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Private Health Insurance (Reinsurance Trust Fund Levy) Bill 2003

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2002-2003

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

PRIVATE HEALTH INSURANCE (REINSURANCE TRUST FUND LEVY) BILL 2003

 

 

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

Senator the Hon. Kay Patterson)



 

PRIVATE HEALTH INSURANCE (REINSURANCE TRUST FUND LEVY) BILL 2003

 

 

OUTLINE

 

The Australian National Audit Office Audit Report No. 32 1999-2000: “Management of Commonwealth Non-Primary Industry Levies”, identified issues with the Private Health Insurance Administration Council (Council) administration levy (established via subparagraph 82G(1)(h)(i) of the National Health Act 1953 ) having regard to the operation of section 55 of the Commonwealth of Australia Constitution (the Constitution). 

 

Section 55 provides that laws imposing taxation shall deal only with the imposition of taxation, and any provision therein dealing with any other matter shall be of no effect.

 

This Bill, together with three other Bills, reimposes four health insurance industry levies (and validates previous impositions of the levies) having regard to section 55 of the Constitution with a view to removing any doubt regarding the technical validity of the levies.

 

The four private health insurance industry levies being reimposed are:

 

§   the Private Health Insurance Administration Council administration levy (subparagraph 82G(1)(h)(i) National Health Act 1953 );

§   the collapsed organization levy (paragraph 82G(1)(j) National Health Act 1953 );

§   the Acute Care Advisory Committee (ACAC) review levy (subparagraph 82G(1)(h)(ii) National Health Act 1953 ); and

§   the Reinsurance Trust Fund levy (section 73BC National Health Act 1953 ).

 

These levies are to be reimposed via the following Bills:

 

§   Private Health Insurance (Council Administration Levy) Bill 2003;

§   Private Health Insurance (Collapsed Organization Levy) Bill 2003;

§   Private Health Insurance (ACAC Review Levy) Bill 2003; and

§   Private Health Insurance (Reinsurance Trust Fund Levy) Bill 2003.

 

The National Health Amendment (Private Health Insurance Levies) Bill 2003 amends the National Health Act 1953 making changes ancillary to, or consequential to, the reimposition of four private health insurance industry levies.

 

The reimposition effects a technical change in process.  The changes effectively repeal the existing levy mechanisms replacing them having regard to section 55 of the Constitution.  While the levies will still be administered by the Council, the money collected under the levies will be placed into the consolidated revenue fund and then appropriated for the purposes of those levies.

 

These levies only apply to the private health insurance industry.  Only registered health benefits organizations are required to meet liabilities imposed via the levies.  The purpose of the reimposition of the levies is not to increase the financial burden on the private health insurance industry.  This proposal does not involve a change in policy but rather corrects a technical defect to ensure that the legislation functions as intended.

 

Doubt in relation to the validity of the levies has the potential to substantially reduce or impede Council in undertaking its functions including the prudential regulation of the private health insurance industry.  Given the role of Council its financial basis should not be compromised by doubt in relation to section 55 of the Constitution.

 

Reinsurance Trust Fund levy

 

This Bill reimposes the Reinsurance Trust Fund levy.  The purpose of the reimposed Reinsurance Trust Fund levy is the same as in the current provision in section 73BC of the National Health Act 1953 .  A payment is imposed on each registered health benefits organization, to be calculated in accordance with the principles determined in writing by the Minister pursuant to subsection 73BC(5B) of the National Health Act 1953 , for the purpose of the registered health benefits organization’s participation in the Reinsurance Trust Fund.

 

Participation in the Reinsurance Trust Fund is a condition of registration for registered health benefits organizations.  The Reinsurance Trust Fund provides for internal cross-subsidisation for aged, chronic and long-term acute care patients within the industry.  The Reinsurance Trust Fund supports community rating by cross-subsidisation for high cost contributors. 

 

The Reinsurance Trust Fund operates as a zero sum equation.  The amount of money paid into it is the amount that is redistributed to the industry.  Organizations are required to pay into the Reinsurance Trust Fund levy when they have 500 or more single equivalent units in a State or Territory.  Payments are made from the Reinsurance Trust Fund for contributors who are either over 65 years of age or have been in-hospital for 35 days cumulative within a 12-month period.

 

Validity

 

The original intent of the Reinsurance Trust Fund levy has not changed.  This legislation addresses a technical concern first identified by the Australian National Audit Office.  As such, this Bill validates the previous purported impositions of the Reinsurance Trust Fund levy.

 

 

FINANCIAL IMPACT STATEMENT

 

The Private Health Insurance (Reinsurance Trust Fund Levy) Bill 2003 is not expected to have any significant impact upon the finances of the Commonwealth.

