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Health Legislation Amendment (Private Health Insurance Reform) Bill 2003 [2004]

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2002-2003

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

 

SENATE

 

 

 

 

HEALTH LEGISLATION AMENDMENT (PRIVATE HEALTH

INSURANCE REFORM) BILL 2003

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Health and Ageing,

Senator the Hon. Kay Patterson)



 

 

ABBREVIATIONS

The following abbreviations are used in this explanatory memorandum.

 

AAT      -        Administrative Appeals Tribunal

DVA     -        Department of Veterans’ Affairs

HIC       -        Health Insurance Commission

LHC      -        Lifetime Health Cover

NHA     -        National Health Act 1953

PHIAC  -        Private Health Insurance Administration Council

PHIO     -        Private Health Insurance Ombudsman

RHBO   -        Registered health benefits organization (often referred to in the NHA as registered organization)

RIS        -        Regulation Impact Statement

The Bill  -        Health Legislation Amendment (Private Health Insurance Reform) Bill 2003

 

 



HEALTH LEGISLATION AMENDMENT (PRIVATE HEALTH INSURANCE REFORM) BILL 2003

 

OUTLINE

 

This Bill amends the National Health Act 1953 (NHA) and the Private Health Insurance Incentives Act 1998 .

 

On 11 September 2002, the Minister for Health and Ageing announced a package of reforms designed to streamline the regulation of the private health insurance industry and provide consumers with better value for money from their private health insurance.  This Bill gives effect to many of the measures contained in that announcement.

 

At present, registered health benefits organisations (RHBOs) are required to submit all rule changes, no matter how insignificant, to the government for approval.  This places a considerable administrative burden on the health benefits industry.  Part 1 of Schedule 1 of this Bill amends the NHA and the Private Health Insurance Incentives Act 1998 by removing this rule change assessment process, and replacing it with a system of monitoring and compliance.  This will remove the inefficiencies associated with the existing rule change process, and allow RHBOs to be more responsive to the needs of their members. 

 

To make sure that government can effectively monitor the performance of RHBOs, Part 1 of Schedule 1 of the Bill also establishes a set of indicators for monitoring the performance of RHBOs.  These indicators will be used to identify RHBOs that breach the NHA, and alert the Minister for Health and Ageing to practices that may be contrary to health policy.  They will be particularly important for monitoring whether RHBOs continue to fulfil their community rating obligations, which are designed to ensure that private health insurance is affordable for all Australians.  The Bill also establishes a broader range of investigatory powers and administrative sanctions that the Minister may use when a RHBO is found to be in breach of the NHA or is failing to meet government objectives.

 

Part 2 of Schedule 1 of the Bill will amend the NHA to increase consumer protection within the private health industry.  The Bill provides the Private Health Insurance Ombudsman (PHIO) with increased powers to investigate complaints and resolve disputes.  RHBOs will now have to respond to a request for information or a recommendation from the PHIO within a specified time frame.  The PHIO will also have the power to report the outcomes of an investigation to the Minister, and make recommendations on ways of dealing with specific issues arising from an investigation.

 

Part 3 of Schedule 1 of this Bill provides for the production of an annual “State of the Health Funds” report by the PHIO.  The report will contain information on how RHBOs are performing and how well they are serving their members, and will be an important tool for consumers when making value for money decisions about their private health insurance.  RHBOs will be required to make information about the report widely available to members.

 

Lastly, Part 4 of Schedule 1 of this Bill will amend the NHA to make the a number of minor improvements to the Lifetime Health Cover (LHC) regulations.  These amendments will:

·          establish a notional annual birth-date of 1 July for the purposes of LHC.  People between the age of 30 and 65 who join a health fund before the next notional birth-date will not incur a LHC loading for that year;

·          recognise cover provided by the Department of Veterans’ Affairs (DVA) Gold Card as counting towards hospital cover for the purposes of calculating a LHC loading;

·          provide new migrants over the age of 30 with 12 months to take out hospital cover without being subject to a LHC loading;

·          ensure that Australian citizens who are overseas on their notional 31 st birthday have a similar 12 month grace period; and

·          ensure that Australian citizens who have hospital cover and go overseas for periods of greater than 12 months will not have that time overseas counted towards any potential LHC loading.

 

This Bill represents an important step in reforming the private health insurance industry. 

 

 

 

FINANCIAL IMPACT STATEMENT

 

The Health Legislation Amendment (Private Health Insurance Reform) Bill 2003 will have no significant impact upon the finances of the Commonwealth.

 



REGULATION IMPACT STATEMENT

 

Background

Context

The Commonwealth Government has introduced a number of reforms in recent years.  These reforms are designed to:

·          ensure there is an appropriate balance between the public and private health sectors in Australia;

·          address the affordability, stability and attractiveness of private health insurance; and

·          encourage consumers to take out private health insurance and decrease the pressure on the public health system.

 

Key Government initiatives have included the:

·          30% Rebate;

·          Lifetime Health Cover (LHC); and

·          No Gap/Known Gap scheme.

 

30% Rebate

The 30% Rebate was introduced in January 1999.  The Rebate has directly reduced the cost of premiums to consumers, by providing Australians with a 30% rebate on the full cost of their private health insurance premiums. 

 

Lifetime Health Cover

LHC commenced in July 2000, and changed the way private health insurance operates.  LHC is a long-term structural reform designed to encourage people to take out hospital cover earlier in life, and to maintain their cover over their lifetime. LHC is designed to:

·          slow the rate of premium increases;

·          discourage ‘hit and run’ behaviour (where someone joins a health fund just before requiring treatment and leaves soon after); and

·          improve the overall health profile of private health insurance membership. 

 

Under LHC, health funds add a fixed loading to premiums based on the age of each member when he or she first takes out hospital cover with a registered health fund.  People who take out hospital cover with a registered health fund before they turn 31 years of age, and who maintain that cover over their lifetime, will pay a lower premium throughout their lives relative to people who delay joining.  The loading applies only to age, regardless of health status.

 

No Gap/Known Gap Scheme

The No Gap/Known Gap Scheme provides health fund members with no gap or known gap insurance.  That is, a registered health fund either:

·          provides insurance to cover the difference between fees charged by providers of health services (doctors) and the combined health insurance and Medicare benefits payable for in-hospital medical services; or

·          ensures that, where possible, any amount not covered is known by the patient before treatment. 

 

Prior to this scheme, health funds were allowed to cover the gap only where a negotiated agreement existed between the doctor, the hospital and/or the health fund about the price of the procedure.

 

Current Regulatory Arrangements

Current regulation through the NHA attempts to:

·          influence underlying participation factors;

·          limit how health funds can generate income; and

·          govern how health funds can use income, in order to minimise risk of premium increases and health fund collapses.

 

Health funds generate the vast majority of their income via member premiums.  The premium change process is regulated by Government and includes the ability for Government to disallow an increase on public interest grounds.  The Government currently has an agreement with industry that premium changes will occur once a year, across the industry.

 

The expenditure side of health fund business - benefit entitlements for ancillaries, the scope and nature of products, product design features and conditions for hospital entitlements - is also regulated by Government.

 

Reform of Regulatory Arrangements

On 2 April 2002, Senator Patterson, Minister for Health and Ageing, announced a review of the regulation of the private health insurance industry.  The review was to consider if the current rules and regulations are delivering the best outcomes for health fund members.

 

Specifically, the review was tasked with considering several important Government objectives, including:

·          private health insurance policy;

·          health policies;

·          fiscal policy objectives;

·          competition policy objectives; and

·          industry policy.

 

The review considered a wide range of issues, including product and premium regulation, regulation of lifestyle and other ancillaries, health fund management expenses and some specific policy issues concerning LHC.

 

The reforms following from the first stage of the review were announced by Senator Patterson, Minister for Health and Ageing on 11 September 2002.

 

This Regulation Impact Statement (RIS) analyses those reform measures that will be effected through the introduction of the Health Legislation Amendment (Private Health Insurance Reform) Bill 2003.

 

The final stage of the review of the regulation of the private health insurance industry is due to be completed in 2003 and will make further recommendations relating to the objectives of the review.

 

 

PROBLEM

The following types of market failure were identified by the review as requiring action. 

 

Affordability

In the March 2002 round, registered health funds sought higher than expected levels of premium increases.  These increases were attributed to the increasing level of claims and benefit payments being experienced by health funds for the 9 months to 31 March 2002.  The request for higher than expected overall levels of premium increases (averaging 6.9 per cent) raised concerns over the level of health fund premium increases in the future.

 

There are some key cost drivers in the private health industry, which are undercurrents in health costs both nationally and internationally.  These include increasing access to new technologies and medicines that treat illnesses previously untreatable, provide better quality of life to patients, and are less invasive.  However, these treatments are often very costly. 

 

In addition, health insurance affects the market for health care.  Once the premium is paid, then prices at the point of consumption are either zero or heavily subsidised.  This can lead to increased demand for health care.

 

In an environment where there are cost pressures across both the public and private health sectors, health funds have limited ability to influence the major cost drivers of private health insurance premiums.  For this reason, there is a need for the Government to intervene in the provision of health care services through regulation.

 

It is likely that there will be continuing, strong growth in demand for services that are insured through private health insurance.  Accordingly, there is a need to develop options to minimise pressures for future premium increases.  

 

Information Asymmetry

There is considerable asymmetry in information between the patient and the health fund.  This has the potential to impair the consumer’s ability to make decisions about private health insurance and its value for money, as they are dependent on health funds to provide information on the appropriateness of products. Consumers have little capacity to check on the relative performance of, or the advice provided by, health funds when determining the best product for their particular needs.

 

Although the introduction of portability arrangements has made it easier for consumers to change their health fund without disadvantage, industry experience suggests that consumers generally do not switch funds.  This means that the main point of competition between health funds is in relation to members signing up for private health insurance for the first time.

 

The Government has therefore undertaken a range of initiatives to improve the ability of consumers to make informed choices when purchasing private health insurance.  These include the introduction of Key Features Statements and Gaps Cover advertising. 

 

The provision of consumer information and its timing are regulated in some areas (for example, requirements for member notification of changes to products).  In addition, the Government is actively encouraging industry self-regulation where that is considered appropriate (eg. development of Industry Codes of Conduct, more targeted ancillaries cover).

