minister if the Council appointed that person and vice versa).

 

Item 31

 

This item omits the word Minister replacing it with appointing authority when identifying the person to whom an inspector must provide a report in relation to this subsection.

 

Item 32

 

This item repeals subsection 82W(4) that previously granted the Minister power to refer a report of an inspector to the Registration Committee for examination and report.

 

Items 33, 34 and 35

 

These items omit the word Minister replacing it with authority or appointing authority , so as to ensure that the Council or the Minister can appoint an inspector and deal with the report of the inspector.

 

Item 36

 

This item inserts a new subsection (9A) into section 82W (the section that sets out the requirements for the handling of the inspector’s report) that declares that an inspector is protected, so long as they are acting in good faith, from civil and criminal proceedings in relation to:

-    the publication of a report to the appointing authority; or

-    any opinion expressed, in accordance with subsection 82W(3), that a person has committed a criminal offence.

 

This amendment puts beyond doubt the inspector’s freedom to report the facts as they see them, without fear of defamation proceedings or any other legal action.

 

Item 37

 

This amendment is a consequential amendment in relation to Item 36.



 

Item 38

 

This item inserts a new section after section 82W.

 

82WA - Minister and Council to inform each other about action taken

 

Subsections (1) and (2) require both the Council and the Minister to inform each other of any action to be taken on the basis of an inspector’s report with regards to an organization.

 

Item 39

 

This item is a renumbering provision.

 

Item 40

 

This item is a transitional provision that ensures any delegation previously made or given effect to under section 82X of the NHA continues to have effect notwithstanding these amendments.

 

Item 41

 

This item is a renumbering provision.

 

Item 42

 

This item is a transitional provision that ensures any proceeding commenced under section 82Y of the NHA continue to have effect notwithstanding these amendments.

 

Item 43

 

This item repeals sections 82Z to 82ZM of the NHA .  Sections 82Z to 82M contained the judicial management of funds and winding up of funds provisions under the Act.  Those provisions are replaced by a new scheme for the administration and winding up of both funds and organizations that is more substantial and detailed than its predecessor.  The new scheme streamlines processes while providing better safeguards for the interests of contributors when funds or registered organizations are under administration or being wound up.

 

Division 3 - Administration of funds and registered organizations

 

Subdivision 1 - Preliminary

 

82XA - Purpose of division

 

Section 82XA defines the purpose of the Division which is to permit the business, affairs and property of a fund or organization under administration to be administered so that it maximises the chance for contributors to continue to be covered for health insurance and if this is not possible safeguards the financial interests of the contributors in the event of winding up.



 

82XB - The basis of the law relating to administration

 

Section 82XB sets the basis of the law in regard to administration.  The general structure of the provision is to displace existing law permitting the voluntary administration of a registered organization so as to properly provide for the protection of the interests of contributors of the fund conducted by the organization.  Thus, subsection (1) prevents any law of a State or Territory that, but for this section, would relate to the administration of a registered organization from applying to that organization.

 

Note also that Division 3 contains new provisions adopted from Part 5.3A of Chapter 5 of the Corporations Law , with modifications to reflect the purposes of this Division.  Those provisions are either set out specifically in Division 3 or are applied by reference as a law of the Commonwealth, rather than State or internal Territory law.  (A different approach is taken to the winding up of funds and registered organizations.)  As a consequence, subsection (2) states that the administration of either a health benefits fund or a registered organizations is to occur in accordance with this Division and Divisions 6, 7, 8, 10, 11, 13 and 16 of Part 5.3A of Chapter 5 of the Corporations Law and Division 7A of Part 5.6 of Chapter 5 of the Corporations Law .  The applied Divisions of the Corporations Law may be modified by provision of this Division and by regulations.

 

Subsection (3) confirms that the Corporations Law that is to apply to any given fund or organization is to be the Corporations Law of the relevant State or internal Territory as it is in force from time to time.  Thus, for example, if an administrator is appointed to a registered organization operating in New South Wales the Corporations Law that would be applied through subsection (2) is the Corporations Law of New South Wales as it exists at that particular time.

 

Subsections (4) and (5) translate key concepts contained in the Corporations Law for use in the NHA .  Subsection (6) confirms that regulations may provide for different modifications of the Corporations Law depending on the nature of the fund or organization under administration.

 

82XC - Definitions

 

Section 82XC inserts a definition of administrator for use in the Division.

 

Subdivision 2 - Appointment of an administrator

 

82XD - Council may appoint administrator

 

Section 82XD declares that the Council, subject to sections 82XE and 82XF, may, by written instrument, appoint a person as an administrator of either a health benefits fund or the registered organization.



 

82XE - Qualifications for appointment as administrator

 

The qualifications required of an administrator are detailed in section 82XE.

 

The basic requirements are set out in subsection (1); that is, the administrator must be registered as an official liquidator under the Corporations Law and must not be related to the fund or the registered organization.

 

Subsection (2) states that, in relation to the fund, a person is regarded as being related to that fund if they are:

-    a contributor to the fund; or

-    an auditor of the fund; or

-    a chargee of property of the fund; or

-    an officer of a body corporate that is a chargee of the property of the fund.

 

Subsection (3) states that, in relation to a registered organization, a person is regarded as related to that organization if they are:

-    an officer of the organization; or

-    an auditor of the organization; or

-    an officer of a body corporate that is related to the organization; or

-    a chargee of property of the organization; or

-    an officer of a body corporate that is a chargee of the property of the organizations.

 

Subsection (4) states that the question as to whether one body corporate is related to another is to be determined in accordance with the relevant provision of the Corporations Law .

 

Subsection (5) notes that, under this section, the appointment of a person as an administrator of a fund or a registered organization does not make the person an officer of the organization.

 

82XF - Grounds of appointment of an administrator

 

Section 82XF lists the grounds for appointment of an administrator to a health fund or to a registered organization.

 

Under subsection 82XF(1) an administrator can only be appointed to a health benefits fund if, and only if, the Council believes that such an appointment is in the interest of the contributors and:

-    the Council is satisfied, on reasonable grounds, that:

.     there has been a breach of the solvency standard; or

.     there has been a breach of the capital adequacy standard; or

.     the conducting organization has contravened any applicable rule, condition or direction ; or

-    a conducting organization has requested it; or

-    there has been a report provided by a liquidator (where the liquidator commenced a voluntary winding up of a fund) stating that the assets of the fund will not be sufficient to meet the liabilities of the fund within a period of 12 months after commencement; or

-    there are grounds set out in regulations that apply to the fund.



 

Subsection (2) provides a definition of the phrase applicable rule, condition or direction ; used in subsection (1).

 

Subsection (3) states that an administrator can only be appointed to a registered organization if, and only if:

-    grounds exist under subsection (1) for the appointment of an administrator to the health benefits fund conducted by the organization and, the Council is satisfied, on reasonable grounds, that

.     the health benefits fund is the primary business of the organization; or

.     property of a fund may have been invested in or transferred to another business conducted by the organization; or

.     because of either the nature of, or the manner of conducting, either the business or affairs of the fund or the organization generally, or because of the ownership of the property of the fund and of other property of the organization, it is either necessary or convenient for the administrator to administer all of the business, affairs and property of the organization; or

-    a request is made to the Council from the governing body of a registered organization for an administrator to be appointed; or

-    there has been a report provided by a liquidator (where the liquidator commenced a voluntary winding up of an organization) stating that the assets of the organization will not be sufficient to meet the liabilities of the organization within a period of 12 months after commencement; or

-    there are grounds set out in regulations that apply to the organization.

 

Subsection (4) notes that, in forming any belief or satisfaction for the purposes of this section, the Council may use any information in its own records or any information contained in any report (including an inspector’s report) or return made to it.  A report may include a report made orally or a report made in writing.

 

82XG - Council may give directions to administrator

 

Section 82XG allows the Council to give an administrator written directions concerning administration (subsection (1)).  Directions will usually be general but can also be specific in relation to the circumstances of the particular organization (subsection (2)).  Directions may require the provision of interim reports to the Council (subsection (3)).

 

82XH - Remuneration of administrator

 

The Council may determine the remuneration and allowances of the administrator under section 82XH and who is to pay the remuneration.  In most cases, the remuneration and allowances of the administrator would be paid from the assets of the fund under administration or the assets of the organization under administration.



 

82XI - Administrator to displace management of fund or registered organization

 

Subsections 82XI(1) and (2) ensure that, for so long as the administrator is appointed to a fund or to a registered organization:

-    the management of the fund or organization vests in the administrator;

-    any officer vested with the management of the fund or organization is, by force of these subsections, divested of that management;

-    the administrator is taken to be the public officer; and

-    the person who was the public officer immediately prior to the appointment of the administrator ceases to be the public officer.

 

82XJ - Administrator of fund may recommend whole organization be placed under administration

 

Section 82XJ allows an administrator appointed to a fund to make a recommendation in writing to the Council (which is accompanied by their reasons for the recommendation) that they be appointed to the whole organization (subsections (1) and (2)).

 

The Council, in considering the administrator’s recommendation and reasons, must have regard to the grounds set out in subsection 82XF(3).  If the person who was appointed as administrator to the fund is appointed as administrator to the organization then under subsection (4) the actions of the administrator made in relation to the original appointment continue to have affect.

 

82XK  - Termination of appointment of administrator

 

The Council, under section 82XK, is able to terminate an administrator’s appointment at any time by written notice (subsection (1)).

 

If the Council terminates an administrator’s appointment it may appoint a replacement administrator under the same conditions and directions or may vary the terms and conditions of appointment (subsections (2), (3) and (4)).

 

A decision to terminate the appointment of an administrator under subsection (1) may be reviewed by the Administrative Appeals Tribunal.

 

Subsection (5) provides that, if a replacement administrator is not appointed, the terminated administrator is divested of the power to control or carry on the business and manage the affairs of the fund or the registered organization and those powers are returned to the controlling officers of the organization.

 

Subsection (6) provides that the Council must not fail to replace an administrator whose appointment has been terminated unless the Council is satisfied that it is in the interest of contributors not to appoint a replacement administrator.



 

Subdivision 3 - Duties and powers of the administrator

 

82XL -Main duties of administrator

 

Section 82XL states that the main duty of the administrator is to examine the business, affairs and property of the fund or organization, form an opinion as to the most appropriate action to be taken with respect to the fund or organization and to make a final written report to the Council.

 

82XM - Day-to-day duties of administrator

 

Section 82XM outlines the day-to-day duties of an administrator appointed to a fund or to an organization.  The fund or organization must be managed the organization as efficiently and economically as possible.

 

If the administrator has been appointed to a fund they are to:

-    ascertain the assets and liabilities of the fund; and

-    if the business of the fund has been mixed with other business of the conducting organization, apportion the assets and liabilities between the fund and that other business; and

-    determine the rights and interests of contributors.

 

If the administrator has been appointed to a registered organization then the duties are wider.  They are required to:

-    ascertain the assets and liabilities of the fund of the registered organization and of the other businesses of the organization; and

-    if the business of the organization has been mixed with the business of the fund apportion the assets and liabilities between the fund and that other business; and

-    determine the rights and interests of contributors to the fund.

 

82XN - Powers of administrator

 

Section 82XN defines the powers of an administrator while a fund or an organization is under administration.  Under subsection 82XN(1) the administrator has the power, in the interests of contributors, to:

-    control the business, affairs and property

-    carry on the business  and to manage the affairs and property

-    terminate or dispose of all or part of the business

-    perform any other function and exercise any other powers that any of major decision-makers could perform or exercise.

