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Private Health Insurance Legislation Amendment (Age of Dependants) Bill 2021

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2019-2020-2021

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

 

 

 

 

PRIVATE HEALTH INSURANCE LEGISLATION AMENDMENT (AGE OF DEPENDANTS) BILL 2021

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Health and Aged Care, the Hon Greg Hunt MP)



PRIVATE HEALTH INSURANCE LEGISLATION AMENDMENT (AGE OF DEPENDANTS) BILL 2021

 

OUTLINE

The Private Health Insurance Legislation Amendment (Age of Dependants) Bill 2021 (the Bill) implements the 2020-21 Budget measure, ‘Supporting Our Hospitals — simpler and more affordable private health cover for all Australians’ , of which ‘Private Health Insurance - increasing the age of dependants’ was an element.

 

The Bill amends the Private Health Insurance Act 2007 and associated legislation to:

·          change the maximum allowable age for people to be covered under a family private health insurance policy as a dependent from up to 24 years old to up to 31 years old;

·          allow people with a disability, regardless of their age, to be covered under a family private health insurance policy as a dependent.

 

The amendments do not make it mandatory for private health insurers to offer this increased coverage for family products.

 

The first change helps provide continuity of care for younger Australians and encourages them to continue with private health insurance up until they reach the age of 31 years, which is the age at which Lifetime Health Cover commences. Lifetime Health Cover is a Government measure designed to encourage young people to take out private hospital insurance earlier in life and maintain it. Allowing younger people to remain on a family policy until the start of Lifetime Health Cover provides them with a clear decision point about maintaining their private health insurance, and increases the attractiveness of private health insurance to young people.

 

The second change provides people with a disability with the flexibility to access more affordable private health insurance as they can be covered under their family’s policy at a lower cost - rather than purchase their own policy.

 

Extensive consultation was undertaken in relation to this reform including the public release of a consultation paper, meetings with peak bodies and interested parties, and the receipt of written submissions.

 

These changes are part of the Government’s commitment to ensuring private health insurance is affordable and provides value for money for consumers.

 

The legislations to be amended are:

·            Private Health Insurance Act 2007 ;

·            Private Health Insurance (Prudential Supervision) Act 2015 ; and

·            Age Discrimination Act 2004 .

 

Financial Impact Statement

The total estimated financial cost of the changes contained in the Bill from 2020-21 to 2023-24 is $0.5 million.

 



Statement of Compatibility with Human Rights

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

PRIVATE HEALTH INSURANCE LEGISLATION AMENDMENT (AGE OF DEPENDANTS) BILL 2021

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

The Bill amends the Private Health Insurance Act 2007 and associated legislation to:

·          change the maximum allowable age for people to be covered under a family private health insurance policy as a dependent from up to 24 years old to up to 31 years old;

·          allow people with a disability, regardless of their age, to be covered under a family private health insurance policy as a dependent.

 

The references to family include a single adult with a dependent. The amendments do not make it mandatory for private health insurers to offer this increased coverage for family products.

 

The first change helps provide continuity of care for younger Australians and encourages them to continue with private health insurance up until the age of 31 years, which is the age at which Lifetime Health Cover commences. Lifetime Health Cover is a Government measure designed to encourage young people to take out private hospital insurance earlier in life and maintain it. Allowing younger people to remain on a family policy until the start of Lifetime Health Cover provides them with a clear decision point about maintaining their private health insurance, and increases the attractiveness of private health insurance to young people.

 

The Age Discrimination Act 2004 will be amended to allow private health insurers to cover older dependent people.

 

This change engages the Right to Equality and Non-Discrimination, but is reasonable, proportionate and to the advantage of all insured people. By allowing for people aged under 31 years to be covered on a family policy, the number of younger people with private health insurance is expected to increase. Furthermore, those who continue to be covered until 31 years are expected to be significantly more likely to take out and maintain their own policies. This is of significant benefit and to the advantage of people not covered by this measure. Private health insurance in Australia is based on community rating where all people pay the same price for the same product, regardless of age or health status. Younger people, as a group claim fewer benefits than older people. Encouraging younger people to opt in and retain private health insurance by making it more affordable for them, also benefits older people with affordability, because the sustainability of the sector and affordability of products relies upon lower claiming younger people subsidising higher claiming older people.