 

The institution of the PHIO provides a significant mechanism for health funds to be accountable to their members. Public confidence in private health insurance is enhanced by this impartial complaints service which is seen to be independent of health funds, hospitals, medical and dental professions.  In view of the Government’s policy to make private health insurance more competitive and attractive to consumers, and to give Australians greater choice in health care, the PHIO’s service will remain an important part of the private health insurance system in the future.

 

A survey of health funds and consumers conducted by Reark Research Consultants in 1997 found the majority of PHIO complainant s surveyed were satisfied with the service.  Complainants found information provided by PHIO easy to understand or had their concerns dealt with to their satisfaction.  Only thirteen per cent of consumers were identified as not satisfied with the PHIO outcomes.

 

Although both complainants and health funds were generally satisfied with the PHIO service, current legislative arrangements restrict the PHIO in bringing disputes to the point of resolution.  In particular, complaint resolution can be protracted, as the PHIO has no power to specify timeframes for the provision of relevant information or to require a fund’s advice on how it proposes to resolve a complaint.  The PHIO’s recourse to further action where a dispute cannot be resolved is also limited.

 

Access

Market failure specific to the private health industry is due primarily to the need for community rating, rather than the traditional risk-rating used by other insurers.

 

Community rating means that a health fund cannot price a product based on a contributors’ risk (that is, age or medical history).  In the absence of regulation, there are many ways in which a health fund could violate community rating and, given the different cost structures of high and low risk members, the incentive is there to do so.  Erosion of community rating can also occur through selective marketing, product design and differences in pricing between products that are attractive to low-risk and high-risk members.

 

As such, most of private health regulation seeks to ensure consumer protection in the area of community rating and product design.

 

OBJECTIVES

The objective of Government action in reforming the regulation of private health insurance is to:

·          make private health insurance more competitive and attractive to consumers; and

·          give  Australians greater choice in health care;

while ensuring a sustainable and balanced health system by supporting a viable private health sector that complements the public health system.

 

In achieving this objective, private health insurance for Australians is pursued through the following target areas:

·          improving the affordability of private health care;

·          increasing consumer awareness, confidence and choice;

·          regulation that allows for developing innovative products;

·          encouraging improved health industry efficiency; and

·          enhancing competition between funds.

 

Options and Impact Analysis

This section sets out the various options for each of the key components contained in the Health Legislation Amendment (Private Health Insurance Reform) Bill 2003.  As numerous components are examined, for ease of reference, an assessment of the impacts has also been included in this section.

 

The groups most likely to be significantly affected by these options are:

·          health funds;

·          consumers; and

·          Government.

 

Component A - Product Regulation

Background

A health fund’s rules provide a framework for the operation of the health fund and include the details of each product offered to clients, entitlement rules and the rates of contribution, as well as governance details.  Some health funds have around 600 individual products, and each product tends to have its own schedules of rates and benefits in each State.

 

No change to a health fund’s rules can be made without a notification in writing being provided to Government.  Thousands of individual rules changes are effected annually as any change of rule, no matter how insignificant, or semantic, must be notified to Government.  Notifications normally include many changes to rules, including complete rewrites of the health fund’s rules. Some 100 or so bundles of rule changes are assessed by the Government annually.

 

Government assesses proposed rule changes against criteria specified in legislation and may declare a change will not come into operation if these criteria are not satisfied.  The change must not:

·          be in breach of the NHA or a condition of registration; or

·          impose an unreasonable or inequitable condition; or

·          adversely affect the financial stability of the health fund. Financial stability is assessed by the Private Health Insurance Administration Council (PHIAC).

There is a range of aspects the Department takes into account when assessing whether a rule change is reasonable and consistent with the NHA.  These include whether:

·          the rule violates principles of community rating;

·          the rule change would cost-shift to the Commonwealth or States;

·          it is likely to be detrimental to consumers because it has potential for being misunderstood; and

·          it is grossly inconsistent with the Government’s health policy directions.

 

These principles are supported by legislative references scattered through the NHA, although not explicitly stated as principles.

 

Options

Option 1 - Status quo

Current arrangements where no change to a health fund’s rules can be made without a notification in writing being provided to Government will continue.  Government will continue to:

·          assess each change and all products (including outreach services) following detailed examination for consistency with legislation; and

·          maintain the 60-day rule (which means that the change cannot come into effect for 60 days following the notification).

 

Option 2 - Remove administrative assessment - Establish indicators

Redesign the assessment process to require health funds to demonstrate that the products they offer comply with specified indicators that support basic Government policy such as community rating.

 

Health funds will need to ensure product changes would not breach Government policies as expressed through the NHA.  Where a health fund is consistently or blatantly in breach, the Government may penalise the health fund.  The range of administrative sanctions in place for breaches include, but are not limited to removing the ability for health funds to offer members the 30% Rebate by way of a premium reduction. 

 

Impact Analysis

Impact of Option 1 - Status quo

On health funds - The criteria by which Government assesses a product are cumbersome.  It is therefore difficult for health funds to plan in a manner that accords with Government expectations.  This adds uncertainty for health funds and a deal of administrative complexity that is unnecessary.  It removes the ability for health funds to respond quickly to changes in the market, and hence, to compete.

 

On consumers - Would have minimal impact on consumers.

 

On Government - The current arrangements are administratively complex and burdensome on Government.

 

Impact of Option 2 - Establishing a system of monitoring and sanctions

On health funds - Will provide greater flexibility and control over the products that health funds offer. Rather than applying to Government for rule changes, it will be within a fund’s control whether a rule change shall occur.  Government would have a monitoring role to ensure that funds continue to abide by the NHA. 

 

This option would increase the level of competition within the private health insurance market with health funds better able to introduce innovative products and compete on this basis.

On consumers - Should lead to better value products.  If a health fund’s actions result in the loss of the ability to provide the Rebate as a premium reduction, members will be required to claim the 30% Rebate through the tax system or change health funds (at no loss in terms of waiting periods).  This inconvenience is likely to act as an incentive for health funds to abide by Government policy, especially in relation to community rating.

 

On Government - This option will reduce the administrative burden of the current arrangements with a monitoring role taking its place.  Legislative change would be required to implement this option.

 

Consultation

The options have considered the industry submissions.  Health funds and their representative organisations have maintained that they should be free to design the products that they sell without unnecessary Government intervention.  Private hospitals and their representative organisations were silent on this issue.

 

 

Conclusion and recommended option

The recommended option is option 2.

 

Under this option, health fund products will be required to be consistent with the Government’s health policy direction, especially the principles of community rating.  Health funds will need to ensure product changes are consistent with Government policy as expressed through the NHA.

 

This option will provide a balanced approach between reducing administrative and regulatory burden and encouraging competition between health funds, while at the same time making clear expectations about how products should interact with the Government’s health policy direction.

 

The introduction of option 2 is intended to encourage improved health industry efficiency while maintaining consumer awareness, confidence and choice in private health insurance.

 

Component B - Consumer Information and Protection

At present, there is no regulation (self- or imposed), on marketing of health fund products. The private health insurance market does not provide current or potential consumers with detailed information to enable health funds performance, products and prices to be readily compared.  It is difficult for consumers to obtain appropriate information to help them choose the health insurance most appropriate to their needs.

 

B 1 - State of the Health Funds Report

Background

The NHAcurrently contains few provisions in relation to information provided to consumers by health funds.  These provisions mainly relate to:

·          providing timely advice to members about premium increases and detrimental rule changes;

·          providing information to members and the public on agreements with medical practitioners, hospitals and other practitioners; and

·          making copies of the Private Patients’ Hospital Charter available to the public.

 

It is argued that the private health insurance market does not provide current or potential consumers with sufficient information to enable health funds, products, prices and performance to be readily compared.  It is difficult for consumers to obtain the information they need to help them choose the health insurance most appropriate to their circumstances.  Improving this situation, so that consumers find it easier to compare prices and products will be essential to achieving a higher degree of competition between health funds.

 

Option 1 - Establish a State of the Health Funds Report

To assist in understanding their health insurance, a report developed to enable comparative information on the service provision of health funds will be made available to consumers.  This information would be available on the Internet and in brochure form, with consideration given to dissemination strategies to reach groups of consumers unlikely to access the Internet. 

 

The ultimate responsibility for choosing an insurance product will rest with the consumer, who will still have to deal directly with their fund of choice.  Health Fund brochures will be required to state where consumers can find the report.

 

Impact of Option 1 - Establish a State of the Health Funds Report

On health funds - In the short term there may be some minimal administrative burden on health funds in complying with this proposal.  The information to be contained in the Report is already provided by health funds and only needs to be aggregated.  In the longer term it would lead to increased competition, as consumers are able to compare the performance and products offered by health funds.

 

On consumers - Will benefit greatly through the improved ability to compare the performance and products offered by health funds.

 

On Government - In the short term, there may be some administrative burden due to the establishment of the implementation and initial information gathering; however, this is expected to reduce over time as the process becomes bedded in.  Legislative change would be necessary to require health funds to provide consumers with details of how to access the Report.

 

Consultation

Health funds and their representative organisations noted that while health funds attempt to provide as much consumer information as possible, requirements add to management expenses that ultimately are borne by consumers.

 

Doctors and their representative organisations asserted that consumer choice should dictate the level of cover that is taken out.  Given that private health insurance is a complex product, regulation is required to ensure that consumers are fully and properly informed.  The PHIO shared these views.

 

Consumer groups stated that consumers are not always informed about private health insurance and in particular about utilising their private patient status in a public hospital.  It was asserted that health funds should ensure there is comprehensive and readily available information for the community at all stages of the regulatory and marketing process.

 

Private hospitals and their representative organisations asserted that it is particularly important in the context of LHC to ensure members can easily switch between products to maintain freedom of choice and engender competition between health funds.

 

Conclusion and recommended option

The recommended option is option 1.

 

Making it simpler for consumers to compare the relative performance of health funds will enhance competition between health funds and increase consumer awareness, confidence and choice.  The publishing of performance measures of health funds will encourage improved health industry efficiency as health funds seek to compete with each other.