 

For a fund, these powers may include the execution of a document, bringing or defending proceedings or anything else for the purpose of the business (subsection (2)).

 

For a registered organization, the administrator can remove from office an officer of the organization and appoint a person as an officer and also execute a document and bring or defend proceedings or do anything else for the purpose of the business (subsection (3)).



 

82XO - Powers of other officers of registered organizations suspended

 

Subsections 82XO(1) and (2) creates two offences (maximum penalty of 6 months imprisonment for each).  If while either a fund or an organization is under administration, a person (other than the administrator) performs or exercises, or purports to perform or exercise a function or power of an officer of either the conducting organization or the registered organization, without the administrator’s written approval, the person is guilty of an offence.  As noted in subsection (5), for the purposes of this section, an officer is to include a receiver or receiver and manager of any assets of the fund or organization, as the case requires.

 

82XP - Administrator taken to act as agent of organization

 

Section 82XP declares that, whilst exercising a power as an administrator of a fund or registered organization, the administrator is taken to be acting as the agent of the organization.

 

82XQ - Additional powers of the administrator

 

Section 82XQ relates to the application of Division 8 of Part 5.3A of Chapter 5 of the Corporations Law .  In broad terms, Division 8:

-    will allow the administrator to deal with property of either the fund or organization covered by a floating charge notwithstanding the fact that the charge may have crystallised (section 442B);

-    specifies the circumstance in which an administrator may dispose of property that is subject to a charge, which has been leased or which is being occupied by another person (section 442C);

-    prevents the administrator from taking control of property in circumstances where, for example, a receiver took possession of the property prior to the appointment of the administrator or the property subject to the charge in question is perishable (section 442D);

-    grants the administrator a qualified privilege (section 442E, but note 82XZK below);

-    allows persons dealing with the administrator to assume that the administrator has been validly appointed and that he or she has the capacity to enter into contracts or dealings on behalf of the fund or organization.

 

In respect of the specific clauses of section 82XQ, subsection (1) states that in applying Division 8 of Part 5.3A of Chapter 5 of the Corporations Law , the Division is taken not to include section 442A (the contents of which are broadly provided for in subsection 82XN(3)) and subsection 442D(1) (which disables an administrator in favour of a person who has a charge over the whole, or substantially the whole, of the property of the fund or the property of the organization).

 

Subsection (2) states that, not withstanding the fact that sections 128 and 129 of the Corporations Law are not within the applied Divisions specified in section 82XB, they are taken to be applied, subject to any modification by regulations, for the purposes of this section.



 

Subdivision 4 - Information concerning and books and property of, funds or organizations under administration

 

82XR - Directors to help administrator

 

Subsection 82XR(1) ensures that the directors of the organization deliver all records in the directors possession that relate to the health insurance business of the fund or organization as soon as possible.  The director is also obliged to inform the administrator of the location of other records that relate to the business of the fund or organization.

 

Directors also are obliged to give the administrator a statement about the business, property, affairs and financial circumstances of the fund or organization in accordance with the requirements of the administrator within 7 days (or later if the administrator agrees) from the commencement of administration (subsection (2)).

 

Subsection (3) ensures that the director gives as much assistance as the administrator reasonably needs.

 

Subsection (4) creates an offence (maximum penalty of 12 months imprisonment) for a director who fails to comply with the requirements of subsections (1), (2) or (3).

 

Subsection (5) defines director for the different types of registered organizations.

 

82XS - Administrator’s rights to certain records

 

Subsection 82XS(1) declares that a person is not entitled to retain possession of the records of the organization that relate to the fund or the organization, as the case requires, against the administrator.

 

Subsection (2) allows secured creditors to retain possession of such records but they must provide the administrator access to those records.

 

Subsection (3) allows the administrator to serve notice upon a person so that they will deliver up any records of the organization.  Subsection (4) requires the minimum period in such a notice to be at least 3 days.

 

Subsection (5) creates an offence (maximum penalty of 1 year imprisonment) for a person who fails to comply with the written request of the administrator.  If the person can prove that they were entitled to retain possession of the books then this is a defence against such a prosecution.



 

82XT - Only administrator can deal with property of fund or organization under administration

 

Section 82XT ensures that only an administrator deals with the property of the fund or organization under administration.  Subsection (2) voids any property transaction or deal the conducting organization or the registered organization enters into unless entered into by the administrator; the administrator consented to the transaction; or the Court ordered the transaction or deal.  Subsection (4) allows the Court to prevent a transaction from being void under subsection (2).

 

Subsection (3) exempts an authorised deposit-taking institutions (banks, building societies etc.) from the application of subsection (2) if the transaction or dealing is made in good faith and in the ordinary course of banking business after the administration began, but not if the administrator gives the bank written notice of their appointment or the administrator places a notice about their appointment in a national newspaper or newspaper circulating in each jurisdiction where the conducting organization or registered organization carries on its business.

 

Under subsection (5), if an officer of the conducting organization:

-    enters into a transaction or dealing; or

-    was in any way related or involved in a transaction; and

the transaction in question is void because of the operation of subsection (2) the officer who entered into the dealing or transaction has committed an offence (maximum penalty of 6 months imprisonment).

 

Subsection (6) defines the terms of Australian ADI and officer used in the section.

 

82XU - Order for compensation where officer involved in transaction

 

Subsections 82XU(1) and (2) provides a mechanism that allows a court to order that compensation be paid by an officer where that officer has been found guilty of the offence contained in subsection 82XT(5).  Subsection (3) gives the court a power to relieve a person of part or all of a liability (to pay compensation) that would otherwise have been payable if the person acted honestly and having regard to the circumstances of the case the person ought fairly to be excused.

 

Subsections (4), (5) and (6) allow a person to apply to the Federal Court of Australia for relief if he or she believes that proceedings under subsection 82XT(5) may be commenced against them.  The provisions allow a person to pre-empt any order to pay compensation and to seek relief from an order to pay compensation before any criminal proceedings have commenced.

 

82XV - Effect of administration on the members of a registered organization

 

Section 82XV ensures that, whilst an organization is under administration, the administrator does not transfer shares or alter the status of the members of the organization unless the Court approves such action.



 

82XW - Protection of property during administration

 

Section 82XW relates to the application of Division 6 of Part 5.3A of Chapter 5 of the Corporations Law .  In broad terms, Division 6 will:

-    prevent, unless the administrator or a Court grants permission, the enforcement of a charge against the property of a fund or the property of a registered organization once the administration commences (section 440B);

-    prevent, unless the administrator or a Court grants permission, the owner or lessor of property that is used, occupied or in the possession of the fund or registered organization from being repossessed by an owner or lessor (section 440C);

-    prevent, unless the administrator or a Court grants permission, the continuation of any court proceeding against the fund, the registered organization or the property of the fund or the registered organization (section 440D);

-    protect the administrator from any civil damages because he or she has refused to consent to a request in respect of the enforcement of a charge, the repossession of an occupied property etc. (section 440E);

-    prevent, unless the administrator or a Court grants permission, the continuation of enforcement proceedings against the fund, the registered organization or the property of the fund or the registered organization (section 440F);

-    limit the power of officers of the Court (such as a Registrar or Sheriff) in relation to take action against the fund, the registered organization or the property of the fund or the registered organization (section 440G);

-    mean that any action taken against the fund, the registered organization or the property of the fund or the registered organization will be deemed to be a pending action (ie it must wait until the outcome of the administration is known) (section 440H); and

-    prevent a guarantee (made personally by a director or a spouse of a director in relation to a liability of the fund or the registered organization) from being enforced unless the Court agrees (section 440J).

 

In respect of the specific clauses of section 82XW, subsection (1) states that section 440A of the Corporations Law will not apply.  (Section 440A contains rules about how a company under administration can be wound up; such rules are not appropriate for the purposes of this Part.)

 

Subsection (2) states that where an administrator or Court is considering (under section 440D of the Corporations Law as applied) whether or not to allow a legal proceeding to continue, whilst the fund or registered organization is under administration, the administrator and the Court must consider whether:

-    the action in question relates to the property of the fund; and

-    such proceedings would be materially detrimental to the interests of contributors.



 

82XX - Rights of chargee, owner or lessor of property of fund or organization under administration

 

Section 82XX relates to the application of Division 7 of Part 5.3A of Chapter 5 of the Corporations Law .  In broad terms, Division 7 will:

-    allow a chargee or receiver to take possession etc. of property where they started the process of taking possession etc. prior to the commencement of the administration (section 441B);

-    allows a chargee or receiver to take possession etc. of perishable property even though the administration may have commenced (section 441C);

-    allow the Court, upon application by the administrator, to limit the actions of a chargee or receiver notwithstanding the fact that they may have started the process of taking possession etc. prior to the commencement of the administration (section 441D);

-    not prevent a person giving a notice to a conducting organization or registered organization stating that they will (when they are allowed) commence action to recover the secured property (section 441E);

-    protect a chargee or receiver from prosecution under subsection @82ZHBB(5) in relation to any transaction they may lawfully make in respect of charged property referred to above (sections 441F and 441G); and

-    allow the Court, upon application by the administrator, to limit the actions of an owner or lessor of property that is used, occupied or in the possession of the fund or registered organization from being repossessed by an owner or lessor (section 441H).

 

In respect of the specific clauses of section 82XX, subsection (1) states that both section 441A and selected words in 441D(1) are not to be included in the applied Division.  (Section 441A relates to situations were there is a charge over all, or substantially all, of the property of a company or there are two or more charges; such rules are not appropriate for the purposes of this Part.)

 

Subsection (2) states that nothing in the applied Division 7 of Part 5.3A of Chapter 5 of the Corporations Law the enforcement of a charge so long as the administrator or the Court are satisfied that:

-    the charge does not relate to the property of the fund; and

-    enforcement of the charge would not be materially detrimental to the interests of contributors.

 

Subdivision 5 - Procedure for considering whether to execute voluntary deeds of arrangement

 

82XY -  Definitions

 

Section 82XY states that, for the purposes of the Subdivision, the definition of a creditor includes a contributor to a health benefits fund or to a registered organization that is under administration.



 

82XZ - Administrator may convene meeting and inform creditors

 

Subsection 82XZ(1) allows an administrator to convene a meeting of the creditors of the fund or organization under administration to consider the possibility of executing a voluntary deed of arrangement.  The administrator must give 5 business days written notice of the meeting to as many creditors as possible and by publishing a notice of the meeting in a national newspaper or a local daily newspaper in all places where the registered organization has an office (subsection (2)).

 

The notice to the creditors must be accompanied by a report which outlines the financial circumstances of the organization, the details of the proposed deed of arrangement, and a statement from the administrator as to why it would be in the creditors’ interests to enter into a voluntary deed of arrangement (subsection (3)).  The deed proposed may be any arrangement for which the administrator might be able to obtain creditor endorsement.  In particular, the proposed deed of arrangement may include a provision for the health insurance business to continue under the control of the same registered organization or may include transfer of the health benefits fund to another registered organization (subsection (5)).

 

Note, however, that any administrator who proposes a voluntary deed of arrangement must be able to satisfy the requirements of subsections 82XZC(3), (4), (5) and (6) (see below).

 

82XZA - Conduct of the meeting

 

Section 82XZA allows the administrator to chair the meeting of creditors and to adjourn the meeting, but not for a period longer than 30 days.  Other matters related to the convening, conduct of, or procedure at a meeting or the voting, quorum and notice requirements of a meeting will be provided for through the regulations (see 82ZF below).