 

This change may engage the Right to Health but does not adversely affect any person’s access to this right. The Australian Government maintains that private health insurance is an essential part of Australia’s mixed public and private health system. By encouraging more young people to take out private health insurance, the private health system becomes more sustainable without removing any other person’s right to the highest possible attainment of mental and physical health.

 

The second change provides people with a disability with the flexibility to access more affordable private health insurance as they can be covered under their family’s policy at a lower cost - rather than purchase their own policy.

 

The overall changes in their entirety will be to the advantage to a person with a disability compared to their current situation and compared to others. Since it will be to the advantage of people with a disability, these changes qualify as a special measure under the Disability Discrimination Act 1992. The changes provide more favourable treatment for people with a disability because they can be dependents on family policy when they are over the age of 31 years. Thus, a person with a disability may have access to lower cost private health insurance for a longer period of time compared to others. In addition, a person with a disability will not face a Lifetime Health Cover loading if they decide to purchase their own standalone product after having been continuously covered on their family’s product, because they will be considered to have had private health insurance for the period they were covered as a dependent.

 

It is proposed a definition of disability will be included in the Private Health Insurance (Complying Product) Rules, and this will be ‘a participant under the National Disability Insurance Scheme under the National Disability Insurance Scheme Act 2013’ . It is also proposed private health insurers will be permitted to be more expansive in their definition under their insurer rules, but will not be able to apply a narrower definition than that in the Rules. The commencement date will be stated in the Rules.

 

Extensive consultation has occurred, including through a consultation paper that was published on the Department of Health’s Consultation Hub, group and bilateral meetings with a number of external stakeholders, and specifically with disability peak organisations and private health insurers.

 

Human rights implications

The Bill engages, or has the potential to engage, the right to health - Article 12 of the International Covenant on Economic, Social and Cultural Rights (ICESCR).

 

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 to which Australia is a signatory. Article 12(2)(d) provides for “ steps to be taken by the States Parties to the present Covenant to achieve the full realization of this right shall include those necessary for the creation of conditions which would assure to all medical service and medical attention in the event of sickness.”

 

This Bill is designed to improve private health insurance participation rates and increase the uptake of private health insurance by both younger people and people with a disability of any age.

 

In summary, the amendments in this Bill do not derogate a person’s right to health, and to the extent that they improve the uptake of private health insurance, they are intended to promote access to health services.

 

Conclusion

The Bill is compatible with human rights because it promotes the right to health, and to the extent that it may limit human rights, those limitations are reasonable, necessary and proportionate.

 

The Hon Greg Hunt MP, Minister for Health and Aged Care

PRIVATE HEALTH INSURANCE LEGISLATION AMENDMENT (AGE OF DEPENDANTS) BILL 2021

 

NOTES ON CLAUSES

 

Clause 1 - Short Title

Clause 1 provides for the short title of the Act to be the Private Health Insurance Legislation Amendment (Age of Dependants) Act 2021 .

 

Clause 2 - Commencement

This clause sets out that the Act commences on 1 April 2021.

 

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. This is a technical provision which gives operational effect to the amendments contained in the Schedules.

 

SCHEDULE 1 - AMENDMENTS

This Schedule will allow private health insurers to offer coverage under family policies for dependent students and non-students up to the age of 31, and dependent people with a disability regardless of age. It will not be mandatory for insurers to offer this increased coverage.

 

Age Discrimination Act 2004

 

Item 1 - Schedule 2 (table item 9A, column headed “Provision(s)”)

This item amends the Age Discrimination Act 2004 to allow private health insurers to cover older dependent people by adding to an existing exception for private health insurance in the Age Discrimination Act 2004 .

 

Private Health Insurance Act 2007

 

Items 2 to 9 - Subsections 22-5(2) (heading), 22-5(2), 22-5(3), 22-5(4)(c), 22-15(5) (note 2), 22-25(1)(b), 22-25(2) and 22-30(1)(b)

These items substitute the term of ‘dependent persons’ for ‘dependent children’, or ‘dependent person’ for ‘dependent child’ as a result of the definition of ‘dependent child’ being replaced with ‘dependent person’ in Schedule 1 the dictionary of definitions for the Private Health Insurance Act 2007 .

 

Items 10, 11 and 12 - Subsection 63-5(4)

The current subsection 63-5(4) allows insurers to charge a different premium for a policy that covers a dependent non-student than the premium for a policy in the same product that includes one or more dependent children or dependent students.