 

B 2 - Expanding the powers of the Private Health Insurance Ombudsman

Background

The PHIO is a statutory authority established under section 82ZR of the NHA.  The operations of the PHIO are funded by a levy imposed on health funds by the Private Health Insurance Complaints Levy Act 1995 .  The levy is based on the number of contributors to a health fund and the number of people covered.

 

Currently, the powers of the PHIO to deal with a complaint or a dispute are limited, in relation to obtaining information and reporting on findings. This can make the process of lodging a complaint ineffectual for a consumer.

 

Option 1 - Increasing the investigation and reporting powers

This option would assist the PHIO to take appropriate action to resolve the situation.  It is proposed that the PHIO’s investigatory and reporting powers be increased to assist in the resolution of complaints.

 

Impact of Option 1 - Increasing the investigation and reporting powers

On health funds - The impact of this proposed change to the powers of the PHIO are expected to marginally increase the regulatory burden on the industry through additional compliance costs.  Health funds might also be required to pay an increased levy to fund the PHIO’s additional activities.

 

On consumers - This option will assist in increasing consumer confidence in the private health insurance product and strengthen consumer protection.

 

On Government - This option would have minimal impact on Government.  The PHIO is a statutory authority and its functions are set out in the NHA.  As such, it would be necessary for the Commonwealth to introduce legislation to enable this option.

 

Consultation

Consumer groups stated that the regulatory system should be, and be seen to be, independent of industry and political influence.  While industry should be asked to bear some of the costs involved in assessing products, government funding must also be provided to enable independent assessment and monitoring and to enhance the confidence of consumers.  It was further stated that there must be adequate market surveillance, enforcement and appropriate remedies for breaches of legislation to ensure compliance.

 

Conclusion and recommended option

Option 1 is recommended.

 

This option will enable the PHIO to respond appropriately to situations, and will increase consumer awareness, confidence and choice in private health insurance.

 

Component C - Lifetime Health Cover Notional Birthday

Background

LHC commenced on 1 July 2000.  The policy requires health funds to charge additional premiums if a person takes out hospital cover for the first time after they have turned 31 years of age.  The additional premium is 2 per cent of the base premium of a given policy, for each year the person’s age exceeds 30.  For example, a person who takes out hospital cover for the first time at age 37 will pay an additional premium of 14 per cent. 

 

A high level of advertising was used to inform the public about the introduction of LHC.  A potential problem may arise as people turning 30 (or indeed any other age) since the campaign, may forget to consider whether to take out private health insurance.

 

Options

Option 1 - Status quo

 

Option 2 - Set an annual date for Lifetime Health Cover purposes

Under this option a single date each year would be set where people are deemed to have a ‘birthday’ for LHC purposes.  This will have the effect of focusing the competition for new members at a single time each year.

 

Impact Analysis

Impact of Option 1 - Status quo

On health funds - Continuation of the current costs.

 

On consumers - Lack of comprehensive information about LHC and comparable fund information.

 

On Government - Would have minimal impact on Government.

 

Impact of Option 2 - Set an annual date for Lifetime Health Cover purposes

On health funds - Would create efficiencies for health funds by allowing more targeted advertising and marketing campaigns.

 

On consumers - Consumers would benefit through more concentrated and targeted advertising campaigns, which would allow them to focus their attention on health insurance as a product.   This option will create a greater awareness of the existence of LHC, particularly among younger people.

 

On Government - This option would complement Government policy by helping to maintain participation at current levels through increased consumer awareness of private health insurance, specifically LHC.  Legislative change would be required to enable this option.

 

Consultation

Health funds and their representative organisations strongly support the LHC notional birthday.  They suggested that it would overcome the present lack of focus of LHC.  It was further stated that current regulation surrounding LHC creates an environment where it is difficult to effectively concentrate information campaigns to make potential members aware of the impact of LHC on them.

 

Conclusion and recommended option

The recommended option is option 2.

The current approach to marketing LHC is expensive, as health funds may need to run more than one campaign per year.  This option is targeted at encouraging improved health industry efficiency and enhancing competition between health funds, by allowing health funds to undertake more targeted advertising campaigns.  The heightened promotion of LHC will also increase consumer awareness, confidence and choice in private health insurance.

 

 

Consultation

On 17 April 2002, Health wrote to a broad range of private health industry stakeholders seeking their views on the current regulatory arrangements.  Submissions from interested stakeholders were received by 10 May 2002 and were considered by the Inter-Departmental Committee responsible for the regulatory review. 

 

These organisations and representatives included private hospitals and their representative organisations, health funds and their representative organisations, consumer groups, the PHIO and the PHIAC board.  In all, 25 submissions were received.

 

Implementation and Review

Implementation

Currently the process for changing products is extensively regulated.  Legislation will need to be amended to accommodate the recommended measures to reduce the regulatory burden on product regulation.   Legislative amendments will also be required to implement the measures associated with LHC

 

The recommended options for consumer information and protection, the production of the State of the Health Funds Report and increasing the powers of the PHIO will require legislative change prior to implementation. 

 

Review

It is proposed that the options explored in this Regulation Impact Statement will be reviewed after 2 years.  As indicated under the heading conclusion and recommended option section for several of the issues outlined in this RIS, Government will review the success of the measures with a view to further reducing the regulatory framework.

 



HEALTH LEGISLATION AMENDMENT (PRIVATE HEALTH INSURANCE REFORM) BILL 2003

 

NOTES ON CLAUSES

 

 

Section 1:  Short Title

Upon enactment, the Bill will be known as Health Legislation Amendment (Private Health Insurance Reform) Act 2003.

 

Section 2:  Commencement

This section details the commencement dates of the various amendments contained within the Bill:

 

·          Sections 1 to 3 of the Bill and all provisions not covered by the table will commence on the day that the Bill receives Royal Assent.

 

·          Items 1 to 40 (Part 1) of Schedule 1 of the Bill may all commence on a single day to be fixed by Proclamation.

 

-           The delayed commencement of these amendments in Part 1 after the Bill gets Royal Assent will enable industry to put in place the necessary changes prior to the actual commencement of these provisions.

 

-           Special commencement arrangements have been included for the amendments in Items 25 to 27.  If the amendments in these Items are not proclaimed to commence within six months of Royal Assent, then they will be repealed: subsection 2(4). 

 

-           The remaining amendments in Part 1 (Items 1 to 24 and 28 to 40) will commence six months after Royal Assent if they are not proclaimed to come into operation on an earlier date: subsection 2(3).

 

·          Parts 2 and 3 of Schedule 1 of the Bill will commence on the day that the Bill receives Royal Assent.

 

·          Part 4 of Schedule 1 of the Bill may have various commencement dates:

-           the amendments in Items 59 to 64, 70 and 72 will commence on Royal Assent:

-           the amendments in Items 58, 65 and 66 will start on a day to be fixed by Proclamation (described in Item 72 of Schedule 1 as being the mainstream amendment day ); and

-           the amendments in Items 67 to 69, 71 and 73 will commence on a day to be fixed by Proclamation (described in Item 72 of Schedule 1 as being the special categories amendment day ). 

-           Depending on when the Bill gets Royal Assent, the special categories amendment day may be sooner than the mainstream amendment day .  This is because RHBOs may require more time to prepare for the amendments that will commence on the mainstream amendment day .

 

Section 3: Schedule(s)

This section sets out the impact of the amendments contained in Schedule 1 - Amendments of health insurance legislation.

 

 

 



Schedule 1 - Amendment of health insurance legislation

 

Part 1 - Amendments regulating obligations of registered organizations

 

National Health Act 1953

Items 1 to 5:  Amendment of section 66

These Items amend section 66 of the NHA to broaden the existing definition of improper discrimination and to define some common terms that are used throughout Part VI of the NHA.

 

Item 1 adds a definition of breach of the Act , to clarify what constitutes a breach of the NHA for the purposes of the new regulatory system.

 

Item 2 adds a definition of Court, as the Federal Court is referred to in several places in Part VI of the NHA.

 

Item 3 will update the definition of improper discrimination so that the term can be used to clarify the principles of community rating in the NHA (to be included in proposed new sections 73AAH to 73AAJ to be added by Item 10).  Community rating prohibits RHBOs from discriminating against contributors in relation to access to private health insurance and the use of private health insurance products, except in specified circumstances. 

 

Specifically, Item 3 amends the definition of improper discrimination to consolidate the various discrimination provisions from the NHA within the same term:

·          new paragraph (b) of the definition of improper discrimination relocates the grounds for discrimination that are currently prohibited by section 73ABA (Item 12 of Schedule 1 will repeal section 73ABA); and

·          new paragraphs (ba) and (bb) of the definition of improper discrimination relocate grounds for discrimination that are currently contained in paragraph (m) of Schedule 1 of the NHA (Item 37 of Schedule 1 of the Bill will repeal paragraph (m) of Schedule 1 of the NHA).

 

Item 4 adds a definition of officer in relation to a RHBO to section 66.  The new regulatory scheme to be established in Division 5 of Part VI of the NHA will clarify the responsibilities of officers of RHBOs. 

 

Item 5 adds subsection 66(2) to refer to new location of the principles of community rating. Prior to this Bill, it has been necessary to read a variety of provisions in Part VI and Schedule 1 of the NHA in order to understand community rating.  Item 10 will more clearly establish the principles of community rating as conditions upon which the registration of every RHBO is subject in new sections 73AAH, 73AAI and 73AAJ.

 

Item 6:  Subsection 67A(1)

This Item makes a consequential amendment to subsection 67A(1) (the amendment in Item 2 establishes a definition of Court for all of Part VI of the NHA).

 

Item 7:  After section 67A

Item 7 clarifies what constitutes a breach of the NHA by relocating section 74B to a more prominent position in Division 1 of Part VI of the NHA. (Item 1 established a definition breach of the Act which refers to new section 67B (relocated section 74B)).

 

In relocating section 74B to section 67B, the terminology has also slightly been changed.  New section 67B will require a RHBO to conduct its health insurance business in accordance with the regulations, conditions, directions and rules listed in section 67B.

