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Private Health Insurance Amendment Bill (No. 1) 2014

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2013-2014

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

 

 

 

 

PRIVATE HEALTH INSURANCE AMENDMENT BILL (NO. 1) 2014

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Health, the Hon Peter Dutton MP)

 





 

PRIVATE HEALTH INSURANCE AMENDMENT BILL (NO. 1) 2014

 

 

 

OUTLINE

The purpose of this Bill is to pause the income thresholds which determine the tiers for the Medicare levy surcharge (MLS) and the Australian Government Rebate (the Rebate) on private health insurance at 2014-15 rates for three years.

 

The Bill amends the Private Health Insurance Act 2007 (the PHI Act) to set income thresholds for the income tiers at the 2014-15 rates in the financial years 2015-16, 2016-17 and 2017-18.

 

Policy Background

As part of the 2014-15 Budget, the Government announced that it would pause income thresholds for the MLS and Rebate for three years from 2015-16.  The income thresholds will be paused at 2014-15 rates. The income thresholds for the MLS are set out in the Medicare Levy Act 1986 and the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999 and these Acts refer to the thresholds set out in the PHI Act. Subsequently no direct amendments to the tax law are required in order to pause the MLS income thresholds, the amendments to the PHI Act will pause the income thresholds for the MLS and the Rebate.

The links between the Rebate and the MLS will be preserved.  This is important as they operate together to ensure that people whose rebates are reduced because of income-testing have a strong incentive to retain their private health insurance.

 

Pausing the income thresholds at 2014-15 levels is expected to result in individuals with incomes marginally below each threshold whose income increases moving into a higher income tier sooner.  As a result some individuals who hold private health insurance may receive a lower Rebate than if the income thresholds were indexed as usual.  Some individuals who do not have private health insurance and who would not otherwise be liable to pay the MLS may become liable to pay the MLS and some individual’s level of MLS may increase. 

 

Financial Impact Statement

The change is estimated to result in net savings to the Government of $599.3 million over four years.  The savings will be invested by the Government in the Medical Research Future Fund.  

 

 



Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

PRIVATE HEALTH INSURANCE AMENDMENT BILL (NO.1) 2014

This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview of the Bill

As part of the 2014-15 Budget the Government announced that the income thresholds used in the calculation of the MLS and the Rebate would be paused at the 2014-15 levels for three years from 2015-16. 

Pausing the income tiers at the 2014-15 rates for three years will result in individuals with incomes marginally below each threshold whose income increases moving into a higher threshold sooner.  As a result some individuals who do not have private health insurance may be liable to pay the MLS. 

 

Human rights implications

 

The right to health

The right to health - the right to the enjoyment of the highest attainable standard of physical and mental health - is contained in article 12(1) of the International Covenant on Economic, Social and Cultural Rights. The United Nations Committee on Economic, Social and Cultural Rights (the Committee) has stated that health is a ‘fundamental human right indispensable for the exercise of other human rights’, and

that the right to health is not to be understood as a right to be healthy, but rather entails a right to a system of health protection which provides equality of opportunity for people to enjoy the highest attainable level of health.

 

Discussion of the Bill

The Committee states that the notion of ‘the highest attainable standard of health’ takes into account both the condition of the individual and the country’s available resources.  The right may be understood as a right of access to a variety of public health and health care facilities, goods, services, programmes and conditions necessary for the realisation of the highest attainable standard of health.

 

There is no incompatibility with the right to health.

Conclusion

This Bill is compatible with human rights as it does not raise any human rights issues.

 

The Hon Peter Dutton MP, the Minister for Health



PRIVATE HEALTH INSURANCE AMENDMENT BILL (NO.1) 2014

 

NOTES ON CLAUSES

 

Clause 1 - Short Title

This clause provides that the Bill, once enacted, may be cited as the Private Health Insurance Amendment Act (No. 1) 2014.

 

Clause 2 - Commencement

This clause provides that the Bill will commence on the day this Act receives Royal Assent.

 

Clause 3 - Schedule(s)

This clause provides that each Act that is specified in a Schedule to this Bill is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item has effect according to its terms.

 

SCHEDULE 1 - Amendments

 

Private Health Insurance Act 2007

 

Item 1 - After subsection 22-45(3)

The private health insurance singles and family thresholds determine whether a person is a ‘tier 1 earner’, ‘tier 2 earner’ or ‘tier 3 earner’ for section 22-30 of the Act.  For a person who is a tier 1 earner for a financial year, the private health insurance rebate to which he or she would otherwise be entitled is reduced by 10 %, for a tier 2 earner the reduction is 20% and for a tier 3 earner the rebate is reduced to nil (s 22-15 of the Act).

 

Section 22-45 of the Act provides for the annual indexation of the singles tier 1, tier 2 and tier 3 thresholds.  Indexation of the singles thresholds flows through to the corresponding private health insurance family thresholds (see section 22-40 of the Act). 

 

The level of indexation is currently determined in accordance with a statutory indexation factor set out in section 22-45. 

 

Item 1 inserts two new subsections 22-45(3A) and (3B).

 

Subsection 22-45(3A) provides that the amounts mentioned in section 22-35 (the private health insurance singles thresholds) are not to be indexed for the 2015-16, 2016-17 or 2017-18 financial years.  

 

Subsection 22-45(3B) provides that when an amount mentioned in section 22-35 is not indexed for a financial year because of the operation of 22-45(3A), the amount for the financial year is the amount for the most recent financial year for which the amount was indexed.  As the tier 1, tier 2 and tier 3 singles thresholds will all be indexed for the 2014-15 financial year; this will be the amount of indexation applied for the 2015-16, 2016-17 or 2017-18 financial years.