 

These items allow insurers to charge a different premium for a policy that covers a dependent person with a disability than the premium for a policy in the same product that includes one or more dependent children or dependent students.

 

These items have the effect, through subsection 55-5(2)(c) of the Private Health Insurance Act 2007 , of excluding premiums charged in compliance with subsection 63-5(4) from being improper discrimination under the Private Health Insurance Act 2007 .

 

The amended subsection 63-5(4) substitutes the term of ‘dependent non-student’ for ‘dependent child non-student’ and ‘dependent persons’ for ‘dependent children’ as a result a new definition of ‘dependent child non-student’ and ‘dependent child’ being placed in Schedule 1 the dictionary for the Private Health Insurance Act 2007 .

 

Item 13 - Subsection 63-5(5)

This item repeals the definition of ‘dependent child non-student’ as part of the consolidation of the definitions of ‘dependent person’ into Schedule 1 the dictionary for the Private Health Insurance Act 2007 .

 

Items 14, 15 and 16 - Subsection 333-20(1)

These items allow the new term ‘person with a disability’ to be defined, if necessary, by the Minister for Health in the Private Health Insurance (Complying Product) Rules. The Private Health Insurance (Complying Product) Rules are made by legislative instrument by the Minister for Health. These items enable the Private Health Insurance (Complying Product) Rules to provide for matters required or permitted in Schedule 1 the dictionary of definitions for the Private Health Insurance Act 2007 .

 

Item 17 - Clause 1 of Schedule 1

This item is intended to allow a dependent person with a disability to be treated the same as an adult for the purpose of Lifetime Health Cover. Part 2-3 of the Private Health Insurance Act 2007 outlines the rules to determine when a person is subject to a Lifetime Health Cover loading and the amount of the loading. This amendment means a person with a disability is considered to have private hospital cover if they are covered under a family policy as a dependent person with a disability. It is of relevance should the person with a disability, after 31 years of age, not be covered under a family policy and decide to purchase their own private hospital cover, they will not immediately be subject to a Lifetime Health Cover loading. Consistent with other persons, the person with a disability would have 1,094 days from the date they ceased to be covered under a family policy, before a Lifetime Health Cover loading would apply.

 



 

Items 18, 19 and 20 - Clause 1 of Schedule 1

Schedule 1 forms the dictionary of definitions used in the Private Health Insurance Act 2007 . These items unify, name and define, and expand the current categories of ‘dependent child’.

 

They replace the term of ‘dependent child’ which covered three categories of ‘dependent child’ with ‘dependent person’ which covers four categories of ‘dependent persons’.

 

The new category of ‘dependent person’ is a ‘dependent person with a disability’. Two of the current categories of ‘dependent child’ which were not individually defined have been named ‘dependent child’ and ‘dependent student’ and are individually defined. The current categories of ‘dependent child’ which was individually defined has had its name changed from to ‘dependent child non-student’ to ‘dependent non-student’.

 

‘Dependent student’ and ‘dependent non-student’ have had their maximum age of 24 years old increased to 31 years old.

 

Dependent child, student and non-students, retain the requirement to not have a partner. The new category of dependent person, dependent person with a disability, are allowed to have a partner and has no maximum age limit.

 

The terms ‘partner’ and ‘dependent’ are not defined in the Private Health Insurance Act 2007 as these terms are commonly understood and applied, with some aspect of the definition contained in the rules of individual private health insurers. There is no evidence additional regulation is required at this stage.

 

Item 21 - Clause 1 of Schedule 1

This item substitute the term of ‘dependent person’ for ‘dependent child’ as a result of the definition of ‘dependent child’ being replaced with ‘dependent person’ in Schedule 1 the dictionary of definitions for the Private Health Insurance Act 2007 .

 

Item 22 - Application

This item makes it clear the amendments to subsection 22-30(1)(b), a provision related to the income testing of families for private health insurance, of the Private Health Insurance Act 2007 apply from 1 April 2021 onwards.

 

Private Health Insurance (Prudential Supervision) Act 2015

 

Items 23, 24 and 25 - Subsection 4(1) and Subsection 15(4)

These items substitute the term of ‘dependent persons’ for ‘dependent children’, or ‘dependent person’ for ‘dependent child’ in the Private Health Insurance (Prudential Supervision) Act 2015 as a result of the definition of ‘dependent child’ being replaced with ‘dependent person’ in Schedule 1 the dictionary of definitions for the Private Health Insurance Act 2007 .