 

Item 8:  Subsections 73(2A) and (2B)

The clarification of the definition of improper discrimination in subsection 66(1) (Item 3) enables consequential amendments to subsection 73(2A) and (2B) to clarify when an application for registration as a RHBO should not be granted by PHIAC. 

 

New subsection 73(2A) will provide that PHIAC shall not register an organization for the purposes of conducting health insurance business if the rules of the organization permit improper discrimination. 

 

Item 9:  Subsection 73AAE(6)

This Item makes a consequential amendment to remove subsection 73AAE(6), as the amendment in Item 2 establishes a definition of Court for all of Part VI of the NHA.

 

Item 10:  Before Section 73A

This Item does two things to Division 3 (Conditions of registration) of Part VI of the NHA:

·          it establishes the principles of community rating as conditions of registration; and

·          it rearranges some existing provisions in Division 3 to clarify the order of this Division.

 

Community rating underpins the equitable access to private health insurance for all Australians. It prohibits RHBOs from discriminating against contributors in relation to access to private health insurance and the use of private health insurance products, except in specified circumstances.

 

These amendments will clarify the monitoring and enforcement of the community rating principles. Taken in conjunction with the changes to the monitoring and enforcement regime, this will provide RHBOs with increased flexibility in the conduct of their health insurance business, without requiring Departmental oversight.

 

Section 73AAF Registration is subject to conditions in this Division and in Schedule 1

 

New section 73AAF relocates existing subsection 73BA(1) to the start of Division 3 of Part VI of the NHA.  New section 73AAF inserts a statement to the start of this Division to note the conditions of registration that a RHBO must comply with.  The amendment in Item 16 repeals subsection 73BA.

 

Section 73AAG Matters ancillary to particular conditions in Schedule 1

 

New section 73AAG consolidates a number of provisions.  Specifically, this section relocates existing subsections 73BA(2A) to (5) to the start of Division 3 of Part VI of the NHA.  These subsections contain matters ancillary to particular conditions in Schedule 1.  The amendment in Item 16 repeals subsection 73BA.

 

As some disallowable instruments were made under the existing provisions in subsection 73BA(2A) to (5), a saving provision has been included in Item 17.  The saving provision states that any determinations made subsection 73BA(2A) or (4) will be deemed to have been made under the relocated provisions in new section 73AAG.

 

Section 73AAH General conditions concerning community rating

 

New section 73AAH enables RHBOs to more readily ascertain their obligations in relation to the principles of community rating.  Previously, community rating requirements had to be derived from a range of provisions within the NHA.  The amendments in this Bill make it easier for RHBOs to identify their obligations and to ensure compliance.

 

Section 73AAI Community rating condition concerning admission of persons as contributors and cancellations of membership

 

New section 73AAI will establish the community rating principles relating to the admission of persons as contributors and the cancellation of membership.  This section consolidates and clarifies two conditions in existing paragraphs (b) and (be) of Schedule 1 of the NHA, and will apply to any hospital cover table (applicable benefits arrangement) or ancillary cover (table of ancillary health benefits).

 

The condition will continue to permit RHBOs to permanently close certain products to new members without breaching this condition of registration.  The ability to close health insurance products to new or transferring contributors will enable RHBOs to:

·          manage their products more effectively, in particular to reduce losses on products that have low or no returns due to changes in the broader health industry; and

·          enable RHBOs to manage those products without disadvantaging members who are contributing to them. 

 

Section 73AAJ Community rating condition concerning quantum and payment of benefits

 

New section 73AAJ relocates the fundamental community rating condition from paragraph (m) of Schedule 1 of the NHA.  This condition establishes the community rating principles in relation to the quantum and payment of benefits for hospital cover tables. 

 

RHBOs are prohibited from applying improper discrimination in relation to the quantum and payment of benefits for hospital cover.  This ensures equity between contributors to the same hospital cover tables at the same RHBO.  It is not appropriate for RHBOs to discriminate between people in relation to the quantum and payment of benefits, other than as allowed by the NHA (eg. permitted discounts or LHC loading).

 

The condition in section 73AAJ does not apply to ancillary cover tables.

 

Section 73AAK Limited exception from community rating for restricted membership organizations

 

New section 73AAK will recognise an exception to the community rating conditions in new sections 73AAH and 73AAI in relation to restricted membership organizations. 

 

Historically, the provision of health insurance was often one of a range of services provided by a friendly society or like organization.  Access to the range of services was often limited to geographical, employment or other distinguishing characteristics.  The exemption contained in this provision recognises that there a still a number of RHBOs that operate on a restricted membership basis.  Other than the restriction to membership, it is important to note that the principles of community rating in new section 73BAAJ apply to restricted membership RHBOs.

 

Item 11:  Subsection 73A(1)

This Item makes a minor amendment to subsection 73A(1) to recognise that it contains a condition that only relates to refund agreements.  The headings to sections 73A and 73AB will also be replaced to help clarify the conditions that are contained in these sections.

 

Item 12:  Section 73ABA

This Item makes a consequential amendment to remove section 73ABA (RHBO not to discriminate), because the grounds for discrimination in section 73ABA will be relocated to the definition of improper discrimination by the amendment in Item 3.

 

Items 13 to 15: Section 73B

These Items will confirm the Minister’s power to impose additional conditions of registrations on more than one health fund.  This power will provide an efficient response mechanism to systemic problems identified in the industry.

 

Item 16:  Section 73BA

This Item makes a consequential amendment by repealing section 73BA.  Other amendments in this Bill will relocate the provisions of section 73BA to other sections of the NHA: 

·          subsection 73BA(1) will be relocated to new section 73AAF (Item 10); 

·          the definition of medical practitioner in subsection 73BA(2) will be relocated in Schedule 1 of the NHA (Item 39); and. 

·          subsection 73BA(2A) to (5) will be relocated to new section 73AAG (Item 10).

 

Item 17:  Savings provisions

The purpose of this Item is to establish savings provisions for determinations made under subsections 73BA(2A) and (4) of the NHA prior to the commencement of Item 16 of the Bill.  This saving provision will deem the determinations to have been made under the provisions in new section 73AAG.

 

Items 18 and 19 :  Before section 73BB

These Items make minor procedural amendments to relocate the reinsurance provisions in sections 73BB and 73BC from Division 3 of Part VI of the NHA:

·          Item 18 will establish a new Division regarding the Health Benefits Reinsurance Trust Fund.  Sections 73BB and 73BC will become part of this new Division; and

·          Item 19 will make a consequential amendment to subsection 73BB(4) to remove a condition of registration from this section.  Item 38 will insert that condition of registration in a more appropriate position in Schedule 1 of the NHA. 

 

Item 20:  Division 5 of Part VI

The purpose of this Item is to consolidate, clarify and broaden the enforcement and remedies regime in the NHA.

 

This Item will substitute a new Division 5 - Enforcement and Remedies in Part VI of the NHA.  This new Division is a major reform in the regulation of the private health insurance industry.  New Division 5 will result in increased regulatory flexibility by:

·          enabling monitoring of RHBO activities via performance indicators, rather than the assessment of rules that currently takes place in accordance with section 78 of the NHA;

·          clarifying the Minister’s investigation powers; and

·          establishing a range of responses and sanctions that the Minister may take to appropriately deal with breaches or potential breaches of the NHA.

 

New Division 5 will include the following sections:

·          Section 73BEA Performance indicators;

·          Section 73BEB Minister may require RHBOs to explain their operations;

·          Section 73BEC Consequences of a failure to provide a satisfactory explanation;

·          Section 73BED Minister may conduct investigation;

·          Section 73BEE Offences relating to requirements under section 73BED;

·          Section 73BEF Minister may consult Council;

·          Section 73BEG Consequences of investigation;

·          Section 73BEH The Minister may accept written undertakings given by a registered organization;

·          Section 73BEI Enforcement of undertakings;

·          Section 73BEJ Directions given by Minister to registered organizations;

·          Section 73BEK Direction requirements;

·          Section 73BEL Minister may revoke registered organization’s status as participating fund;

·          Section 73BEM Minister may apply to the Court for orders for redressing breach of Act or imposing pecuniary penalties;

·          Section 73BEN Imposition and enforcement of orders by the Court;

·          Section 73BEO Restrictions relating to payment of pecuniary penalties; and

·          Section 73BEP Jurisdiction.

 

The direction making powers in existing Division 5 (sections 73BE, 73BF, 73BFA and 73BFB) will be consolidated in a single direction making power: new section 73BEJ.  The Minister’s power to direct RHBOs in relation to the provision of services (section 73D) will be relocated to Division 6 of Part VI: new section 75 (Item 24).

 

 

Division 5 - Enforcement and remedies

 

Subdivision A - Performance indicators and preliminary explanations

 

Section 73BEA Performance indicators

 

New Section 73BEA will enable the setting of the performance indicators for monitoring RHBO’s compliance with community rating obligations, via regulation. 

 

This important new element recognises the evolving nature of the health industry, and the need to respond to any changes in an expeditious manner. Given the dynamic nature of the private health industry and government policy in the area, the power for setting the performance indicators via regulations means that the performance indicators may be changed to respond to any new circumstances that arise. 

 

The power will enable the Minister to raise concerns with industry and to negotiate a non-regulatory solution with the industry.  If a resolution to the particular issue cannot be found, then consideration will be given to the other options and remedies that will be consolidated in new Division 5 of Part VI of the NHA.

 

Section 73BEB Minister may require registered organizations to explain their operations

 

New section 73BEB describes the process by which the Minister may seek an explanation from a RHBO in relation to information received by the Minister that suggests an RHBO may be in breach of its legislative obligations.

 

New subsection 73BEB(2) enables the Minister to specify a time in which the RHBO must respond.  If a RHBO does not consider the time given to respond is sufficient, it may seek an extension of that time: new subsection 73BEB(3).  If the Minister refuses to extend the time, then new subsection 105AB(4) (Item 31) will enable the RHBO to seek review of that decision in the AAT.

 

Section 73BEC Consequences of a failure to provide a satisfactory explanation

 

New subsection 73BEC(1) will enable the Minister to consider an explanation from a RHBO and take appropriate action.  If the Minister is satisfied with the explanation, the Minister must inform the RHBO. 