 

82XZB - What creditors may decide

 

Section 82XZB allows the creditors at the meeting to resolve whether or not to execute a deed of arrangement specified in a resolution.  The deed specified in the resolution may be different from the one originally proposed by the administrator.

 

Subdivision 6 - Administrator to report to Council

 

82XZC - Administrator to give a report to Council

 

Section 82XZC instructs the administrator on the report to Council.  Subsection (1) requires the administrator to conclude the investigation of the fund or organization and submit a final report to the Council within 3 months.  Council may give the administrator a longer period for submitting the report if there are special circumstances (Subsection (2)).

 

If the creditors of the organization agree to the voluntary deed of arrangement originally proposed by the administrator, or a different voluntary deed of arrangement that is still protective of the interest of contributors, the administrator must recommend to the Council that it approve the execution of the deed (Subsection (3)).



 

Under subsections (4) and (5) the administrator must not recommend to the Council the approval of a voluntary deed of arrangement that limits the rights of a creditor unless the administrator is of the opinion that the organization is insolvent or likely to become insolvent.  A deed will be taken to limit those rights if it:

-    removes or limits the right of a creditor to the payment of a debt or other liability; or

-    removes or limits a creditor’s entitlement to an asset; or

-    delays the right of a creditor to make or enforce a claim for the payment of a debt or liability.

 

If the administrator:

-    does not propose a deed; or

-    the administrator proposes a deed but the creditors do not agree with it, have varied it in such a way that the administrator is not satisfied that it would be protective of the interests of contributors or the administrator has proposed a deed but the organization is not insolvent or likely to be so;

then the administrator must recommend a course of action that is in the best interests of the contributors to the fund (Subsection (7)).

 

Subsection (8) outlines the course of action the administrator might otherwise recommend to the Council.  Those courses of action are:

-    a scheme of arrangement which may involve the execution of the deed in the same terms as the voluntary deed that the creditors rejected; or

-    that the fund be wound up; or

-    that the administration cease and that the control of the health insurance business be resumed by the organization.

 

Subsection (9) provides that the scheme of arrangement may make provision for the fund to continue under certain conditions or may provide for the transfer of the fund to another organization.

 

82XZD - Dealing with the report given to the Council

 

Section 82XZD instructs Council in dealing with the administrator’s report.  In deciding whether or not to approve a voluntary deed of arrangement Council may request the administrator to provide any further information that it considers necessary and engage any person to assist it in evaluating the information contained in the report of the administrator (Subsection (1)).

 

Subsection (2) provides that, if the Council is satisfied that a voluntary deed of arrangement is in the circumstances, in the interests of contributors, it must by written notice inform the administrator that it approves the execution of the deed and request the administrator to prepare the deed for execution.



 

Subsection (3) provides that, if the Council is not satisfied that a voluntary deed of arrangement is in the circumstances, in the interests of contributors, it is required to inform the administrator in writing and request that the administrator to either:

-    seek another meeting of the creditors to consider a further voluntary deed of arrangement; or

-    to examine the other possible courses of action outlined in section 82XZC(8)

and report back to Council.

 

Subsection (4) states that, if the Council is satisfied that a course of action recommended by the administrator under subsection 82XZC(7) will be in the best interests of the contributors to the fund, the Council must, by written notice, direct the administrator to either:

-    make an application to the Court, in accordance with subsection 82XZE(1), to seek orders to implement a scheme of arrangement; or

-    make an application to the Court, in accordance with subsection 82YP(1) or 82YU(1), to seek orders for the winding up of either the fund or the organization.

 

Subsection (5) states that, if the Council is not satisfied that a course of action recommended by the administrator under subsection 82XZC(7) will be in the best interests of the contributors to the fund, the Council must, by written notice, request the administrator to either:

-    seek another meeting of the creditors to consider a further voluntary deed of arrangement; or

-    to examine the other possible courses of action outlined in section 82XZC(8)

and report back to Council.

 

If the administrator has to provide a further report to Council under subsections (3) or (5) then that report must be dealt with in accordance with this section (Subsection (6)).

 

82XZE - Administrator to seek order of Court in respect of certain courses of action

 

Section 82XZE provides that an administrator may seek an order of Court in respect of certain courses of action.

 

If the administrator recommends a scheme of arrangement, and the Council agrees that this is in the best interest of contributors, the administrator must seek approval from the Court to give effect to recommendation (subsection (1)).

 

During the application to the Court for approval of the scheme, the Council and any other person interested is entitled to be heard and the Court may give orders in relation to scheme if those orders are in the circumstances in the interests of the contributors (subsection (2)).

 

Any Court order in these circumstances is binding on all persons and overrides the constitution and any rules of the organization (subsection (3)).

 

Subsection (4) provides, for clarification, that a Court order is not required to give effect to a voluntary deed of arrangement or when the business is resumed by the organization .



 

Subdivision 7 - Execution, variation, termination and avoidance of voluntary deeds of arrangement

 

82XZF - Execution of voluntary deeds of arrangement

 

Section 82XZF relates to the application of Division 10 of Part 5.3A of Chapter 5 of the Corporations Law .  In broad terms, Division 10 will:

-    allow for the inclusion of prescribed clauses in a voluntary deed of arrangement, allow the administrator to also be the administrator of the deed, and require the administrator to prepare the deed (section 444A);

-    specify the way in which the deed is to be executed (section 444B);

-    compel a creditor not to act inconsistently with the deed prior to its formal execution (section 444C);

-    specify the impact of the deed upon the all of the creditors of the fund or the registered organization (section 444D);

-    prevents a person bound by the deed from taking legal action against the fund, the registered organization or the property of the fund or the registered organization, unless a Court grants permission (section 444E);

-    allow the Court to limit the rights of a secured creditor, an owner or lessor where the exercise of such rights by those people would have a material adverse effect on achieving the purposes of the deed (section 444F);

-    specify the impact of the deed upon the organization, its officers and the deed’s administrator (section 444G); and

-    explains the extent to which the deed will release the fund or registered organization from debts owed (section 444H).

 

In respect of the specific clauses of section 82XZF, subsection (2) states that if the creditors resolve to replace the administrator (in their role as administrator of the deed) with another person the resolution does not have effect unless it has been approved by the Council.

 

Subsection (3) states that the obligations upon the administrator to prepare the deed (subsection 444A(3)) and the obligation upon the organization to execute the deed (subsection 444B(2)) have effect only if the Council has approved the execution of the deed.

 

82XZG - Variation, termination and avoidance of voluntary deeds of arrangement

 

Section 82XZG relates to the application of Division 11 of Part 5.3A of Chapter 5 of the Corporations Law .  In broad terms, Division 11 will:

-    allow a variation of a voluntary deed of arrangement (section 445A);

-    give the Court a power to cancel a variation of the deed (section 445B);

-    specify the circumstances when the deed terminates (section 445C);

-    provide grounds for the Court to terminate a deed where, for example, information provided to creditors prior to their vote on the deed was false or misleading (section 445D);

-    allow a meeting of creditors to be called at which a variation or termination of the deed might be considered (section 445F);

-    allow, where doubt may exist, for the Court to conclusively determine whether the deed has been entered into in a lawful way (and thus should be validated) or determine that there was a flaw in the entering of the deed (and thus should be avoided) (section 445G);

-    declare that any termination or avoidance of the deed will have no effect on the previous operation of the deed.

 

In respect of the specific clauses of section @82ZKB, subsection (1) confirms that section 445E will not be included as a part of the applied law (because that section would allow the creditors to decide that they wish to wind up the fund or the registered organization).  Subsection (1) also precludes paragraph 445C(b) from forming part of the applied law.

 

Subsection (2) confirms that at a meeting, called in accordance with section 445F of the applied law, the creditors may consider either the variation of termination of the voluntary deed of arrangement.  If those creditors resolve to vary the deed the variation does not come into effect unless both the administrator and the Council believe that the variation is, in the circumstance, in the interests of contributors (see subsections (3), (4), (5) and (6)).

 

82XZH - Effect of termination of voluntary deeds of arrangement

 

Subsection 82XZH(1) states the four ways in which a voluntary deed of arrangement may be terminated, these are:

-    by resolution passed at a meeting of creditors convened under section 445F of Corporations Law (as applied) and as provided for in subsection 82XZG(2); or

-    by order of the Court under section 445D of Corporations Law (as applied); or

-    by order of the Court under section 445G of Corporations Law (as applied); or

-    in circumstances specified in the deed as circumstances in which the deed is to terminate.

 

Thus, unless the Council makes a determination under subsection (2), upon termination the administration of the fund or the registered organization revives.  So for example, if the creditors simply decided that they no longer wished to participate in the deed they may terminate it but, at that point, the control of the fund or organization does not return to the original managers.  Rather, the administration revives so that Council, based upon information and a recommendation provided by the administrator, may make a considered decision about possible future courses of action in respect of the fund or the organization.

 

Notwithstanding subsection (1), the Council may determine that the administration is not to revive (subsection (2)).  Such a decision may be made where, for example, the voluntary deed of arrangement has self-terminated after almost all of the requirements of the deed have been met.  In such a case, the Council may determine that there is no benefit to the contributors in reviving the administration and simply allow the control of the fund or organization to be returned to its original management.  Subsections (3), (4) and (5) deal with machinery matters.



 

Subdivision 8 - Additional powers of the court in relation to administration

 

82XZI - Court may make orders to protect interests of contributors

 

Section 82XZI relates to the application of Division 13 of Part 5.3A of Chapter 5 of the Corporations Law .  In broad terms, Division 13 will:

-    provide the Court with a power to make such orders about how this Division should operate in relation to a particular fund or registered organization (section 447A);

-    provide the Court with a power to protect the interests of contributors during administration (section 447B);

-    provide the Court with a power to declare whether the appointment of an administrator under this Division is valid or not (section 447C);

-    allow the administrator to seek directions from the Court in respect of any aspect of administration provided for under this Division (section 447D); and

-    provide the Court with a power to supervise the conduct of the administration if the Court believes that such supervision is warranted (section 447E).

 

The specific modifications made in the section relate to the translation of the section 447B of the Corporations Law (as applied) for use with funds and registered organizations.

 

Subdivision 9 - Miscellaneous

 

82XZJ - When Administration begins and ends

 

Section 82XZJ clarifies when administration begins and ends.  Administration begins when the administrator is appointed to a fund or organization (subsections (1) and (2)).

 

Administration of a fund or organization ends when:

-    the Council terminates the appointment of an administrator and does not replace them; or

-    a voluntary deed of arrangement is executed; or

-    when the Council notifies the administrator that it has accepted the administrator’s recommendation that the administration cease; or

-    when a liquidator is appointed; or

-    the Court makes an order for a course of action approved by the Council.

 

82XZK - Indemnity

 

Section 82XZK indemnifies the administrator for anything done in good faith while being an administrator.

 

82XZL - Effect of things done during administration of fund or registered organization

 

Section 82XZL ensures that any payment transaction or other act or thing done with the consent of the administrator, while the fund or organization is under administration, is valid and effectual and cannot be set aside in the winding up of the organization.



 

82XZM - Time for doing act does not run while act prevented by this Division

 

Section 82XZM states that where, for any purpose, this Division prevents an act from being done within a time period that was required, or allowed, for the doing of that act then the time period is extended or deferred according to how long this Division prevented the particular act from being done.  An example of the application of this section is as follows.  If a registered organization has entered into a contract that contains a clause allowing it an option to extend the contract (and that clause also requires that such an option be exercised before the day the contract would otherwise terminate) the organization would not lose the legal right to extend the contract due simply because no action had been taken during a period of administration.  This is because section 82XZM has the effect of extending that time period by how long the registered organization was under administration.

