Bills Digest no. 112 2007–08
Private Health Insurance Legislation Amendment Bill
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Contact officer & copyright details
Private Health Insurance Legislation
Amendment Bill 2008
introduced: 15 May
House: House of Representatives
Portfolio: Health and Ageing
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
The Private Health Insurance Legislation Amendment Bill 2008
(the Bill) proposes, amongst other things, to amend the Private
Health Insurance Act 2007 (the Private Health Insurance Act)
and other related legislation to remove the dual regulation of
health-related business conducted through health benefit funds by
both the Private Health Insurance Administration Council (the
Council) and the Australian Prudential Regulation Authority (APRA),
and to require private health insurers to be a company in order to
apply for registration to the Council.
The Private Health Insurance Act, which commenced on 1 April
2007, was part of the previous Government s attempt to overhaul the
private health insurance industry.
Organisations must be registered as private health insurers with
the Private Health Insurance Administration Council (the Council)
in order to carry on health insurance business.
It has been stated that since the Private Health Insurance Act
commenced, the Council has said it would be difficult to enforce
the Act in relation to private health insurers who are registered
bodies under the Corporations Act 2001 (the Corporations
of the Corporations Act relating to directors duties of registered bodies only
apply to interstate business and activities. Intrastate business and activities of
registered bodies are regulated by the relevant authority in the
State or Territory not the Council.
At the time of writing this Digest, the Bill has not been
referred to any committee for inquiry.
There has been little commentary on this
particular Bill. According to the Explanatory Memorandum, the
four insurers that will be required to incorporate have been
specifically consulted on the measures.
The Explanatory Memorandum states that the Bill has no financial
impact for the Government.
However, in its Regulatory Impact Statement on the Bill, the
Government states that there would be costs incurred by private
health insurers resulting from the proposed amendments, which
include costs in applying and becoming registered as a company;
legal costs in complying with the new legislation; as well as
administrative costs associated with changing their constitutions
or operating rules, informing members of and seeking approval for
These additional costs need to be considered in light of recent
reports claiming that the budgetary measures relating to the
Medicare Levy Surcharge in the 2008-09 Budget are likely to
increase private health insurance premiums by as much as 10
Four of 38 private health insurers, registered with the Council,
are not companies and will be affected by the requirement to become
Items 1-5 of the Schedule 1 of the Bill propose
to amend the following legislation:
- Australian Securities and Investments Commission Act
2001 (the ASIC Act)
- Corporations Act 2001 (the Corporations Act)
- Insurance Act 1973 (the Insurance Act), and
- Insurance Contracts Act 1984 (the Insurance Contracts
These proposed amendments have the effect of removing the
requirement for dual regulation of health-related business that are conducted via
health benefits funds, thereby ensuring that such health-related business be
regulated only by the Council.
For example, item 1 proposes to amend
the definition of financial product in paragraphs
12BAA(7)(d) and 12BAA(8)(b) of the ASIC
Act so as to clarify that insurance provided as part of a
health-related business conducted through a health benefits fund is
not a financial product under the ASIC Act and would not fall under
the unconscionable conduct and consumer protection provisions in
Items 3-5 propose similar amendments to the
Corporations Act, the Insurance Act and Insurance Contracts
Items 1-4 of Schedule 2 of the Bill propose
largely technical amendments to the Private Health Insurance Act
relating to restricted access insurers.
Item 2 proposes to amend subsection
126-20(6) of the Private Health Insurance Act by requiring
restricted access insurers to specify their registration
requirements in either their constitutions or rules.
Items 1, 3 and 4 propose amendments
consequential to item 2.
Items 1 and 2 of Schedule 3 of the Bill propose
to amend paragraph 126-10(1)(a) and
subsection 126-45(1) of the Private Health Insurance Act
to the effect that all private health insurers would have to be
registered as companies pursuant to the Corporations Act.
Currently, private health insurers may also be registered
bodies, which have different governance and regulation as
It is expected that the proposed amendment would ensure that
all private health insurers are subject to the same
governance and accountability standards.
Under the proposed amendments in items 1 and 2
(above) of Schedule 3 of the Bill, private health insurers who are
registered bodies must change their status and become registered as
companies under the Corporations Act before 1 January 2010.
Items 3 and 4 of Schedule 3 of the Bill contain
Item 3 addresses a situation where a body that
is not a company applies to be a private health insurer before the
Bill commences and on commencement of the Bill, a decision is not
yet made about that application. Under item 3,
that application would not be valid.
Item 4 proposes certain stamp duty exemptions
for private health insurers seeking to become registered as
companies pursuant to the Corporations Act to avoid cancellation of
their private health insurer registration between the date of
commencement of the Bill and 1 January 2010.
Item 1 of Schedule 4 of the Bill proposes to
amend section 55-5 of the Private Health Insurance
Act in relation to offers of discounted premiums for corporate
the principle of community rating.
The principle of community rating is defined in Division 55 of
the Private Health Insurance Act. According to section 55-1, this
principle is about ensuring that:
everybody who chooses has access to health
insurance, the principle of community rating prevents private
health insurers from discriminating between people on the basis of
their health or for any other reason described in this Part.
Section 55-5 provides that private health insurers must not
improperly discriminate between people who are or want to be
insured based on factors such as a person s health, gender, age,
sexual orientation and religious affiliation.
The proposed amendment would clarify that offers of discounted
premiums for corporate products would not be improper
discrimination for the purposes of the principle of community
It should be noted that under the proposed amendment, a private
health insurer would breach the principle of community rating by
cancelling a discounted insurance policy of a person who ceases to
be employed or contracted by the particular employer. This proposed
amendment appears to be consistent with the general principle of
community rating, whereby high risk groups, which would include
people ending their employment or contract due to age or suffering
a major illness, are not discriminated against. However, this
proposed amendment would not hinder an employer from cancelling
such discounted insurance policies.
Item 1 of Schedule 5 of the Bill proposes to
amend Division 55 of the Private Health Insurance
Act by inserting a new section
The Government states that it is keen to ensure that a broader
health cover is offered in private health insurance products and
policies and the ability to conduct pilot projects is regarded as
an important means of achieving that goal.
The proposed amendment seeks to do two things.
First, where private health insurers conduct pilot projects that
are specified in the Private Health Insurance (Complying Product)
Rules (the Rules), they would not breach the principle of community
Second, the Minister would be able to specify the kind of pilot
projects in the Rules, which private health insurers may
. For a
comprehensive and detailed discussion of the policies underlying
the Private Health Insurance Act, see Amanda Biggs and Luke
Health Insurance Bill 2006 , Bills Digest, no. 81,
Parliamentary Library, Canberra 2006-07.
26 May 2008
Bills Digest Service
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