 

If the Minister is not satisfied with the explanation from the RHBO, the Minister must inform the RHBO that he or she intends to take any of the courses of action specified in new subsection 73BEC(2).  New subsections 73BEC(2) and (3) set out the options for dealing with a perceived or actual breach of the NHA, after a RHBO has provided an insufficient or unsatisfactory response.

 

If the Minister requires further information regarding the conduct or actions of a RHBO, the Minister may conduct an investigation in accordance with new Subdivision B of Division 5:  new paragraph 73BEC(2)(a).

 

Whether or not the Minister is satisfied that the RHBO has breached the NHA, the Minister may:

·          request the RHBO commits to an enforceable undertaking in accordance with new Subdivision C:  new paragraph 73BEC(2)(b);

·          give the RHBO a direction in accordance with new Subdivision D:  new paragraph 73BEC(2)(c); or

·          impose a further condition of registration on the RHBO in accordance with section 73B:  new paragraph 73BEC(2)(d);

 

If the Minister is satisfied that a RHBO has breached the NHA, then new paragraph 73BEC(3)(b) provides further options that the Minister may consider (note that if there is a breach of the NHA the Minister may still rely on one of the options in new paragraphs 73BEC(2)(b) to (d) to resolve the breach):

·          if the RHBO has breached the principles of community rating, then the Minister may revoke the status of the RHBO to offer the 30% Rebate as a premium reduction (contributors will have to obtain the 30% reduction as a tax deduction or incentive payment):  new paragraph 73BEC(2)(e);

·          the Minister may apply to the Federal Court for an order in accordance with new Subdivision F:  new paragraph 73BEC(2)(f); and

·          the Minister may take action to appoint an inspector, place a RHBO under administration, or seek the winding up of a RHBO in accordance with Part VIA of the NHA: new paragraph 73BEC(2)(g);

 

The expanded range of enforcement options contained in these reforms enables the Minister to have flexibility and proportionality as to action and outcomes in relation to the regulation of the private health insurance industry.

 

Subdivision B - Investigations

 

New Subdivision B relocates and clarifies the Minister’s existing investigatory power in section 75.  The purpose of this new subdivision is to grant the Minister sufficient powers to conduct investigations to enable access to information relevant to potential breaches of legislative requirements by the RHBOs in conducting health insurance business.

 

73BED Minister may conduct investigation

 

New section 73BED relocates the investigatory powers from subsections 75(1) to (4) and (6).  These provisions describe the various options and processes available to the Minister to conduct an investigation of a RHBO.

 

In particular, this section empowers the Minister to access relevant information in relation to concerns regarding compliance with the NHA:

·          new subsections 73BED(2) and (3) enable the Minister to direct that the information to be provided, or the records books accounts and other documents, be examined by a person specified by the Minister.  These provisions replace subsections 75(1) and (2), which previously only enabled the Secretary to authorize an officer of the Department to conduct these investigations;

·          new subsection 73BED(4) provides that access to the records, books, accounts and other documents of an RHBO relevant to an investigation, must be allowed at all reasonable times.  A reasonable time includes normal business hours of the RHBO or any other agreed time; and

·          new subsection 73BED(5) relocates the provision from subsection 75(6) which enables the investigation of a recently deregistered RHBO.  It is necessary for the regulatory regime to be able to be applied to recently deregistered RHBOs to ensure the on-going protection of consumers and the industry.

 

73BEE Offences relating to requirements under section 73BED

 

New section 73BEE relocates the penalty provisions from subsection 75(5) and (5A) and establishes a new penalty for providing false or misleading information. 

 

New subsection 73BEE(4) establishes a protection against self-incrimination in certain circumstances.

 

New subsection 73BEE(5) of the NHA establishes an offence for providing false or misleading information in relation to an investigation under new section 73BED of the NHA.

 

Where a RHBO is required to provide information for the purpose of an investigation, that information is required even if the answer to the question, or the production of the document, might tend to incriminate the person or make the person liable to a penalty.  To this end, to ensure cooperation with an investigation under new section 73BED, new subsection 73BEE(4) provides that information provided in response to a request under new subsections 73BED(1) or (2) may not be used in evidence against the person providing the evidence.  This exemption does not apply to an offence under new subsection 73BEE(5).

 

The offences of not cooperating with an investigation in new subsections 73BEE(1) and (2) of the NHA are strict liability offences (as set out in the Criminal Code Act 1995 ).  The dollar amount per penalty unit is set out in section 4AA of the Crimes Act 1918 .

 

73BEF Minister may consult PHIAC

 

Section 73BEF establishes a new provision to clarify the link between the prudential regulation of RHBOs by PHIAC and the broader regulation of the industry.  This amendment does not detract from the independence of the PHIAC.  If an issue identified by the Minister has a prudential element or effect it is important that it may be handled by the entity which has been specifically established and empowered to deal with such matters.  A referral to PHIAC will not negate the ability of the Minister to undertake whatever additional action the Minister considers appropriate.

 

73BEG Consequences of investigation

 

New section 73BEG establishes regulatory options for the Minister to use following an investigation (similar to the options in new section 73BEC).  If, following an investigation, the Minister is satisfied with the performance of a RHBO, he or she must notify the RHBO: new paragraph 73BEG(a). 

 

If, as a result of the investigation, the Minister is satisfied that there is a breach of the NHA, then the Minister must advise the RHBO of the necessary action in accordance with new paragraph 73BEG(b).  These options include:

·          requesting an enforceable undertaking in accordance with new Subdivision C:  new subparagraph 73BEG(b)(i);

·          giving a direction to the RHBO in accordance with new Subdivision D: new subparagraph 73BEG(b)(ii);

·          imposing a further condition of registration on the RHBO under section 73B:  new subparagraph 73BEG(b)(iii);

·          revoking the status of the RHBO to offer the 30% Rebate as a premium reduction (contributors will have to obtain the 30% reduction as a tax deduction or incentive payment): new subparagraph 73BEG(b)(iv);

·          applying to the Federal Court for an order in accordance with new Subdivision F: new subparagraph 73BEG(b)(v); or

·          taking action to appoint an inspector, place a RHBO under administration or seek the winding up of a RHBO in accordance with Part VIA of the NHA: new subparagraph 73BEG(b)(vi).

 

If, following the investigation, there is no or insufficient evidence of a breach of the NHA, but the Minister considers the performance of a RHBO can be improved, then the Minister may:

·          request an enforceable undertaking in accordance with new Subdivision C:  new subparagraph 73BEG(c)(i);

·          give a direction to the RHBO in accordance with new Subdivision D: new subparagraph 73BEG(c)(ii); or

·          impose a further condition of registration on the RHBO under section 73B:  new subparagraph 73BEG(c)(iii).

 

Subdivision C - Enforceable undertakings

 

The purpose of this new Subdivision is to establish an additional option for the enforcement of the regulatory requirements under the NHA.  Enforceable undertakings are a regulatory tool that will enable the RHBOs to address and resolve problems or breaches of the Act with the consent and involvement of the regulator.

 

73BEH The Minister may accept written undertakings given by a registered organization

 

New section 73BEH will enable the Minister to accept undertakings from RHBOs that will improve the performance of RHBOs and/or avoid breaches of the NHA.  The willingness of RHBOs to provide, and comply with, undertakings should assist in avoiding the need for the application of more severe sanctions.

 

New subsection 73BEH(2) will provide some flexibility in the operation of an undertaking, by enabling a RHBO to withdraw from or vary the undertaking at any time with the consent of the Minister.  If the Minister does not agree to the variation or withdrawal, then new subsection 105AB(4AAA) will provide the RHBO with a right of review of the refusal by the AAT (Item 31).

 

73BEI Enforcement of undertakings

 

If a RHBO gives an undertaking under section 73BEH but does not comply with the terms of the undertaking, then the Minister may apply to the Federal Court for an order under subsection 73BEI(2) of the NHA.  To make such an application the Minister must consider (on reasonable grounds) that the RHBO that gave the undertaking has breached any of the terms of that undertaking.  In applying to the Court the Minister may seek an order of compliance and, if there has been a breach of the NHA, any other order that is appropriate.

 

Subdivision D - Ministerial directions

 

The purpose of new Subdivision D is to consolidate the Minister’s direction making powers in existing Division 5.  Section 73B enables the Minister to impose conditions of registration on RHBOs on any matter (so long as the condition is consistent with the NHA).  The new Subdivision consolidates and clarifies the Minister’s direction making powers in relation to community rating.

 

73BEJ Directions given by the Minister to registered organization

 

New section 73BEJ clarifies the situations in which the Minister may issue a direction to an RHBO.  This power increases the flexibility of the sanctions available to the Minister to address concerns in relation to improper discrimination. The power to make a direction in relation to day-to-day operation of the RHBO is an important tool in the protection of the principles of community rating. 

 

New subsections 73BEJ(1) and (3) will enable the Minister to impose a direction requiring a RHBO to modify its constitution, rules or operations to prevent improper discrimination from occurring.  New subsection 73BEJ(1) will apply as the result of an insufficient or unsatisfactory explanation under new Subdivision A.  New subsection 73BEJ(3) will apply as the result of an investigation under new Subdivision B.

 

New subsection 73BEJ(2) will enable the Minister to impose a direction where the Minister concludes that there appears to be a breach of the NHA.

 

New subsections 73BEJ(4) and (5) establish a further level of protection to contributors or potential contributors.  These subsections allow the Minister to specify the action required including the reconsideration of decisions already taken in relation to eligibility to become or retain membership or for the use of a private health insurance product.

 

73BEK Direction requirements

 

New section 73BEK establishes the requirements for a Ministerial direction made under the NHA.  This new section relocates section 73BH.

 

Subdivision E - Removal of entitlement to offer rebate as a premium reduction

 

This new Subdivision establishes a penalty for RHBOs that breach the principles of community rating or a direction issued under new section 73BEJ. 

 

73BEL Minister may revoke a registered organization’s status as a participating fund

 

New section 73BEL provides that the Minister may remove the eligibility for a RHBO to offer the Federal Government 30% Rebate on private health insurance to contributors as a premium reduction.  This new sanction will be a major disincentive for non-compliance with the principles of community rating.  While the 30% Rebate may be removed as a premium reduction from a particular RHBO, the 30% Rebate will still payable to contributors via the taxation system or the HIC.