 

82XZN - Disclaimer of onerous property

 

Liabilities in respect of the health benefits fund or registered organization under administration may be reduced through a process of disclaiming assets, where those assets can only be owned subject to meeting a liability.

 

Examples of assets that might be subject to disclaimer include unsaleable land on which there is a liability for mortgage payments and for rates or a lease on a building which is near to its expiry date but which is subject to liability for repair.  In such cases it may be more effective to abandon the asset and leave the party to whom a liability is owed to claim the liability as against the fund or organization as a creditor.

 

To disclaim such property means that a fund or organization’s rights, interests or liabilities in that property is taken to have been terminated.  However, the termination of those rights, interests or liabilities in that property does not affect any other person’s rights, interests and liabilities in that property (except so far as necessary to relieve the fund or the organization from the liability).  Any person against who a liability falls after an administrator of a fund or an organization disclaims property will be able to claim that liability as a debt against the fund or organization in question.

 

Section 82XZN relates to the application of Division 7A of Part 5.6 of Chapter 5 of the Corporations Law .  In broad terms, Division 7A:

-    will enable the administrator to disclaim certain property (in some cases only with Court approval) and will allow a person with a property interest to prevent disclaimer (section 268);

-    requires the administrator to provide notice of the fact that they have disclaimed property (section 268A);

-    allows a person who has a property interest in property that is the subject of a disclaimer by the administrator to apply to the Court to set aside that disclaimer (section 268B);

-    determines when disclaimer takes effect in relation to the property in question (for example, 14 days after the notice of disclaimer) (section 268C);

-    states the effect of disclaimer (section 268D);

-    allows an application to be made to a Court to set aside a disclaimer even after the disclaimer has been deemed to take effect (section 268E); and

-    allows the Court to dispose of the disclaimed property (section 268F).



 

Subsections 82XZN(1) and (2) modify the application of Division 7A of the Corporations Law .  Subsection (3) places the administrator in the same position as liquidator operating under Division 7A of Part 5.6 of Chapter 5 of the Corporations Law .

 

Division 4 - Winding up of funds and registered organizations

 

Subdivision 1 - Preliminary

 

82YA - Purpose of Division

 

Section 82YA sets the purpose of the Division which is to permit the business, affairs and property of a fund or organization to be wound up in a way that is not materially detrimental to the interests of contributors to the fund when it is being voluntarily wound up and in the case of a Court approved winding up only when in the interests of contributors.

 

82YB - The basis of the law relating to winding up

 

Section 82YB sets out the basis of the law in relation to winding up either funds or registered organizations.  Subsection (1) states that the winding up of a fund is to be carried out in accordance with Division 4.

 

Subsections (2), (3), (4) and (5) declares that a registered organization that is a company, friendly society or incorporated association is, subject to this Division, to be wound up in accordance with the applicable law that would apply to that type of corporate entity (that is, companies are to be wound up in accordance with the relevant State or internal Territory Corporations Law , friendly societies are to be wound up in accordance with the relevant State or internal Territory friendly society law - usually the Friendly Societies Code - and incorporated associations are to be wound up in accordance with the relevant State or internal Territory incorporated associations legislation).

 

A registered organization that is an unincorporated association may only be wound up by the Court and dissolved in accordance with Part 5.7 of Chapter 5 of the Corporations Law .  Thus, an unincorporated association is not at liberty to either dissolve itself or wind itself up whilst it remains a registered organization.  The law relating to unincorporated associations is relatively uncertain and, if this Act is to protect the interests of the contributors of such an organization, it is imperative that such a body is only allowed to wind up upon an order of the Court (where any uncertainties may be properly dealt with through Court orders and the like) (subsection (6)).

 

82YC - Regulations may modify provisions of this Division for certain purposes

 

Subsection 82YC(1) declares that regulations may be made to which override the law or a State or internal Territory where it is necessary or convenient to make such regulations for the purposes of this Division.

 

Such regulations cannot modify a provision of Division 4 that creates an offence or include a new provision that creates an offence (subsection (2)).  Further, the division has effect subject to any modifications made through the regulations (where a modification may include an omission, addition or substitution) (subsections (3) and (4)).



 

An example of a circumstance when such regulations may be necessary is where a State or internal Territory makes a relevant amendment to their Associations Incorporation Act and that amendment does not promote the purposes of this Division.  In such a case, regulations may be made which override the operation of the amendment in question.

 

82YD - Definitions

 

Section 82YD includes a definition of director for the Division (and any associated regulations) for the different types of organizations that are health funds eg. companies, friendly societies, incorporated associations and unincorporated entities.

 

Subdivision 2 - The circumstances in which winding up can occur

 

82YE - When winding up of funds can occur

 

Subsection 82YE(1) sets the circumstances in which winding up of a fund can occur:

-    by order of the Court on application of the Council;

-    by order of the Court on application of the administrator;

-    on the passing of a resolution by the directors of the organization for the voluntary winding up of the fund and the approval of that resolution by Council.

 

If the Council or an administrator applies to the Court for the winding up of a fund, the Court may only agree to the winding up if it is in the interest of the contributors (subsection (2)).

 

82YF - When winding up of registered organizations can occur

 

Section 82YF specifies the manner in which a registered organization may be wound up.  The winding up of such a registered organization under any other law is prohibited by subsection 82QC(2) of the Act.  Subsection 82YF(1) specifies the 3 ways in which a registered organization may be wound up, being:

-    by order of the Court upon an application by the Council and in accordance with section 82YT;

-    by order of the Court upon an application by an administrator and in accordance with section 82YU;

-    on the passing of a special resolution of the members of the registered organization, and the approval of that resolution by the Council, in accordance with section 82YL (recall that a registered organization that is an unincorporated association may not voluntarily wind itself up).

 

When the Court is considering an application made by the Council or an administrator for the winding up of a registered organization it may only order such a winding up if it considers that such an order is, in the circumstances, in the interests of contributors to the fund concerned (subsection (2)).  Further, to avoid any doubt, subsection (3) declares that Division 3 of Part 5.5 of Chapter 5 of the Corporations Law does not apply.  (The Division in question sets out the usual requirements for a creditors voluntary winding up of a company under the Corporations Law .)



 

Subdivision 3 - Starting the voluntary winding up of health benefits funds

 

82YG - Resolution for the voluntary winding up of a fund cannot be passed in certain circumstances

 

Section 82ZZZF states that a registered organization cannot resolve that the fund conducted by it be wound up voluntarily if an application for the fund or organization to be wound up has already been made to the Court by the Council or an administrator.

 

82YH - Resolution for the voluntary winding up of a fund

 

Subject to 82YG, section 82YH states that a fund may be voluntarily wound up if a majority of the directors of the organization resolve that the fund should be voluntarily wound up, the Council approves of the winding up and any additional approval in relation to the organization’s rules and constitution has been obtained.

 

The Directors may resolve that the fund be wound up only if the assets of the fund will be sufficient to meet the liabilities of the fund within 12 months after the commencement of the winding up and the contributors to the fund will not suffer any material detriment, financial or otherwise as a result of the winding up (subsection (2)).

 

If the Directors resolve to voluntarily wind up they must provide a copy of the resolution to Council together with a statement of any additional approval obtained in relation to the organization’s rules and constitution; a declaration of reasons for having satisfied subsection (2); and a statement of the financial position of the fund (subsection 3).

 

Under subsection (4), if additional approval is required under the organization’s constitution and rules the directors must seek that required approval.  If such additional approval involves the members considering the issue at a meeting the directors must provide those members with a copy of the same information detailed in subsection (3).

 

Under subsection (5) an instrument of appointment of a liquidator setting out the terms and conditions of appointment etc. should be provided as soon as the resolution is made or additional approval has been obtained.  If the Council is satisfied that all the correct processes have been adhered to it may approve, in writing by notice, the winding up (Subsection (6)).  With effect from the date of Council’s approval or a date specified in the notice the appointment of the liquidator takes effect and winding up commences (Subsection (7)).

 

Subsection (8) clarifies the meaning of material detriment and subsection (9) defines winding  up.

 

82YI - Effect of appointing liquidator of fund

 

Under section 82YH(7) the appointment of a liquidator takes effect when the Council approves it.  At that point the conducting organization must cease to carry only any health insurance business related to the fund except so far as is in the opinion of the liquidator, required for the beneficial disposal or winding up of the fund (subsection 82YI(1)).



 

Any transaction that is made without the sanction of the liquidator, after the approval of the appointment is void (subsection (2)).

 

Subsection (3) states that on the appointment of a liquidator all the powers of the directors in relation to the health insurance business of the conducting organization cease, except if the liquidator approves them.

 

If a vacancy occurs in the office of the liquidator then the directors may fill the vacancy by the appointment of a replacement liquidator, but only with the approval of the Council (subsection (4)).

 

82YJ - Duty of liquidator where fund turns out to be insolvent

 

Section 82YJ sets the duties of a liquidator in a voluntary winding up situation.  If the liquidator forms the opinion that the assets of the fund will not be sufficient to meet the liabilities of the fund within the period of 12 months after the commencement of the winding up, the liquidator must provide a written report to Council stating this opinion and the reasons for it.  The liquidator must recommend the Council either applies to the Court for the winding up of a fund or that the Council appoints a person as administrator to the fund (subsections (1)).

 

The report must include a statement of the assets and liabilities of the fund (subsection (2)).  On receipt of the report the Council must having regard to the details in the report and the interest of the contributors decide the most appropriate course of action (subsection (3)).

 

Subdivision 4 - Starting the voluntary winding up of registered organizations

 

82YK - Resolution for the voluntary winding up of organization cannot be passed in certain circumstances

 

This section declares that a registered organization cannot resolve to wind itself up voluntarily if an application has been made to the Court by either an administrator or the Council for its winding up.  Section 82YK applies notwithstanding the existence of section 490 of the Corporations Law which simply states that a company being wound up in insolvency cannot, unless it has the permission of the Court, file for a voluntary winding up.

 

82YL - Resolution for the voluntary winding up of a registered organization

 

Subject to 82YK, subsection 82YL(1) states that a registered organization may be voluntarily wound up if:

-    the majority of the directors of the organization resolve that the question of whether it should be voluntarily wound up be put to its members; and

-    upon being put to the members, those members resolve by special resolution that it should be voluntarily wound up; and

-    the Council approves of the winding up.

 



 

The Directors may can only put the question to their members if the assets of the fund will be sufficient to meet the liabilities of the fund within 12 months after the commencement of the winding up and the contributors to the fund will not suffer any material detriment, financial or otherwise as a result of the winding up (subsection (2)).

 

Under subsection (3), if the directors resolve to voluntarily wind up they must invite the members to a meeting to vote on a proposed resolution for the voluntary winding up of the organization and, for the purposes of that meeting, give each member a copy of the resolution accompanied by:

-    a declaration of reasons for having satisfied subsection (2)); and

-    a statement of the financial position of the fund; and

-    a proposal for the appointment of a liquidator on specified terms and conditions that would take effect only when Council approves the resolution.

 

The directors must ensure that, as soon as practicable after the invitation to members is made a copy of the resolution and accompanying documentation is given to the Council (subsection  (4)).

 

The members may resolve by special resolution that the organization be wound up and by ordinary resolution appoint a liquidator (subsection (5)).