 



 

 

Private Health Insurance (Reinsurance Trust Fund Levy) Bill 2003

 

NOTES ON CLAUSES

 

Part 1

 

Clause 1:  Short Title

 

This clause provides that upon enactment this Act may be cited as the Private Health Insurance (Reinsurance Trust Fund Levy) Act 2003 .

 

Clause 2:  Commencement

 

This clause provides for the commencement of the Act on 1 July 2004 to enable a seamless transition in the reimposition of the Reinsurance Trust Fund levy between financial years.

 

Clause 3: Crown to be bound

 

This clause provides that this Act binds the Crown in each of its capacities.

 

Clause 4:  Extension of Act to external territories

 

This clause provides that this Act extends in its application to the Territory of Cocos (Keeling) Islands and to the Territory of Christmas Island.

 

Clause 5: Definitions

 

This clause establishes a range of definitions for the purposes of the Act.  In particular the clause defines the Reinsurance Trust Fund as the Health Benefits Reinsurance Trust Fund established by subsection 73BC(2) of the National Health Act 1953 .

 

Clause 6:  Imposition of the Reinsurance Trust Fund levy

 

Subclause 1 provides that the Reinsurance Trust Fund levy is imposed on each registered health benefits organization on:

 

·           Each day specified in the regulations as a Reinsurance Trust Fund levy day for a financial year; and

·           Each day (if any) determined in writing by the Minister as a supplementary Reinsurance Trust Fund levy day for a financial year.

 

The Minister’s power to determine supplementary Reinsurance Trust Fund levy days is included to cover unforeseen needs in relation to the Reinsurance Trust Fund.

 

Subclause 2 of this clause provides that the regulations may not impose more than four Reinsurance Trust Fund levy days for a financial year.

 

Subclause 3 of this clause provides that the Minister may not determine more than two supplementary Reinsurance Trust Fund levy days for a financial year.

 

The purpose of the Reinsurance Trust Fund levy is to require payment of monies from registered health benefits organizations, calculated having regard to the principles determined by the Minister in relation to the operation of the Reinsurance Trust Fund levy, for their participation within the Reinsurance Trust Fund.  The purpose is set out in the National Health Amendment (Private Health Insurance Levies) Bill 2003.

 

Clause 7:  Rate of the Reinsurance Trust Fund levy

 

This clause provides that the rate of the Reinsurance Trust Fund levy to be imposed on the Reinsurance Trust Fund levy day is the rate that is determined in writing by the Council and applies on that day.  This clause also provides that the rate of the Reinsurance Trust Fund levy imposed on a supplementary Reinsurance Trust Fund levy day is the rate determined in writing by the Minister and that applies on that day.

 

Subclause 2 of this clause provides that in determining the rate of the Reinsurance Trust Fund levy, the Council, or in relation to the supplementary Reinsurance Trust Fund levy the Minister, must follow the Ministerial principles made under subsection 73BC(5B) of the National Health Act 1953 .

 

Subclause 3 of this clause will enable the Council or the Minister to set a zero rate for the Reinsurance Trust Fund levy and supplementary levy if necessary.

 

A maximum rate has not been set in the legislation for the Reinsurance Trust Fund levy or supplementary Reinsurance Trust Fund levy.  In determining rates the Council and the Minister must follow the Ministerial principles made under subsection 73BC(5B) of the National Health Act 1953 .

 

Clause 8: Minister to obtain advice from Council

 

Before the Minister may make a determination in relation to a supplementary Reinsurance Trust Fund levy, the Minister must obtain and take into account advice from Council in relation to the following:

 

·           whether to make a determination;

·           the day or days to be specified as the supplementary Reinsurance Trust Fund levy day or days for a financial year; and

·           the rate that is to be specified as the rate of the supplementary Reinsurance Trust Fund levy.

 

Clause 9:  Validation of Reinsurance Trust Fund levy

 

This clause validates all previous Reinsurance Trust Fund payments.

 



Clause 10:  Validation of late payment penalty in respect of Reinsurance Trust Fund levy

 

This clause validates all previous late payment penalties made in accordance with subsection 73BC(9) of the National Health Act 1953 .

 

Clause 11:  Regulations

 

This clause provides for the Governor-General to make regulations prescribing matters:

 

§   required or permitted by this Act to be prescribed; or

§   necessary or convenient to be prescribed for carrying out or giving effect to this Act.

 

Subclause 2 of this clause provides that prior to the Governor-General making regulations under the previous subclause the Minister must take into consideration any relevant recommendations made to the Minister by the Council.