 

Section 14A-1 of the Private Health Insurance Incentives Act 1998 must be used to effect the removal of eligibility of a RHBO to offer the 30% Rebate as a premium reduction.  Item 40 of Schedule 1 will amend section 14A-1 of that Act to broaden the reasons for having status removed to offer the 30% Rebate as a premium reduction.

 

Subdivision F - Court imposed sanctions

 

New Subdivision F consolidates and expands the powers of the Minister to apply to the Federal Court to impose sanctions.  The existing power to seek a court order imposing fines on officers of a RHBO from sections 74 and 74BA will be relocated to this Subdivision.

 

73BEM Minister may apply to the Court for orders redressing breach of Act or imposing pecuniary penalties

 

New subsection 73BEM(1) will enable the Minister to apply to the Court for an appropriate order.  In addition to an application to impose a pecuniary penalty on an officer of a RHBO which is currently available under sections 74 and 74A, the Minister may seek any other order that is appropriate to redress a breach of the NHA. 

 

Two such orders are listed in new paragraphs 73BEM(1)(a) and (c):  an order to pay compensation to an affected individual and an adverse publicity order (defined in new subsection 73BEM(2)).  However, this is not an exhaustive list and paragraph 73BEM(1)(d) recognises that the Minister may apply for any other appropriate orders.  The Court in considering whether to grant an order shall have recourse to any information it considers reasonable and relevant.  The Court may vary any order as it sees fit.

 

73BEN Imposition and enforcement of orders by the Court

 

New section 73BEN of the NHA relocates the procedural provisions from section 74A which specify how the Court may make an order sought under section 73BEM of the NHA:

·          new subsection 73BEN(1) enables the Court to make an appropriate order to redress a breach of the Act;

·          new subsection 73BEN(2) enables the Court to impose a fine of up to $10,000 on an officer of a RHBO that has failed to take reasonable steps to prevent the breach of the Act;

·          new subsection 73BEN(3) relocates existing subsection 74A(3) to ensure that there is no duplication in relation to the application of sanctions for specified matters;

·          new subsection 73BEN(4) establishes that in hearing and determining an application for an order under subsections 73BEN(1) or (2) the Court is to apply the rules of evidence and procedure that it applies in hearing and determining civil matters (ie. where the Court needs to be satisfied of a matter it must be satisfied on the balance of probabilities); and

·          new subsection 73BEN(5) relocates the provision in subsection 74A(7), to clarify that an order under new subsections 73BEN(1) or (2) may be enforced as a judgement of the Federal Court.  This functions to enable the additional application of sanctions for non-compliance with a Federal Court order. 

 

73BEO Restrictions relating to payment of pecuniary penalties

 

New section 73BEO relocates subsection 74A(8) to prohibit RHBOs from using contributor’s funds to cover pecuniary penalties imposed on officers under new section 73BEN.  The penalty is imposed on the relevant officer and should be paid by the officer, not by the RHBO or the health benefits fund that the RHBO manages. 

 

Subdivision G - Miscellaneous

 

73BEP Jurisdiction

 

This new section makes it clear that the Federal Court has jurisdiction to hear and determine applications under new Division 5 of Part VI of the NHA, and to make any orders as considered appropriate by the Court in respect of those applications.

 

Items 21 and 22:  Section 74

These Items make consequential amendments to remove subsections 74(5), (5AA) and (5A) and amend subsection 74(10).  The power to impose fines on the public officer has been relocated to new Subdivision F of Division 5 (new sections 73BEM, 73BEN and73BEO - Item 20).  It is no longer necessary to have a separate power to impose fines on the public officer.

 

Item 23: Sections 74A and 74B

Item 23 makes a consequential amendment to remove two sections that have been relocated elsewhere in the NHA:

·          the power to impose pecuniary penalties on officers of a RHBO in section 74A has been replaced by the new sections 73BEM, 73BEN and73BEO (Item 20); and

·          the provision relating to how RHBOs should conduct their health insurance business in section 74B has been relocated to new section 67B (Item 7).

 

Item 24: Section 75

This Item contains a consequential amendment to relocate section 73D (power to give RHBOs directions in relation to services) to section 75.  Section 75 will be repealed because the investigation powers have been relocated to new sections 73BED and 73BEE (Item 20).

 

Items 25 to 27:  Section 78

These Items amend the rule change requirements in section 78 to reduce the regulatory burden on RHBOs.

 

Item 25 amends subsection 78(1) so that RHBOs only have to notify the Secretary of the Department of Health and Ageing of changes of the rules of the RHBO (not changes to the constitution or articles of association).  This amendment will reduce the regulatory burden on the RHBOs, it will not remove the limitations placed on the constitution or articles of association of an RHBO by the operation of sections 68 and 73AAB of the NHA.

 

Item 26 amends paragraph 78(1A)(b) to reduce the notification requirements so that RHBO will only have to provide detailed advanced notification of rule changes that involve changes to premiums/contributions.  The Secretary can be informed of all other rules changes before the changes come into effect. This will result in the RHBOs having increased flexibility in the timing and range of non-contribution rule changes, and in product design.

 

Item 27 amends subsections 78(1C) and (2) to reduce the notification requirements for RHBOs.  This may include but is not limited to the provision of the notification in writing or in an electronic format.

 

If these changes come into effect, (note the special commencement arrangements in Section 2 of the Bill) section 78 will only be appropriate for assessing and potentially disallowing rule changes that involve changes to premiums.  This power will no longer be appropriate for disallowing other rule changes.  In those circumstances, the Minister will have to impose a condition under section 73B or give a RHBO a direction under new section 73BEJ to vary or remove certain rules.

 

Item 28: Subsection 78(7)

This Item amends subsection 78(7) to clarify the obligations of RHBOs to inform their contributors of rule changes.  The new requirement should be less burdensome to industry as it only requires RHBOs to inform contributors of detrimental, and not all, changes of rules.

 

Items 29 and 30: Paragraphs 82XF(2)(c) & 82YO(2)(c)

These Items make consequential amendments to paragraphs 82XF(2)(c) and 82YO(2)(c) to correct cross references to new section 73BEJ.

 

Item 31: Subsections 105AB(4), (4AAA) and (4AA)

This Item makes consequential amendments to section 105AB to identify the new administrative decisions to be included in the NHA by this Bill that will be subject to review by the AAT. 

 

Item 32: Paragraphs 105AB(4A)(a) and (b)

This Item makes consequential amendments to paragraphs 105AB(4A)(a) and (b) to correct cross references to relocated new section 75 (Items 20 and 24).

 

Items 33 and 35: Paragraphs (b) and (be) of Schedule 1

These Items make consequential amendments to repeal paragraphs (b) and (be) from Schedule 1 of the NHA.  The conditions in these paragraphs have been clarified and established as one of the principles of community rating in new section 73AAI (Item 10).

 

Item 34: Before paragraph (ba) of Schedule 1

This Item makes a minor amendment to add a statement at the start of Schedule 1 of the NHA to clarify the reading and operation of that Schedule.

 

Item 36:  Subparagraph (lb)(ii) of Schedule 1

This Item makes a consequential amendment to subparagraph (lb)(ii) of Schedule 1 to correct a cross reference to relocated new section 75 (Items 20 and 24).

 

Item 37: Paragraph (m) of Schedule 1

This Item makes a consequential amendment to repeal paragraph (m) from Schedule 1 of the NHA.  The community rating condition in this paragraph has been clarified and established as one of the principles of community rating in new section 73AAJ (Item 10).

 

Item 38: Paragraph (w) of Schedule 1

This Item contains a consequential amendment to repeal paragraph (w) of Schedule 1 of the NHA and relocate the condition from subsection 73BB(4) which was repealed by Item 19 (ie. the condition from subsection 73BB(4) is being put in a more appropriate location).  The existing condition in paragraph (w) is not necessary because new subsection 67B will require a RHBO to comply with any direction of the Minister. 

 

Item 39: At the end of Schedule 1

This Item makes a minor amendment to relocate the definition of medical practitioner from former section 73BA to Schedule 1 of the NHA.

 

Private Health Insurance Incentives Act 1998

Item 40: After paragraph 14A-1(1)(c)

This Item amends the Private Health Insurance Incentives Act 1998 to enable the Minister to remove the ability of a RHBO to offer the 30% Rebate as a premium reduction if the RHBO fails to comply with a direction given by the Minister under new section 73BEJ of the NHA or the community rating conditions in sections 73AAH to 73AAI.  The amendment is necessary to give effect to the new enforcement provisions that will be set out in new Subdivision E of Division 5 of Part VI of the NHA to be added by Item 20.

 

If action is taken in accordance with this amendment, the 30% Rebate will still be payable to contributors in relation to health insurance products offered by the particular RHBO, but the 30% Rebate will only be available via the taxation system or HIC.

 



Part 2 - Amendments increasing the powers of the Private Health Insurance Ombudsman

 

The purpose of this Part is to amend the NHA to expand the powers of the PHIO in order to allow the PHIO to deal more effectively with complaints.

 

Item 41:  Subsection 82ZQ(1)

Item 41 inserts a definition of records in subsection 82ZQ(1) for the purposes of Part VIC of the NHA.  The amendment clarifies the types of documents that the PHIO may require a RHBO to provide in order to deal with a complaint under Division 3 of Part VIC or an investigation under Division 4 of Part VIC the NHA. 

 

Item 42:  After paragraph 82ZRC(c)

This Item amends section 82ZRC to expand the functions of the PHIO.  The functions of the PHIO will now include the power to report and make recommendations to the Minister following the investigation of a complaint or an investigation of the practices and/or procedures of RHBOs.

 

Paragraph 82ZRC(d) has been retained to allow the PHIO to make recommendations to the Minister and/or the Department about more general industry practices.

 

Item 43:  After section 82ZSA

This Item adds new section 82ZSAA to enable the PHIO to notify a RHBO that a complaint has been received and conduct a preliminary investigation to determine how best to deal with a complaint.  Currently, the PHIO does not have power to request information in order to evaluate or investigate a complaint, and must rely on information provided voluntarily by the complainant and/or the RHBO.