 

If the members approve the resolution and the Council is satisfied that the assets of the fund will be sufficient to meet the liabilities of the fund within 12 months after the commencement of the winding up and the contributors to the fund will not suffer any material detriment, financial or otherwise as a result of the winding up, Council may approve the appointment of the liquidator.  The date of effect of appointment is the day of the Council’s notice in writing or such later date as is specified in the notice and the winding up commences (subsections (6) and (7)).

 

Subsection (8) clarifies the meaning of material detriment and subsection (9) defines special resolution as it applies to different types of registered organizations.

 

82YM - Effect of appointing liquidator of registered organization

 

Under subsection 82YL(7), the appointment of a liquidator for a voluntary winding up of a registered organization takes effect when the Council approves it.  At that point the organization must cease to carry on any business of the organization, except so far as is in the opinion of the liquidator, the carrying on of such business is required for the beneficial disposal or winding up of the organization (subsection 82YM(1)).  Any transaction that is made without the sanction of the liquidator, after the approval of the resolution is void (subsection (2)).

 

Subsection (3) states that, subject to subsection (4), on the appointment of a liquidator all the powers of the directors in relation to the business of the organization cease, except if the liquidator approves them.  If a vacancy occurs in the office of the liquidator then any of the members may convene a general meeting for the purpose of appointing a replacement liquidator and, at that meeting the members, with the approval of Council, can fill the vacancy (subsection (4)).



 

82YN - Duty of liquidator where registered organization turns out to be insolvent

 

Section 82YN sets the duties of a liquidator in a voluntary winding up situation.  If the liquidator forms the opinion that the assets of the organization will not be sufficient to meet the liabilities of the fund within the period of 12 months after the commencement of the winding up, the liquidator must provide a written report to Council stating this opinion and the reasons for it.  The liquidator must recommend the Council either applies to the Court for the winding up of the organization or that the Council appoints a person as administrator to the organization (subsection (1)).

 

The report must include a statement of the assets and liabilities of the organization (subsection (2)).  On receipt of the report the Council must having regard to the details in the report and the interest of the contributors decide the most appropriate course of action (subsection (3)).

 

This section excludes any duties imposed on the liquidator by section 496 of the Corporations Law or that section as it is applied in relation to a registered organization.

 

Subdivision 5 - Starting the winding up of insolvent funds

 

82YO - Application by Council to the Court for winding up a fund

 

Section 82YO lists the grounds upon which the Council can make an application to the Court for the winding up of a fund.

 

Under subsection 82YO(1), the Council can make an application to the Court for the winding up of a fund if, and only if, the Council believes that such an application is in the interest of the contributors and:

-    the Council is satisfied, on reasonable grounds, that:

.     there has been a breach of the solvency standard; or

.     there has been a breach of the capital adequacy standard; or

.     the conducting organization has contravened any applicable rule, condition or direction ; or

-    a conducting organization has requested it; or

-    there has been a report provided by a liquidator (where the liquidator commenced a voluntary winding up of a fund) stating that the assets of the fund will not be sufficient to meet the liabilities of the fund within a period of 12 months after commencement; or

-    there are grounds set out in regulations that apply to the fund.

 

Subsection (2) provides a definition of the phrase applicable rule, condition or direction ; used in subsection (1).

 

Subsection (3) notes that, in forming any belief or satisfaction for the purposes of this section, the Council may use any information in its own records or any information contained in any report (including an inspector’s report) or return made to it.  A report may include a report made orally or a report made in writing.



 

Where an application is made to the Court by the Council to wind up a fund any person likely to be affected by the winding up may be heard by the Court (subsection (4)).

 

82YP - Application by administrator to the Court for winding up of a fund under administration

 

Subsection 82YP(1) requires an administrator to apply to the Court to wind up a fund when, after consideration of the administrator’s report, the Council has agreed that the winding up is in the best interests of the contributors.

 

At Court the Council and any other person likely to be affected by the winding up may be heard (subsection (2)).

 

82YQ - Orders made on applications for winding up

 

The Court may make an order for the winding up of a fund only if it considers the order to be in the interest of contributors to the fund.

 

82YR - Scheme for winding up of fund to be prepared by liquidator

 

If an order is made by the Court for a fund to be wound up the liquidator appointed by the Court must prepare a scheme for the winding up of the fund and then apply to the Court for orders to give effect to the scheme (subsection (1)).

 

The conducting organization, the Council and any other person likely to be affected by the winding up of the fund is entitled to be heard by the Court (subsection (2)).

.

82YS - Binding nature of Court orders

 

Under section 82YS, any orders made by the Court are binding on all persons and take effect despite anything in the constitution or rules of the conducting organization.

 

Subdivision 6  - Starting the winding up of insolvent registered organizations

 

82YT - application by Council to the Court for winding up of a registered organization

 

Subsection 82YT(1) declares that the Council may apply to the Court for the winding up of a registered organization if, and only if:

-    grounds exist under paragraph 82YO(1)(a) or (c) for an application to be made to the Court for the winding up of the fund conducted by that organization and, the Council is satisfied, on reasonable grounds, that

.     the health benefits fund is the primary business of the organization; or

.     property of a fund may have been invested in or transferred to another business conducted by the organization; or

.     because of either the nature of, or the manner of conducting, either the business or affairs of the fund or the organization generally, or because of the ownership of the property of the fund and of other property of the organization, it is either necessary or convenient for the administrator to administer all of the business, affairs and property of the organization; or

-    a request is made to the Council from the governing body of a registered organization for an administrator to be appointed; or

-    there has been a report provided by a liquidator (where the liquidator commenced a voluntary winding up of an organization) stating that the assets of the organization will not be sufficient to meet the liabilities of the organization within a period of 12 months after commencement; or

-    there are grounds set out in regulations that apply to the organization.

 

Subsection (2) notes that, in forming any belief or satisfaction for the purposes of subsection (1), the Council may use any information in its own records or any information contained in any report (including an administrator’s report or an inspector’s report) or return made to it.  A report may include a report made orally or a report made in writing.

 

Subsection (3) declares that, where an application is made to the Court to wind up an organization, the organization and any person likely to be affected by the winding up may be heard.

 

82YU - Application by administrator to the Court for winding up of a registered organization under administration

 

Subsection 82YU(1) requires an administrator to apply to the Court to wind up an organization when, after consideration of the administrator’s report, the Council has agreed that the winding up is in the best interests of the contributors.

 

At Court the Council and any other person likely to be affected by the winding up may be heard (subsection (2)).

 

82YV - Orders made on applications for winding up

 

The Court may make an order for the winding up of a registered organization only if it considers the order to be in the interest of contributors to the fund conducted by that organization.

 

82YW - Scheme for winding up of a registered organization to be prepared by liquidator.

 

If an order is made by the Court for an organization to be wound up the liquidator appointed by the Court must prepare a scheme for the winding up of the organization and then apply to the Court for orders to give effect to the scheme (subsection (1)).

 

The organization, the Council and any other person likely to be affected by the winding up of the organization is entitled to be heard by the Court (subsection (2)).

 

82YX - Binding nature of orders

 

Under section 82ZZQC any orders made by the Court are binding on all persons and take effect despite anything in the constitution or rules of the conducting organization.



 

Subdivision 7 - Procedural provisions relating to winding up of funds or registered organizations

 

82YY - Notification provisions

 

Section 82YY ensures that Council and the liquidator notify each other in writing of their intention to make an application to the Court for a direction in relation to the winding up of the fund or organization.  The notice must specify the intention and details of the proposed application (subsections (1), (3) and (4)).  The liquidator and Council are entitled to be heard by the Court if the other has made application (subsections (2) and (5)).

 

82YZ - Council may require liquidator to provide information

 

Under subsection 82YZ(1) the Council may in writing require a liquidator to provide information on any aspect of the winding up of a fund or organization.  The information is to be provided within the period specified by the notice, or a longer period, but only if the Council allows (subsection (2)).

 

82YZA - Liquidator of fund or registered organization to determine amounts owed to contributors

 

Section 82YZA allows the liquidator of a fund or a registered organization to determine the amounts owed to contributors (subsection (1)).

 

Under subsections (2) and (3), when a liquidator is winding up a fund or organization the liquidator must:

-    determine the identity of each person who is a contributor to the health benefits fund; and

-    determine whether the registered organization has a liability to that person as a contributor to the fund; and

-    if so, determine the amount of the liability.

 

A determination made by the liquidator under subsections (2) or (3) is to be made in accordance with regulations (if any) that are made for the purposes of this section (subsection (4)).

 

The liquidator must notify each person of the amount determined as the liability and, for the purposes of winding up, the fund or organization is taken to have that liability to that person (subsections (5) and (6)).

 

However, a person who is notified of an amount by the liquidator may dispute that amount in Court (subsection (7)).

 

82YZB - Application of the assets of funds in winding up situations

 

Section 82YZB sets out the rules that apply to the application of assets of a health benefits fund to the liabilities of the fund.  These rules apply irrespective of whether or not it is the fund or the registered organization that is being wound up.



 

As a preliminary point, section 556 of the Corporations Law is the base rule in relation to the application of the assets of an entity upon winding up.  Subsection 556(1) sets out a priority list of payments.  Thus, in general terms, the costs and expenses of the liquidator and administrator rank first (see paragraphs (a) to (df) of subsection (1)).  Then monies owed to employees or related to employment are paid (see paragraphs (e) to (h) of subsection (1)).  Ordinarily all unsecured creditors would then rank equally to be paid from any remaining assets.

 

Subsection 82YZB(1) applies to the winding up of a fund.  The subsection states that the assets of the fund are, firstly, to be distributed or applied in accordance with section 556 of the Corporations Law (as a law of the Commonwealth and with appropriate modifications made through regulations) to the winding up of the fund.

 

Subsection (2) applies to the winding up of a registered organization.  The subsection states that the assets of the fund conducted by the organization are, firstly, to be distributed in accordance with subsection 556(1) of the Corporations Law (regardless of whether that subsection applies to the registered organization directly or if it is applied under the applicable law relating to that registered organization).  Thus, for example, where a South Australian incorporated association is being wound up, the assets of the health benefits fund of that association are firstly to be applied in accordance with subsection 556(1) of the Corporations Law as that provision of the Law is applied to that incorporated association by the South Australian Associations Incorporation Act 1985.

 

Subsection (3) declares that, where any assets of a fund remain after the application of subsections (1) or (2), those assets must then be applied according to the rules set out in this subsection.  Thus, if any assets remain, they are firstly to be applied in discharging liabilities owed to the contributors of the fund concerned.  Then, if any assets still remain, they are then to be applied to the other liabilities referrable to the fund.  Lastly, if any more assets remain, they are to be applied - for a voluntary winding up - in accordance with subsection (4) or they are to be applied - for a Court ordered winding up - in such manner as the Court directs.

 

Subsection (4) requires any surplus assets to be dealt with in the manner specified in the constitution or rules of the registered organization.  Finally, if any surplus assets are still available for distribution they must either be transferred to the general assets of the registered organization (as opposed to being vested in the fund) and used to pay any remaining liabilities owed by the organization or they must be transferred to the general assets of the organization for use in whatever way the organization thinks best (whichever case applies).

 

Subsection (5) lists classes of persons the Court must have regard to when considering where any surplus assets remaining (after the satisfaction of all the liabilities referrable to the health benefits fund) should go.

 

Subsection (6) confirms that, where a registered organization is being wound up, any assets that are not referrable to the health benefits fund of that organization should be applied to any non-fund liabilities in accordance with the relevant State or Territory law.  Thus, for example, if the registered organization is a company, any assets of that company (that are not related to the fund) should be applied to the payment of liabilities of the company (that are not related to the fund) in accordance with the Corporations Law .



