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Thursday, 21 October 1999
Page: 10164

Senator CHRIS EVANS (12:02 PM) —The Health Legislation Amendment Bill (No. 3) 1999 makes a number of amendments to the National Health Act 1953 and seeks to address various concerns raised in the Industry Commission's report No. 57 into private health insurance by making changes to the operation and powers of the Private Health Insurance Administration Council. The main elements of the bill relate to the Private Health Insurance Administration Council. The proposals that are now before us extend the regulatory powers and the independence of PHIAC from the department and the minister in all but matters of policy. Schedule 1 of the bill will transfer further functions and powers from the Department of Health and Aged Care to PHIAC to enhance its role as an industry regulator, and this includes the power to register funds, cancel registrations and approve mergers.

Schedule 1 also has a number of other amendments that give PHIAC further functions, including (1) requiring health funds to be incorporated as companies—this will ensure a professionalism in the health funds and will ensure that funds are subject to the financial rigour that members could legitimately expect in any membership arrangement; (2) amending the act to require health funds to hold health insurance as their primary business so that health fund moneys are spent on health insurance matters; (3) making sure that business decisions must now be made acting in the interests of members, and this also gives the courts powers to set aside transactions which are not in the interests of members of the fund; (4) there will also be a new civil penalty regime for directors where serious contraventions have occurred without them taking reasonable steps to avoid them.

The opposition supports all of these amendments because we believe they will make the industry more accountable and more in line with the expectations of their membership. However, we believe the government should go further, and that PHIAC should be made a stronger and more independent authority. The huge rebate the government is now pouring into private health insurance adds weight to that argument and that there needs to be effective monitoring of the spending of that rebate.

The powers in relation to the prudential regulation of registered funds are dealt with in schedule 2 of the bill. At the moment the minimum reserve requirements do not adequately reflect the reality that a number of funds have operated within these for a number of years. It is proposed to strengthen PHIAC's role by giving it increased power of oversight and the power to order the appointment of an administrator or the wind-up of a fund. It is worth noting that, as at 30 June last year, PHIAC reported that five out of 44 funds were in breach of the solvency standards—down from nine in the previous year. It is unsettling to the opposition that this number of funds are in breach of these requirements. This bill will require PHIAC to set a standard, which may differ between various health benefit organisations, in writing. PHIAC is required to consult with the Australian Government Actuary in that process, and these standards would be a disallowable instrument of this parliament.

The involvement of the Government Actuary is a key to the success of these arrangements in the view of the opposition. We believe it is the appropriate body from which PHIAC can draw advice over capital adequacy and solvency standards, but under the legislation there is no requirement for PHIAC to actually follow the actuary's advice. Again I am drawn to my point relating to the experience and skills base in PHIAC currently. The opposition has put forward an amendment to require the council to publish its reasons if it decides to reject the advice of the Government Actuary, so that the council's decisions will be transparent.

With regard to schedule 3 of the bill, these measures deal with a number of changes that arise out of the defects and unforeseen consequences of the 1998 private health insurance rebate legislation. This bill will remove the requirement for annual registration for receiving the rebate—meaning that, while we may have some incorrect payments, the administration becomes much simpler. In keeping with Senator Harradine's amendments, should a fund not offer no gap or no gap policies by July 2000, the minister will have the power under these amendments to have them wound up. The Health Insurance Commission will be required to pay claims within 14 days. Fund members who have had a claim rejected will be able to seek a review by the Health Insurance Commission before having to go to the Administrative Appeals Tribunal as currently applies.

While we agree with these amendments, this serves to underline for us the rather ham-fisted and excessively hurried approach the government has had to the health rebate legislation. The point that needs to be made is that the government keeps making change after change to private health insurance without ever planning out what it wants to do or how it will get there. I refer the government to the Industry Commission report No. 57 into private health insurance. On page 364 of that report it states:

The overriding purpose of any regulatory regime should be the protection of consumers and not the protection of inefficient funds.

This is one of the key objectives of the opposition in relation to the private health insurance legislation, and I am pleased that the government has accepted the opposition amendments to give a stronger set of consumer rights for those with health insurance. Under the opposition amendments, the council will have a clear set of objectives which require the protection of consumer interests and the minimisation of premium increases.

Other important changes include: public reports will show the price increases for each fund and each state, which will allow consumers to shop around between health funds; rule changes will no longer be allowed to be made in secret; all members will receive an explanation of changes in plain English before they become effective; appeals will be allowed against decisions of the Health Insurance Commission to recover overpayments of the 30 per cent health rebate; and a waiver will be allowed where the overpayment is due to incorrect information or administrative error. These changes will give consumers more power and will force the industry to be more competitive.

We have also proposed amendments to improve the accountability of the industry regulator, the Private Health Insurance Administration Council. Council members will no longer be able to be drawn from people managing or working for a fund in order for it to operate at arms length from the industry. These changes will make the bill stronger, and this will be good for the long-term health of the private health insurance funds. I indicate that we will support the bill, and we hope that other senators will support the amendments we move today.