 

New subsection 82ZSAA(1) will enable the PHIO to make a preliminary request for records from a RHBO relating to a complaint.  New subsections 82ZSAA(1) and (2) clarify the powers of the PHIO to request further records from a RHBO if the PHIO:

·          decides to settle the complaint by mediation under paragraph 82ZSB(1)(a),

·          refers the matter to the RHBO to resolve under paragraph 82ZSB(1)(b), or

·          conducts a more detailed investigation in accordance with subsection 82ZSB(2).

 

New subsection 82ZSAA(7) protects the privacy of individual complainants by requiring the complainant to agree to the production of records by the RHBO that relate to the complainant.

 

When the PHIO requests the provision of records he or she must specify when the records are to be provided:  new subsection 82ZSAA(4).  New subsections 82ZSAA(5) and (6) enable a RHBO to seek a longer time to provide the records, and apply to the AAT for review if the PHIO does not agree to extend the time (Item 53: new subsection 105AB(6AC)).

 

New subsections 82ZSAA(8), (9) and (11) establish offences for not complying with a request to provide information, or for providing false and misleading information.  To ensure cooperation with a request for records, new subsection 82ZSAA(10) provides that records produced in response to a request may not be used against the officer who provided the records (other than where the offence is against new subsection 82ZSAA(11)).

 

Item 44:  Subparagraph 82ZSB(1)(b)(ii)

This Item makes a minor amendment to subparagraph 82ZSB(1)(b)(ii) to enable the PHIO to require a RHBO to report to the PHIO on any action that the RHBO proposes to take following the internal investigation of a complaint, within the period specified by the PHIO.

 

Item 45:  After subsection 82ZSB(1)

This Item will add new subsections 82ZSB(1A) and (1B) to enable an RHBO to seek an extension of time if it cannot conduct an internal investigation and report to the PHIO within the period specified by the PHIO under amended paragraph 82ZSB(1)(b). 

 

New subsection 105AB(6C) will enable the RHBO to apply to the AAT for review if the PHIO refuses to extend the period (Item 53).

 

Item 46:  At the end of section 82ZSD

This Item will enable the PHIO to request that a RHBO, hospital, day hospital facility or medical practitioner advises him or her of the action(s) that it intends to take in relation to a recommendation made by the PHIO.

 

New subsections 82ZSD(4) to (6) create new offences for the public officers of RHBOs that fail to report to the PHIO.

 

Item 47:  After section 82ZSD

This Item adds new section 82ZSDA to enable the PHIO to report and make recommendations to the Minister where:

·          he or she has made a recommendation to the RHBO in respect of a complaint; and

·          the RHBO refuses to comply with the recommendation, or fails to report on the action that it intends to take in relation to a recommendation.

 

New subsection 82ZSDA(2) requires the PHIO to consult with the RHBO prior to reporting to the Minister, to enable the organization to comment on criticisms to be made in the report.

 

The Minister will then be able to consider the PHIO’s report and recommendations, and any comments provided by the organization, and determine whether any further action is required.

 

Item 48: Paragraph 82ZSE(1)(a)

This Item makes a minor consequential amendment to paragraph 82ZSE(1)(a) to recognise the addition of new section 82ZSAA to the NHA by Item 43. 

 

Item 49:  Subsection 82ZTA(3)

This Item makes a consequential amendment to remove the requirement in subsection 82ZTA(3) for the PHIO to report to the Minister.  This power will be dealt with in new section 82ZTCA (Item 52).

 

Item 50:  Section 82TZB

This Item repeals and replaces section 82ZTB to expands the power of the PHIO to obtain information from a RHBO in relation to an investigation under sections 82ZT or 82ZTA.  New section 82ZTB will ensure that the PHIO has the power to access appropriate information in undertaking the functions of the Office.

 

Item 51:  Subsection 82ZTC(2)

This Item amends section 82ZTC to strengthen the PHIO’s power to make a recommendation to a RHBO and request notification of action taken in relation to the request.

 

New subsection 82ZTC(2) will require the public officer of the RHBO, before the RHBO takes any action or changes its rules to give effect to a recommendation of the PHIO to report to the PHIO on the action proposed to be taken or the rule change proposed to be made.

 

New subsection 82ZTC(3) will enable the PHIO to require a hospital, day hospital or medical practitioner to report on the action proposed to be taken in response from a recommendation of the PHIO.

 

New subsections 82ZTC(4) to (6) establish offences for non-compliance with a request under new subsection 82ZTC(2) by the public officer of the RHBO.

 

Item 52:  After section 82ZTC

Item 52 adds new section 82ZTCA to enable the PHIO to report to the Minister on the outcome of investigations or recommendations.  The report function will keep the Minister abreast of developments within the industry and may highlight any need for further action.

 

Before the PHIO can make a report to the Minister, new subsection 82ZTCA(2) will require him or her to inform the RHBO of the nature of the report and provide the RHBO with the opportunity to respond.

 

Item 53:  After subsection 105AB(6AB)

This Item makes consequential changes to section 105AB to enable RHBOs to apply to the AAT for review of certain decisions by the PHIO under the new powers to be added by this Bill.

 

Item 54:  Application and transitional provisions

This Item establishes the transitional arrangements for any complaints that have been lodged with the PHIO or are being considered when the amendments in Part 2 of Schedule 1 of the Bill take effect.

 



Part 3 - Amendments relating to annual State of the Health Funds Report

 

Part 3 amends the NHA to enable the PHIO to produce an annual State of the Health Funds Report (the Report).

 

Item 55: After paragraph 82G(1)(sa)

Item 55 amends subsection 82G(1) to give PHIAC an extra function, to provide information relevant to the production of the Report to the PHIO.

 

Item 56: After paragraph 82ZRC(b)

This Item amends section 82ZRC to give PHIO an extra function to produce an annual State of the Health Funds Report.

 

The Report is to be published in written form and on the PHIO’s website, as soon as practicable after the end of each financial year.  The Report will provide comparative information on the performance and service delivery of all RHBOs during that financial year.

 

Item 57: Before paragraph (hb) of Schedule 1

This Item adds paragraph (hac) to Schedule 1 to impose a new condition on RHBOs to require them to publicise the existence of the Report and to advise where copies of the Report will be available.



Part 4 - Amendments relating to Lifetime Health Cover

 

Part 4 makes the following minor amendments to the LHC provisions in Schedule 2 of the NHA:

·          to establish a fixed annual date on which Australian residents over the age of 31 must have hospital cover if they want to avoid paying a LHC loading for taking out hospital cover after turning 31 (Items 58, 65 to 68 and 72);

·          to enable periods overseas of more than one year to be counted as “permitted days without hospital cover” (Items 60 to 62);

·          to recognise health cover provided by a DVA gold card as counting towards hospital cover for the purposes of calculating any LHC loading (Items 63 and 64);

·          to provide Australian citizens who are overseas on their 31 st birthday a grace period of 12 months to take out hospital cover when they return to Australia without being subject to a LHC loading (Items 69, 72 and 73); and

·          to provide new migrants to Australia over the age of 31 with a grace period of 12 months to take out hospital cover without being subject to a LHC loading (Items 68, 70 to 73).

 

Annual date for people over 31 to take out LHC

Schedule 2 of the NHA currently requires an individual to take out hospital cover before his/her Schedule 2 application day to avoid having to pay a LHC loading for hospital cover. 

 

A person’s Schedule 2 application day is determined by clause 5 of Schedule 2.  The general rule in paragraph 5(1)(b) is that a person must have hospital cover before he or she turns 31 years of age.  If a person takes out hospital cover after that time, they will be required to pay a LHC loading. Other paragraphs in subclause 5(1) establish different Schedule 2 application days for people who satisfy other criteria, for example:

·          refugees arriving in Australia on refugee or humanitarian (migrant) (class BA) visas; or

·          Australian citizens who were overseas when LHC was introduced on 1 July 2000.

 

The purpose of the amendments in Items 58 and 65 to 68, is to establish a common annual date by which time all Australian citizens and permanent visa holders over the age of 31 years should have hospital cover to avoid paying a LHC loading later.  The annual date will be the 1 July following the person’s actual 31 st birthday. 

 

Items 58 and 59:  Subclause 1(2) of Schedule 2

Item 58 amends the method for calculating the LHC loading for people who are late taking out hospital cover in subclause 1(2) of Schedule 2.  The loading will no longer be calculated based on the person’s actual age.  Instead it will be calculated on the basis of the person’s age on the previous 1 July.  The new subclause sets out the details of how the LHC age will be calculated and contains two examples.

 

Item 59 contains a saving provision to note that the amendment to subclause 1(2) in Item 58 will not affect any LHC loading determinations made under the previous formula in subclause 1(2).

 

Items 65 and 66:  Paragraphs 5(1)(b) and (ba) of Schedule 2

Item 65 will amend paragraph 5(1)(b) of Schedule 2 so that the current method for calculating a person’s Schedule 2 application day (ie. the day he or she turns 31 years of age) will only apply until the new method for calculating a person’s Schedule 2 application day comes into effect (to be established by the amendment in Item 66).

 

Item 66 inserts new paragraph 5(1)(ba) in Schedule 2.  This paragraph establishes that,  after the mainstream amendment day (ie. the date that this amendment comes into effect), a person’s Schedule 2 application day will be the 1 July immediately following the day he or she turned 31 years of age. 

 

The general rule will be that a person will have until the 1 July immediately after his or her 31 st birthday to take out hospital cover to avoid having to pay a LHC loading.

 

Items 67 and 68:  Paragraphs 5(1)(c) and (ca) of Schedule 2

Paragraph 5(1)(c) of Schedule 2 of the NHA sets out the current method for calculating a refugee’s Schedule 2 application day .  Item 67 amends Paragraph 5(1)(c) so that it will only apply until new paragraph 5(1)(ca) is inserted by Item 68.

 

Item 68 will insert new paragraph 5(1)(ca) in Schedule 2 to establish that after the date that this amendment comes into effect, a refugee’s Schedule 2 application day will be whichever is the later of:

·          the 1 July following the day he or she turned 31 years of age; or

·          the first anniversary of the day he or she became eligible for Medicare benefits.