 

82YZC - Liquidator to apportion liabilities between health insurance business and other businesses

 

Under subsection 82YZC(1) the liquidator is able to apportion liabilities between the health insurance business and the other business(es) of a registered organization.  In making any apportionment the liquidator must comply with any directions of the Court (subsection (2)).

 

Subdivision 8 - Miscellaneous

 

82YZD - When winding up of registered organizations taken to have begun

 

Section 82YZD states when the winding up of registered organizations is taken to have begun, namely:

-    in the case of a voluntary winding up-on the day of the Council’s notice in writing approving the special resolution or such later day as the Council specifies in that notice;    or

-    in the case of a Court ordered winding up-on the day when the order was made.

 

82YZE - Liability of officers of registered organizations for loss to health benefits fund

 

Subsection 82YZE(1) declares that officers of registered organizations are liable to pay compensation to the organization if:

-    the registered organization contravenes the NHA in relation to the health benefit fund; and

-    the contravention results in a loss to the fund; and

-    the Court orders that the fund or organization be wound up.

 

A person is not liable if the person proves that they used due diligence to prevent the occurrence of the contravention (subsection (2)).

 

The Court, on application by the liquidator, may order the person liable to pay the organization (that is being wound up) the whole of, or part of, the loss (subsection (3)).

 

82YZF - Actions etc. to be stayed on application for winding up

 

Under section 82YZF if an application has been made to the Court for the winding up of a fund, then writs, summons and other processes against the organization conducting the fund are stayed and cannot proceed without Court approval.

 

Division 5 - Miscellaneous

 

82ZA - Order of Court to be binding on all persons

 

Section 82ZA makes an order of the Court, in relation to this Part, binding on all persons.



 

82ZB - Compensation for acquisition of property

 

Subsection 82ZB(1) declares that where, apart from this section, the operation of a provision of Part VIA of the NHA would result in the acquisition of property from a person otherwise than on just terms, and such an acquisition would be contrary to the constitutional guarantee contained in section 51(xxxi) of the Constitution, the Commonwealth is liable to pay compensation of a reasonable amount to the person concerned.

 

Subsection (2) states that where the person, referred to in subsection (1), and the Commonwealth cannot agree on an amount of compensation to be paid, the person may commence proceedings in the Federal Court of Australia for the payment of such compensation.  Subsection (3) confirms that certain phrases used in the section have the same meaning as those same phrases as they are used in the Constitution.

 

82ZC - Continued application of other provisions of Act

 

Under subsection 82ZC(1), the appointment of a person as an administrator of a fund or registered organization does not affect the operation of other provisions of the NHA .  However, this does not apply to the provisions of Division 3 (which relate to the fund or organization under administration and the rights and obligations of persons when a fund or organization is under administration).

 

Under subsection 82ZC(2), the appointment of a person as liquidator of a fund or registered organization does not affect the operation of other provisions of the NHA .  However, this does not apply to the provisions of Division 4 (which relate to the fund or organization that is being wound up, and the rights and obligations of persons when a fund or organization is being wound up).

 

82ZD - Regulations may set out modifications of this Act in relation to funds or organizations under administration or being wound up

 

For the period of time during which a health benefits fund or registered organization is either under administration or being wound up there may be circumstances where some of the conditions of registration (contained in Division 3 of Part VI or Schedule 1 of this Act) applicable to that fund or organization may inhibit the process of administration or winding up and act to the detriment of contributors.  Section 82ZD is to be inserted in the NHA to provide a mechanism to address such circumstances.

 

Subsection 82ZD(1) provides a power to make regulations modifying Division 3 of Part VI and Schedule 1 of the NHA whilst a fund or organization is under administration or is being wound up.

 

Subsections (2) and (3) state that the modifications made through regulations may provide for different modifications according to the nature of the fund or organization but any modification cannot modify a provision of the NHA that creates an offence or create an offence from regulations.



 

Subsection (4) confirms that the NHA has effect subject to any modifications made under this provision and subsection (5) notes that modifications may include omissions, additions and substitutions.

 

82ZE - Jurisdiction of Courts

 

Section 82ZE enables the Federal Court of Australia to have jurisdiction to hear and determine applications and make any orders under Part 1.

 

82ZF - Regulations dealing with various matters

 

Throughout Divisions 3 and 4 there are numerous circumstances where a meeting may be held or where a document or instrument must be provided to either the administrator or the Council.  Section 82ZF allows regulations to be made in respect of these meetings and documents.

 

Item 44

 

Section 105AB of the NHA sets out those decisions made under the NHA that are reviewable by the Administrative Appeals Tribunal.

 

Subsection (3A) allows decisions made by the Council in relation to a declaration (made under section 73BCD) to exempt a registered organization from the solvency standard to be reviewed by the Tribunal.

 

Subsection (3B) allows decisions made by the Council in relation to a solvency direction (made under section 73BCE) issued to a registered organization to be reviewed by the Tribunal.

 

Subsection (3C) allows decisions made by the Council in relation to a declaration (made under section 73BCI) to exempt a registered organization from the capital adequacy standard to be reviewed by the Tribunal.

 

Subsection (3D) allows decisions made by the Council in relation to a capital adequacy direction (made under section 73BCJ) issued to a registered organization to be reviewed by the Tribunal.

 

Item 45

 

The insertion of subsection 105AB(6) allows an application to be made to the Administrative Appeals Tribunal for a review of a decision of Council, made under subsection 79(7), to cancel the registration of a registered organization.

 

The insertion of subsection 105AB(6AA) allows an application to be made to the Tribunal for a review of a decision of Council, made under section 82XK, to terminate the appointment of an administrator.



 

The insertion of subsection 105AB(6AB) allows an application to be made to the Tribunal for a review of a decision of Council, made under subsection 82XZH(2), to prevent the revival of the administration of a fund or organization where a voluntary deed of arrangement has been terminated.

 

Item 46

 

This item relates to transitional arrangements in respect of the appointment of administrators under Division 3.

 

Subsection (1) declares that, subject to subsections (2) and (3), an administrator who may have been appointed in accordance with a relevant State or Territory law to a registered organization (prior to the commencement of Part 1 of Schedule 2) is not prevented from continuing their control of that registered organization simply because of the prohibitions on such action that are contained in sections 82QC and 82XB of the NHA .

 

Subsection (2) declares that, where the Council appoints an administrator to a registered organization referred to in subsection (1), any administration of that organization being carried out in accordance with a relevant State or Territory law is to cease at the time of the Council’s appointment of an administrator.

 

Subsection (3) declares that where, the Council appoints an administrator to a health benefits fund of a registered organization referred to in subsection (1), any administration of that organization being carried out in accordance with a relevant State or Territory law may continue, but only in so far as that administration relates to the non-fund property of the organization.

 

Item 47

 

This item relates to transitional arrangements in respect of the appointment of judicial managers and the winding up under Division 4.

 

Subsection (1) declares that where, prior to the commencement of Part 1 of Schedule 2, an application has been made to a Court (under section 82Z of the NHA ) for the judicial management of a health benefits fund, that application lapses if Part 1 of Schedule 2 commences prior to the actual appointment of a judicial manager.

 

Subsection (2) states that where a person has been appointed by a Court under section 82ZM of the NHA as a judicial manager of a fund, sections 82Z to 82ZM are to apply in relation to that judicial management (and to any subsequent Court orders), as if those sections had not been repealed.

 

Subsection (3) states that where an application has been made under section 82Z of the NHA , prior to the commencement of this Schedule, for the winding up of the fund conducted by a registered organization, sections 82Z to 82M continue to apply as though those sections had not been repealed.



 

 

Schedule 2 - The prudential regulation of registered organizations

 

 

Part 2 - Amendments omitting references to friendly societies

 

 

National Health Act 1953

 

 

Introduction

 

As noted in the discussion of the commencement clauses, the sole purpose of Part 2 of Schedule 2 is to remove from Part 1 of Schedule 2 any references to friendly societies after the transfer date in the Financial Sector Reform (Amendments and Transitional Provisions) Bill (No. 1) 1999 has been Proclaimed.

 

The primary purpose of the Financial Sector Reform (Amendments and Transitional Provisions) Bill (No. 1) 1999 is to transfer regulatory responsibility for State and Territory based financial institutions, including friendly societies, to a Commonwealth regulatory regime.  Upon transfer, friendly societies previously registered or incorporated under State or Territory law will become companies under the Corporations Law and will be dealt with as such by the National Health Act 1953 (as amended).

 

A further consequence of the Financial Sector Reform (Amendments and Transitional Provisions) Bill (No. 1) 1999 will be the amendment of a large number of Commonwealth Acts (including the National Health Act 1953 ) to remove any reference to friendly societies (as entities registered or incorporated under State and Territory law).  However, as the Financial Sector Reform (Amendments and Transitional Provisions) Bill (No. 1) 1999 and this Bill are expected to be in Parliament at the same time, it is desirable that a mechanism be put in place in this Bill to prevent it from operating contrary to the intent of the Financial Sector Reform Bill .

 

Items 48, 49, 50, 51, 52 and 53

 

These items remove references to friendly societies from the relevant provisions.

 

Item 54

 

This item repeals paragraph (a) of the definition of director in subsection 82XR(5) and substitutes a new paragraph that refers only to the directors of companies incorporated under Corporations Law rather than also mentioning directors of friendly societies.

 

Items 55

 

This item removes the reference to friendly societies from the relevant provision.



 

Item 56

 

This item repeals paragraph (a) of the definition of director in subsection 82YD(1) and substitutes a new paragraph that refers only to the directors of companies incorporated under Corporations Law rather than also mentioning directors of friendly societies.

 

Items 57, 58 and 59

 

These items remove references to friendly societies from the relevant provisions.

 

Item 60

 

This item allows regulations to be made to deal with any transitional, saving or application issues that might arise relating to the amendments and repeals made in Part 2 of Schedule 2.

 



 

 

Schedule 3 - Private health insurance incentives

 

 

Part 1 - Private Health Insurance Incentives Act 1998

 

 

Introduction - Items 1 to 6

 

These amendments make it clear who is entitled to receive an incentive payment and that a receipt will be issued by the health fund concerned.  Under the new arrangements the HIC will have 14 days to pay a claim for the incentive payment and a decision to refuse payment will be reviewable by the HIC before it is reviewable by the Administrative Appeals Tribunal.

 

Item 1

 

This item repeals subsection 4-5(1) and replaces it with a new subsection.  The new subsection 4-5(1) provides that a person is entitled to receive the incentive payment if they have paid a premium under an appropriate private health insurance policy and the policy was issued by a health fund.  A health fund is defined in section 20-5 as “a registered organization within the meaning if Part VI of the National Health Act 1953 ”.

 

Item 2

 

This item inserts new section 4-6.

 

4-6 - Receipt for payment of premium

 

The new section 4-6 requires a health fund to issue a receipt to a person who pays a premium.  The receipt must contain information and be in such form as determined in writing by the Managing Director of the HIC (subsection 4-6(1)).

 

Subsection (1) does not apply if the premium to which the payment relates has been reduced under the premium reduction scheme (subsection 4-6(2)).

 

Item 3

 

This item repeals subsection 6-20(1) and inserts a new subsection.  The new subsection

6-20(1) provides that the HIC has 14 days in which it must grant or refuse a claim made by a person for the incentive payment.



 

Item 4

 

This item inserts new sections 6-25, 6-30 and 6-35.