 

Item 68 will also insert two other paragraphs in subclause 5(1) of Schedule 2 for the purposes of establishing a 12 month grace period for new arrivals in Australia who are not refugees (‘migrants’).  The grace period for new migrants is explained in more detail below.

 

Items 72:  At the end of clause 5 of Schedule 2

This Item adds:

·          a definition of mainstream amendment day in new subclause 5(3) for the purposes of the amendments in Items 58, 65 and 66.  The mainstream amendment day is the day on which these amendments will commence, being a day to be fixed by proclamation; and

·          a definition of special categories amendment day in new subclause 5(3) for the purposes of the amendment in Items 67 and 68.  The special categories amendment day is the day on which these amendments will commence, being a day to be fixed by proclamation.

 

Permitted days without hospital cover - more than one year overseas

Item 60:  After paragraph 3(1)(a) of Schedule 2

This item adds new paragraph 3(1)(ab) to Schedule 2 to provide that:

·          where an adult beneficiary is overseas for a continuous period of more than one year; and

·          the period he or she is overseas occurs after he or she has ceased to have hospital cover,

the period he or she is overseas will be “permitted days without hospital cover”.

 

If such a person returns to Australia and resumes hospital cover, the period overseas will not be considered when assessing whether the person has incurred a LHC loading.

 

Item 61:  Subparagraph 3(2)(a)(i) of Schedule 2

This Item makes a minor consequential amendment to subparagraph 3(2)(a)(i) to ensure that the 730 permitted days allowed in paragraph 3(1)(a) without hospital cover will not include any permitted days accessed through new paragraph 3(1)(ab).

 

Item 62:  At the end of clause 3 of Schedule 2

This Item adds new subclauses 3(3) and (4) to clarify that:

·          the NHA does not apply to residents of Norfolk Island, so a person will be taken to be overseas while they are residing there; and

·          any period during which an adult beneficiary returns to Australia for less than 90 days, counts as part of the period overseas.

 

Gold card

Items 63 and 64 make minor amendments to Schedule 2 of the NHA to recognise that cover provided by a DVA gold card will count towards hospital cover for the purposes of calculating any LHC loading. 

Item 63: Subclause 4(2) of Schedule 2

This Item repeals and substitutes subclause 4(2) of Schedule 2 and inserts a definition of gold card in new subclause 4(3):

·          new paragraph 4(2)(a) will provide that a person will be deemed to have hospital cover for so long as they are the holder of a gold card under the Veterans’ Entitlements Act 1986 at any time after 30 June 1999.

A person who takes out hospital cover after losing his or her eligibility for the gold card will then have any LHC loading calculated according to clause 2 (People who cease to have hospital cover after 1 July 2000) of Schedule 2 rather than clause 1 (People who are late taking out hospital cover) of Schedule 2.  The person will have 730 days to take out hospital cover without incurring a LHC loading.  If the person waits longer than 2 years, then under clause 2 of Schedule 2 the person will incur a 2% loading for every 365 days that he/she did not have hospital cover;

·          new paragraph 4(2)(b) restates the provision in existing subclause 4(2), that the regulations may specify a class of person who is taken to have hospital cover; and

·          new subclause 4(3) notes that for the purposes of clause 4, a gold card is a card that evidences a person’s entitlement to be provided with treatment in accordance with the Treatment Principles issued under section 90 of the Veterans’ Entitlements Act 1986.

 

Item 64:  Saving provisions

This Items establishes two saving provisions in relation to the changes in Item 63:

·          Clause (1) preserves any regulations made under subclause 4(2) of Schedule 2 immediately before the commencement of Item 63.  These regulations will be deemed to continue in force, on and after that commencement day, as if the regulations had been made under new paragraph 4(2)(b).

·          Clause (2) establishes specific arrangements for people who lost their eligibility for the gold card between 1 July 2000 and the commencement of Item 63. 

These people will be deemed to have had hospital cover while they held the gold card and any LHC loading will be calculated as if they ceased to have hospital cover after 1 July 2000 (clause 2, Schedule 2), rather than on the basis that they are late taking out hospital cover (clause 1, Schedule 2).

This provision:

-           will not require RHBOs to repay any LHC loading that has been incurred before the commencement of Item 63; and

-           only requires the re-calculation of a former gold card holder’s LHC loading (based on clause 2 of Schedule 2) from the commencement of the amendments in Items 63 and 64.

·          Clause (3) notes that for the purposes of this saving provision, gold card has the same meaning as in new subclause 4(3) of Schedule 2 of the NHA.

 

Grace period for Australian citizens returning to Australia

Item 69:  At the end of subclause 5(1) of Schedule 2

This Item adds new paragraph 5(1)(e) to clarify the Schedule 2 application day of an adult beneficiary returning to Australia.  If the person:

·          is an Australian citizen or the holder of a permanent visa within the meaning of the Migration Act 1958 ; and

·          is absent from Australia on the day, occurring after 1 January 2000, on which he or she turned 31 years of age; and

·          has not returned to Australia since turning 31 years of age; and

·          is not an adult beneficiary to whom paragraph (d) applies;

 

then the Schedule 2 application day will be whichever day is later of:

·          the first anniversary of the day the person returned to Australia; or

·          the first anniversary of the day that this amendment comes into effect (ie. the special categories amendment day).

 

Items 72:  At the end of clause 5 of Schedule 2

This Item adds a definition of special categories amendment day in new subclause 5(3) for the purposes of the amendments in Items 69 and 73.  The special categories amendment day is the day on which these amendments will commence, being a day to be fixed by proclamation.

 

Item 73  Transitional provisions

Subclause (2) of this Item will assist Australian citizens who:

·          returned to Australia after turning 31 years of age, but before these amendments take effect; and

·          took out hospital cover after the introduction of LHC, thereby incurring a LHC loading. 

 

From the date that this Item comes into effect, this group of adult beneficiaries will be deemed to have obtained hospital cover before they turned 31 years of age, and will no longer be required to pay any LHC loading.

 

This provision will not require RHBOs to repay LHC loading that has been incurred before the commencement of Item 73.

 

Subclause (3) of Item 73 notes that the terms adult beneficiary , base rate , hospital cover and special categories amendment day all have the same meaning as in the NHA.

 

Subclause (4) provides that the provisions in clause 5 of Schedule 2, relating to the return to Australia of an adult beneficiary, shall have the same meaning in this transitional provision.

 

 

Grace period for new migrants

Item 68:  After paragraph 5(1)(c) of Schedule 2

Item 68 adds paragraphs 5(1)(cb) and (cc) to Schedule 2 to establish a 12 month grace period for new arrivals to Australia (other than refugees) to take out hospital cover without incurring a LHC loading.

 

Under new paragraph 5(1)(cb), the Schedule 2 application day of a migrant who became eligible for Medicare benefits after 30 September 1999 but before the commencement of this amendment will be whichever is the latest of:

·          the 1 July next following the day on which he or she turned 31 years of age;

·          the first anniversary of the day that this amendment comes into effect (ie. the special categories amendment day); or

·          if the person was a citizen of New Zealand before entering Australia—the first anniversary of the day that the HIC makes the determination that the person is eligible for Medicare benefits.

 

Under new paragraph 5(1)(cc) the Schedule 2 application day of a migrant who became eligible for Medicare benefits after the commencement of this amendment will be whichever is the latest of:

·          the 1 July next following the day on which he or she turned 31 years of age; and

·          the first anniversary of the day he or she became eligible for Medicare benefits; and

·          if the person was a citizen of New Zealand before entering Australia—the first anniversary of the day that the HIC makes the determination that the person is eligible for Medicare benefits.

 

Item 70:  Subclause 5(2) of Schedule 2

This Item makes a minor amendment to subclause 5(2) of Schedule 2.  The amendment clarifies that, where a person’s Schedule 2 application day is based on the day that the person becomes eligible for Medicare benefits, that day will be calculated from when he or she becomes an eligible person within the meaning of section 3 of the Health Insurance Act 1973

 

This Item removes the alternate eligibility arrangements that were in subclause 5(2), that a person could be eligible for Medicare benefits in accordance with sections 6 or 7 of the Health Insurance Act 1973, and which provide for temporary eligibility for Medicare benefits. 

 

Item 71: clause 5(2) of Schedule 2

This Item inserts a new subclause 5(2A) after subclause 5(2) of Schedule 2 to clarify who will be a new arrival for the purposes of new paragraphs 5(1)(cc) and (cb). 

A person will be taken to have entered Australia as a new arrival if, at the time of the person’s entry into Australia, the person:

·          is the holder of a permanent visa within the meaning of the Migration Act 1958 ; or

·          is a New Zealand citizen who is lawfully present in Australia; or

·          is a person:

-             who is the holder of a temporary visa within the meaning of the Migration Act 1958 ; and

-             who has made application for a permanent visa under the Migration Act 1958 and the application has not been withdrawn or otherwise finally determined; and

-             in respect of whom either an authority to work in Australia is in force, or another person (being the person’s spouse, parent or child) is an Australian or the holder of a permanent visa under the Migration Act 1958 .

 

Item 70 will also insert a new subclause 5(2B) to clarify when a person who is overseas is taken to have returned to Australia. If the person returns for a period of at least 90 days, he or she will be deemed to have returned to Australia.

 

Items 72:  At the end of clause 5 of Schedule 2

This Item adds a definition of special categories amendment day in new subclause 5(3) for the purposes of the amendments in Items 69 and 73.  The special categories amendment day is the day on which these amendments will commence, being a day to be fixed by proclamation.

 

Item 73  Transitional provisions

Subclause (1) of this Item will assist recent arrivals who arrived in Australia after 1 January 2000 and took out hospital cover after the introduction of LHC on 1 July 2000 but before the commencement of these amendments, thereby incurring a LHC loading.  From the date that this Item comes into effect, this group of recent arrivals will be deemed to have obtained hospital cover before they turned 31 and will no longer be required to pay any LHC loading.

 

This provision will not require RHBOs to repay LHC loading that has been incurred before the commencement of Item 73.

 

Subclause (3) of Item 73 notes that the terms adult beneficiary , base rate , hospital cover and special categories amendment day all have the same meaning as in the NHA.