 

6-25 - Application for reconsideration of decision refusing claim

 

The new section 6-25 provides for a person who has been refused a claim for the incentive payment to apply to the HIC to have the decision reconsidered (subsection (1)).

 

The application for reconsideration must be in writing and made within 28 days of notification of the decision to refuse, unless the HIC has extended the period for making an application (subsections (2) and (3)).

 

6-30 - Reconsideration by HIC

 

The new section 6-30 provides that the HIC has to reconsider the decision and either affirm or revoke the decision.

 

6-35 - Deadline for reconsideration

 

The new section 6-35 provides that the HIC must reconsider its decision within 28 days after receiving the application for reconsideration (subsection (1)).

 

If the HIC does not advise the applicant of its decision on reconsideration before the end of the 28 day period, it is taken to have made a decision confirming the original decision (subsection (2)).

 

Item 5

 

This item amends subsection 8-5(1) by removing the word “written”.

 

Item 6

 

This item repeals section 8-10 of the PHIIA .  Section 8-10 has been incorporated into new section 18-2 at item 50.

 

Introduction - Items 7 to 28

 

These amendments allow a person to register for premiums reduction once only, rather than each financial year.  If a person, already registered for the premiums reduction scheme, obtains a further policy from the same fund that issued the first policy, there is no need to register again. Under the amendments a person who pays for a policy but is not covered by the policy is also entitled to register for the premium reduction scheme.  Notification requirements have also been amended to make it clear when and to whom notification of registration and revocation of registration in the premiums reduction scheme is be given.



 

Item 7

 

This item amends section 10-5 by removing the words “for a financial year”.

 

Item 8

 

This item amends paragraph 10-5(b) by removing the words “, for that year”.

 

Item 9

 

This item amends paragraph 10-5(c) by removing the words “for that year”.

 

Item 10

 

This item amends subsection 11-5(1) by removing the words “for a financial year”.

 

Item 11

 

This items amends subsection 11-5(1) by removing the words “for that year”.

 

Item 12

 

This item repeals subsection 11-5(3) and inserts two new subsections.

 

The new subsection 11-5(3) enables a person to register once only for the premiums reduction scheme.

 

The new subsection 11-5(3A) provides that if a person who is registered with a fund in respect of an appropriate private health insurance policy becomes eligible to be registered in relation to another appropriate private health insurance policy issued by the same fund, they are deemed to be registered.  If a person becomes eligible for registration in relation to an appropriate private health insurance policy that is issued by a different fund, they must submit another application to register for premiums reduction.

 

Item 13

 

This item amends subsection 11-5(4) by removing the words “for a financial year”.

 

Item 14

 

This item repeals section 11-10 and inserts a new section.

 

11-10 - Eligibility to apply for registration

 

The new section 11-10 sets out who is eligible to apply for registration under the premiums reduction scheme, including:

-    a person or employer who has paid a premium;

-    a person who is covered by the policy;  or

-    a parent, if everyone the policy covers is a dependent child.



 

Item 15

 

This item repeals redundant subsection 11-15(4).

 

Item 16

 

This item repeals subsection 11-20(1) and inserts a new subsection with two paragraphs.  The new paragraph 11-20(1)(a) provides that a health fund must notify the HIC when it receives an application for registration.  New paragraph 11-20(1)(b) requires a health fund to notify the HIC of a person who is already registered for the premiums reduction scheme and subsequently becomes eligible to be registered in respect of another appropriate private health insurance policy.

 

Item 17

 

This item repeals subsection 11-25(1) and inserts a new subsection.  The new subsection

11-25(1) requires the HIC to notify a person that it is refusing to register them for premiums reduction and also the health fund that issued the policy to the person.  The HIC must do so within 28 days of the refusal occurring.

 

Item 18

 

This item amends subsection 11-25(2) by removing the words “for a financial year”.

 

Item 19

 

This item amends paragraph 11-30(1)(a) by removing the words “for a financial year”.

 

Item 20

 

This item amends paragraph 11-30(1)(b) by removing the words “ for the year” and substituting the words “for a financial year”.

 

Item 21

 

This item amends subsection 11-30(1) by removing the word “written”.

 

Item 22

 

This item repeals subsection 11-30(4) and inserts a new subsection.  The new subsection

11-30(4) requires a person who no longer wishes to be registered in the premiums reduction scheme to notify their health fund.

 

Item 23

 

This item amends subsection 11-40(1) by removing the words “for a financial year”.



 

Item 24

 

This item amends subsection 11-40(1) be removing the words “for that year”.

 

Item 25

 

This item amends section 11-40 by inserting a new subsection.  The new subsection 11-40(3) requires the HIC to notify the person if it revokes their registration in the premiums reduction scheme and to also notify the fund that issued the policy.  The HIC must issue the notification within 28 days of the revocation occurring.

 

Item 26

 

This item amends subsection 12-5(1) by removing the word “scheme” and substituting the words “for that year”.

 

Item 27

 

This item amends subsection 12-5(3) by inserting a new subsection.  The new subsection

12-5(3A) provides a formula for the amount of reduction a participant in the premiums reduction scheme will receive if their policy is less than 1 year.

 

Item 28

 

This item repeals section 12-10 and substitutes a new section.

 

12-10 - Participant in premium reduction scheme

 

The new section 12-10 provides that a person is a participant in the premiums reduction scheme in respect of an appropriate private health insurance policy if:

-    where the financial year is the financial year that began on 1 July 1998 - the individual was registered under the Private Health Insurance Incentives Act 1997 immediately before 1 January 1999 in respect of the policy; or

-    where the financial year is the financial year that began on 1 July 1998 or a later financial year - the individual was registered under the premiums reduction scheme in respect of the policy and the registration has not been refused.

 

Introduction - Items 29 to 38

 

These amendments require a health fund to only register once to become a participating fund in the premiums reduction scheme.  A fund will have its status revoked if it does not issue a recept to a person for the purposes of the incentive payment, does not comply with the regulations or on or after 1 July 2000, the fund does not offer no gap or known gap policies.



 

Item 29

 

This item amends subsection 14-5(1) by removing the words “for that financial year”.

 

Item 30

 

This item amends subsection 14-5(2) by removing the words “for the financial year beginning on 1 July 1998 or later financial year” and substituting the words “for the purposes of this Act”.

 

Item 31

 

This item repeals subsection 14-5(3) and inserts a new subsection.  Under the new subsection 14-5(3) a health fund, if approved by the Minister, will become a participating fund.

 

Item 32

 

This item amends paragraph 14-10(1)(d) by removing the words “until the end of the financial year concerned”.

 

Item 33

 

This item inserts is a new subsection 14-10(1A) providing that any undertaking given by a health fund prior to the date on which Schedule 3 to the Health Legislation Amendment Act (No. 3) 1999 receives Royal Assent is taken to comply with paragraph 14(1)(d) of the PHIIA .

 

Item 34

 

This item repeals redundant subsection 14-10(2).

 

Item 35

 

This item amends subsection 14-15(1) by removing the words “subsections (2) and (3)” and substituting the words “subsection (2)”.

 

Item 36

 

This item repeals subsections 14-15(2) and (3) and inserts a new subsection.  The new subsection 14-15(2) provides that the Minister must not approve an application by a health fund to participate in the premiums reduction scheme on or after 1 July 2000 unless the health fund offers its members no gap and known gap policies.

 

Item 37

 

This item amends subsection 14-20 by removing the words “in writing”.



 

Item 38

 

This item inserts new Division 14A.

 

Division 14A - Revocation of status of health fund as a participating fund

 

14A-1 - Revocation of status of participating fund

 

Subsection 14A-1(1) provides for the Minister to give notice to a health fund revoking its status as a participating fund if any one of the following occurs:

-    if the fund fails to issue a receipt to a person who has paid a premium;

-    if the fund fails to comply with a condition of participating in the premium reductions scheme as contained in the regulations;  or

-    if the fund does not offer its members the choice of no gap and known gap policies on or after 1 July 2000.

 

Subsection 14A-1(2) declares that, upon the giving of the notice, the fund ceases to be a participating fund.

 

Introduction - Items 39 to 46

 

The HIC is processing claims by health funds using summary data.  Consequently, these amendments are required to facilitate summary data claiming and payment by the HIC and to ensure there is a suitable mechanism for the HIC to pay part of a claim by a health fund and to reconsider that decision.

 

Item 39

 

This item amends subsection 15-5(1) by removing the words “a financial year for”.

 

Item 40

 

This item amends subsection 15-5(2) by removing the words “The HIC must pay a health fund” and substituting the words “If a health fund makes a claim that the HIC decides is correct, the HIC must pay to the fund”.

 

Item 41

 

This item repeals subsection 15-10(1) and inserts two new subsections.

 

The new subsection 15-10(1) enables the HIC to refuse to pay a claim, or part of a claim, by a health fund if it considers that the claim is not correct.

 

Under the subsection 15-10(1A) the HIC must notify the health fund of its decision.



 

Item 42

 

This item amends subsection 15-20(2) by removing the number “(1)” and substituting it with the number “(1A)”.

 

Item 43

 

This item repeals subsection 15-25(1) and inserts a new subsection.

 

The new subsection 15-20(3) provides that the HIC will be taken to have made a decision that a claim from a health fund is correct if it does not give the health fund notice on or before the day on which the claim would be payable.

 

Item 44

 

This item amends subsection 15-25(1) by removing the number “(1)” and substituting it with the number “(1A)”.

 

Item 45

 

This item repeals redundant paragraph 15-25(2)(a).

 

Item 46

 

This item repeals subsections 15-25(3), (4) and (5) and inserts two new subsection, being subsections 15-25(3) and (4).

 

The new subsection 15-25(3) states that the HIC, as soon as practicable after receiving a request from a health fund, must reconsider its decision not to pay a claim or only pay a part of the claim.

 

The new subsection 15-25(4) states that if the HIC varies its original decision or revokes it and makes a fresh decision, the varied or fresh decision has effect from the time that the original decision was made.

 

Item 47

 

This item amends subsection 16-5(3) by removing the words “in writing”.

 

Item 48

 

This item amends section 16-5 by inserting a new subsection.  The new subsection 16-5(7) provides that, if the HIC gives a health fund notice, it is required to give the HIC a certificate from a registered company auditor as to the correctness of the fund’s accounts and records as they relate to the participation of persons in the premiums reduction scheme, the reductions of premiums and the receipt of money from the HIC.



 

Item 49

 

This item amends subsection 16-10(1) by removing the words “written”.

 

Introduction - Items 50 to 55

 

These amendments ensure that amounts are recoverable as debts to the Commonwealth and provides for the HIC to set off a Commonwealth debt owed by a person or a health fund with an amount due to be paid to the person or health fund.

 

Item 50

 

This item amends paragraph 18-5(1)(b) by inserting a new paragraph.  The new paragraph 18-5(1)(ba) provides that the incentive payment is recoverable from a person who withdraws their claim.

 

Item 51

 

This item repeals paragraph 18-5(1)(c) and substitutes it with two new paragraphs.

 

The new paragraph 18-5(1)(c) provides that an amount is a debt due to the Commonwealth if it was a payment to a health fund in relation to a reduced premium and the person to whom the appropriate private health insurance policy relates was a participant in the premiums reduction scheme and not eligible to participate in the scheme.

 

The new paragraph 18-5(1)(ca) provides that, a payment made to a health fund that relates to a premium for which a reduction was not allowable, is a debt due to the Commonwealth.

 

Item 52

 

This item repeals subparagraph 18-5(1)(d)(ii) and inserts a new paragraph.

 

The new subparagraph 18-5(1)(d)(ii) provides that an amount is a debt due to the Commonwealth, owed by a health fund, where the health fund has not retained a persons application for registration with the premiums reduction scheme.

 

Item 53

 

This item amends subparagraph 18-5(1)(d)(iii) by removing the words “to a financial year and”.

 

Item 54

 

This item amends paragraph 18-5(2)(a) by removing the words “or (b)” and substituting the words “, (b) or (ba)”.



 

Item 55

 

This item amends paragraph 18-5(2)(b) by removing the words  “(c), (d) or (e)” and substituting the words “(c), (ca), (d) or (e).

 

Item 56

 

The item inserts a new section.

 

18-20 - HIC may set off debts against amounts payable

 

The new subsection 18-20(1) provides that where an amount would be payable to a person or a health fund and there is an amount that is recoverable under section 18-5, the HIC may set off the HIC may set off the whole or part of the amount that is owing against the amount of the debt.

 

Under new subsection 18-10(2), if the HIC makes a set off, it must be pay the person or the health fund the amount remaining after the set-off and the amount that is owing to the Commonwealth is reduced by the amount that has been set off.

 

Item 57

 

This item amends Division 19 by inserting 3 new sections. 

 

19-1 - Notification requirements-health funds

 

The new subsection 19-1(1) provides that the HIC may require a health fund to provide certain information in relation to the premiums reduction scheme and the incentive payments scheme relating to person who:

-    is covered at any time during a financial year specified in the notice by an appropriate private health insurance policy issued by the fund; or

-    paid premiums under such a policy.

 

Subsection 19-1(2) states that the information that the HIC can require a fund to produce includes:

-    the name, residential address and date of birth of each person covered by a policy or the person who paid premiums under the policy;

-    the fund membership number of the policy;

-    the name, residential address and date of birth of the person covered by the policy whom the health fund treats as the contributor in respect of the policy;

-    whether the policy provides hospital cover, ancillary cover or combined cover;

-    the date on which the policy was issued;

-    whether the policy has terminated or been suspended, and, if it has, the date on which it was terminated or was suspended;

-    the amount of the premium under the policy

-    the period to which the premiums relates;

-    any increase or decrease in the premium;

-    whether a payment in respect of a premium that was due within a period specified by the HIC was not paid;  and

-    any other information relevant to Chapters 2 or 3 that has been determined in writing by the Managing Director.

 

The new subsection 19-1 (3) provides that the Managing Director must not make a determination that requires a health fund to provide a person’s tax file number or information relating to the physical, psychological or emotional health of any person.

 

The new subsection 19-1(4) provides that determinations referred to in paragraph 19-1(2)(l) are disallowable instruments for the purposes of section 46A of the Acts Interpretation Act 1901 .

 

The new subsection 19-1(5) states that the information that a health fund is required to provide must be in a form approved by the HIC and provided within the period specified in the notice.

 

The new subsection 19-1(6) provides that a health fund is guilty of an offence if it fails to provide the information within the time as specified on the notice issued by the HIC.  The maximum penalty for the offence is 20 penalty units.  The obligation to provide information is a continuing obligation and a health fund is guilty of an offence for each day, after the period specified in the notice, until the information is provided.

 

19-2 - Form of notices

 

The new subsection 19-2(1) provides that a notice under the PHIIA by the Minister or the HIC to a health fund, or a notice, request or application by a health fund to the Minister or the HIC may be in writing or in electronic form.

 

The new subsection 19-2-(2) provides that a notice under the PHIIA by the HIC to a person, other than a health fund, or a notice, request or application by a person other than a health fund to the HIC must be in writing.

 

19-3 - Use of information to determine whether persons covered by private health insurance policies are eligible for medicare benefits

 

The new section 19-3 provides that, to determine whether a person covered by appropriate private health insurance policy is an eligible person under either section 3, 6 or 7 of the Health Insurance Act 1973 , the HIC can use information it has obtained in determining whether the person was eligible to receive Medicare benefits.



 

Item 58

 

This item inserts a new section 19-6.

 

19-6 - Principles relating to personal information

 

The new subsection 19-6(1) provides that the Minister may make principles in relation to the acquiring of personal information under the PHIIA and the storage, security, correction and use and disclosure of such personal information.

 

The new subsection 19-6(2) provides that a health fund must comply with such principles.

 

The new subsection 19-6(3) provides that the principles are disallowable instruments for the purposes of section 46A of the Acts Interpretation Act 1901 .

 

The new subsection 19-6(4) provides that personal information has the same meaning as in the Privacy Act 1998.

 

Item 59

 

This item repeals paragraph 19-10(a) and inserts a new paragraph.  The new paragraph

19-10(a) provides that the decision of the HIC confirming a decision to refuse to pay a claim for the incentive payment is reviewable by the Administrative Appeals Tribunal.

 

Item 60

 

This item amends paragraph 19-10(b) by removing the words “for a financial year”.

 

Item 61

 

This item repeals paragraph 19-10(e) and inserts two additional paragraphs.

 

The new paragraph 19-10(e)(da) provides that a decision to revoke a health funds status as a participating fund is reviewable by the Administrative Appeals Tribunal.

 

The new paragraph 19-10(e) provides that a decision by the HIC that a claim submitted by a health fund is incorrect is reviewable by the Administrative Appeals Tribunal.

 

Item 62

 

This item amends subsection 19-15 by inserting five additional paragraphs after paragraph

19-15(b).  Section 19-15 requires the HIC to give the Commissioner of Taxation certain information within 90 days after the end of the financial year.  The additional information is:

-    the fund membership number of the policy;

-    the identification code of the fund that issued the policy;

-    the type of membership provided by the fund in respect of the policy;

-    whether the policy has been terminated or suspended;

-    if the policy has been terminated or is suspended, the date of the termination or suspension.



 

Item 63

 

This item amends section 19-15 by adding two additional paragraphs of information to be given by the HIC to the Commissioner of Taxation and two new subsections.

 

The additional paragraphs of information to be provided are:

-    the total amounts paid by the HIC under Chapters 2 and 3 for the financial year;

-    any other information that the Commissioner determines in writing.

 

The new subsection 19-15(2) provides that the Commissioner must not make a determination that the HIC provide a person’s tax file number or information relating to the physical, psychological or emotional health of any person.

 

The new subsection 19-15(3) provides that determinations by the Commissioner are disallowable instruments for the purposes of section 46A of the Acts Interpretation Act 1901 .

 

Item 64

 

This item amends section 19-15 by inserting a new section.

 

19-16 - Delegation

 

The new subsection 19-16(1) provides that the Minister may delegate, in writing, all or any of his or her powers under the Act to:

-    the Secretary of the Department of Health and Aged Care;

-    the Managing Director;

-    an officer or an employee of the Department of Health and Aged Care; or

-    a staff member of the HIC.

 

The new subsection 19-16(2) provides that the HIC may delegate, in writing, all or any of its powers under the PHIIA to the Managing Director or to a staff member.

 

The new subsection 19-16(3) provides that the Managing Director may, in writing, delegate,  all or any of his or her powers under the PHIIA to a staff member of the HIC.

 

Introduction - Items 65 to 66

 

These amendments include changes and additions to the definitions contained in the Private Health Insurance Incentives Act 1998 .

 

Item 65

 

This item amends paragraph (b) of the definition of appropriate private health insurance policy by inserting “or 7” after “6”.  This is a reference to section 7 of the Health Insurance Act 1973 .



 

Item 66

 

This item repeals the definition of participating fund and substitutes a new definition.  Participating fund means a health fund referred to in subsection 14-5(1) or (3), other than a fund whose status as a participating fund has been revoked under subsection 14A-1(1).

 



 

 

Schedule 3 - Private health insurance incentives

 

 

Part 2 - Health Insurance Commission Act 1973

 

 

Introduction

 

This Part allows for consequential amendments to the Health Insurance Commission Act 1973 , which are required to implement the 30% rebate scheme contained in the Act.

 

Item 67

 

This item repeals section 8DA and substitutes a new section.

 

8DA - Administration of the private health insurance incentives legislation

 

New section 8DA provides that the functions of the Health Insurance Commission include the administration of the Private Health Insurance Incentives Act 1997 and the Private Health Insurance Incentives Act 1998.

 

 



 

 

 

 



 

 

Schedule 3 - Private health insurance incentives

 

 

Part 3 - National Health Act 1953

 

 

Introduction

 

This Part allows for consequential amendments to the National Health Act 1953 , which are required to implement the 30% rebate schemes contained in the PHIIA .

 

Item 68

 

This item repeals section 73ABB and substitutes a new section.

 

73ABB - Registered health benefits organization to comply with requirements of health insurance incentives legislation

 

The new section 73ABB provides that it is a condition of registration of a registered organization that it must not contravene a requirement imposed on it by or under the Private Health Insurance Incentives Act 1997 or the Private Health Insurance Incentives Act 1998.

 

Item 69

 

This item amends paragraph 82G(1)(bb) by inserting the words “or the incentives payment scheme, or the premiums reduction scheme within the meaning of the Private Health Insurance Incentives Act 1998 ” after “ 1997” .

 

Item 70

 

This item amends paragraph 82L(3)(a) by repealing the paragraph and substituting a new paragraph.  The new paragraph 82L(3)(a) requires the report of a participating fund, to the Private Health Insurance Administration Council, to include:

-    if the year was the year that commenced on 1 July 1997 - persons in respect of whom private health insurance policies issued by the registered organization were in force during that year and who were participants in the incentives scheme for that year; and

-    if the year was the year that commenced on 1 July 1998 or a later year - persons in respect of whom appropriate private health insurance policies issued by the registered organization were in force during that year.

 

Item 71

 

This item amends paragraph 82L(3)(c) by inserting the words “or the Private Health Insurance Incentives Act 1998 ” after “ 1997” .



 

Item 72

 

This item amends subsection 82L(4) by inserting the words “or the Private Health Insurance Incentives Act 1998 ” after “ 1997” .

 

Item 73

 

This item repeals subsection 82L(5) and substitutes a new section. New section 82L(5) provides for:

 

-    appropriate private health insurance policy means an appropriate private health insurance policy within the meaning of the Private Health Insurance Incentives Act 1998 ;

-    participant in the incentives scheme and participant in the premiums reduction scheme   have the same meaning as in the Private Health Insurance Incentives Act 1997 ;

-    participating fund means a participating fund within the meaning of the Private Health Insurance Incentives Act 1997 or the Private Health Insurance Incentives Act 1998 ;

-    private health insurance policy means a private health insurance policy within the meaning of the Private Health Insurance Incentives Act 1997 or the Private Health Insurance Incentives Act 1998.

 

Item 74

 

This item amends subsection 82PA(2A) by inserting the words “or the incentive payments scheme, or the premiums reduction scheme within the meaning of the Private Health Insurance Incentives Act 1998 ”.

 

Item 75

 

This item amends subsection 82PA(2B) by inserting the words “or the Private Health Insurance Incentives Act 1998 ” after “ 1997 ”.

 

Item 76

 

This item amends paragraph 82R(1)(c) by inserting the words “or the Private Health Insurance Incentives Act 1998 ” at the end of the paragraph.

 

Item 77

 

This item amends section 82ZSA by inserting a new paragraph at the end of the section.  New paragraph 82ZSA(c) provides that a complaint to the Private Health Insurance Complaints Commissioners may be about any matter arising out of or connected with the incentive payments scheme or the premiums reduction scheme within the meaning of the Private Health Insurance Incentives Act 1998.