Bills Digest no. 13 2009–10
Midwife Professional Indemnity (Run-off Cover Support
Payment) Bill 2009
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
introduced: 24 June
House: House of Representatives
Portfolio: Health and Ageing
1 July 2010
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 Bill seeks to impose a tax on midwives professional
indemnity insurance to contribute to the costs of run-off cover
(cover for midwives who cease practise).
More detailed information on the policy issues raised by this
suite of Bills is included in the Bills Digest for the Health
Legislation Amendment (Midwives and Nurse Practitioners) Bill 2009
and in particular insurance issues are dealt with in the Digest for
the Midwife Professional Indemnity (Commonwealth Contribution)
Scheme Bill 2009.
There are two types of medical indemnity insurance policy which
are known as a claims made policy or a claims incurred policy.
Under a claims incurred policy, the policy holder pays a premium
for each year and is covered for all claims that are lodged in
relation to an incident in that year, regardless of when the actual
claim is lodged.
Under a claims made policy, the policy holder pays a premium for
each year and is covered for all claims that are lodged in that
year and which relate to an incident that occurs in that year.
Claims made in other years for an incident that occurs in that
policy year will not be covered by a claims made policy.
If a policy holder wishes to leave practice for a period of time
or retire altogether, they must take out an additional insurance
policy, known as run-off cover , if they wish to have insurance
cover for claims made in those non-practising/retirement years.
The Midwife Professional Indemnity (Commonwealth Contributions)
Scheme Bill 2009 sets up a professional indemnity scheme in the
form of a claims made policy.
Along with two cognate Bills, the Health Legislation Amendment
(Midwives and Nurse Practitioners) Bill 2009 and the Midwife
Professional Indemnity (Commonwealth Contribution) Scheme Bill
2009, this Bill has been referred to the Senate Community Affairs
Committee for inquiry and was due to report by 7 August 2009. On
that date the Committee issued an interim report pointing to the
1880 submissions received and suggesting that more time was
necessary to give due consideration to the submissions. The new
reporting date is 17 August 2009. Details of the inquiry are at
The Explanatory Memorandum estimates that the two Bills dealing
with midwives indemnity will have a total cost of $25.2 million
over four years (including the effects of delegated legislation).
This figure incorporates the budgeted annual costs, which include
administrative and Department of Health and Ageing costs, and
administrative costs for Medicare Australia to introduce the
necessary systems changes and manage the program :
The Bill purports to impose a tax, referred to as a run-off cover support
payment on eligible insurers .
Sections 53 and 55 of the Commonwealth of Australia
Constitution Act (the Constitution) deal with laws imposing
taxation. In particular such a law:
- cannot originate in or be amended by the Senate
- must deal only with the imposition of taxation, so that any
provision in the proposed law dealing with any other matter has no
It would appear from the form and content of the Bill that it
conforms with the provisions of section 55 of the Constitution as
clause 4 imposes the run-off cover support payment as a tax.
At the outset it is important to note that
clause 8 provides that the Minister may, by legislative
instrument, make Rules in respect of the matters covered by the
proposed Act which are necessary and convenient to give effect to
the Act. Likewise
clause 9 provides for the making of regulations in
respect of the proposed Act. It would appear that most of the
relevant instruments will be Rules. Although both Rules and
Regulations are legislative instruments in accordance with the
Legislative Instruments Act 2003, rule-making is slightly
faster than regulation-making as regulations must be approved by
Executive Council whereas Rules do not. In any event, Rules and
Regulations are required to be tabled in both Houses of Parliament
and are subject to disallowance.
Clause 4 of the Bill provides that for each
contribution year a run-off cover support
payment is imposed as a tax on each eligible insurer. An eligible
insurer is an insurer included in a class of insurers specified in
Clause 5 of the Bill defines the term
contribution year which is either:
- a financial year that starts on or after 1 July 2010:
paragraph 5(1)(a), or
- another period of 12 months, specified in the Rules, which
starts on or after 1 July 2010: paragraph
A period set by rule under proposed paragraph 5(1)(b) may relate
to a particular insurer or a class of insurers: subclause
5(3). In addition, the Rules may declare that a specific
financial year is the last contribution year : subclause
Clause 6 provides that the amount of run-off
cover support payment payable by an eligible insurer in a
contribution year is calculated having regard to a percentage of
the insurer s premium income in the 12
months ending on 31 May in the contribution year or another period
set out in the Rules.
Paragraph 6(2)(a) limits the applicable
percentage to a maximum of 15 per cent. However, according to the
second reading speech:
The actual rate will be set through rules
detailed in a legislative instrument that will be tabled in
It is expected that the actual rate will be
initially set, on the advice of the Australian Government Actuary,
at 10 per cent of premiums.
Subclauses 6(3) and (4) allow
for the making of Rules which may specify a different period or a
different applicable percentage respectively for a particular
eligible insurer or class of insurers.
An eligible insurer s premium income
is calculated in accordance with the formula in clause
7. The calculation takes into account all premiums paid to
the insurer during the period in respect of midwife professional
indemnity cover, which is reduced by:
- the amount of goods and services tax payable in respect of
- stamp duty payable under a State or Territory law
- other amounts specified in the Rules, and
- an amount calculated having regard to the formula in
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library by telephoning Paula
Pyburne (02) 6277 2434 for matters relating to the main provisions;
and Kirsty Magarey (02) 6277 2680 or Rhonda Jolly (02) 6277 2429
for matters relating to policy.
. Section 6 of
the Legislative Instruments Act 2003 provides that a
legislative instrument includes, amongst other things, Statutory
Rules. A legislative instrument must be tabled in both houses of
the Parliament and is subject to disallowance.
Dr Rhonda Jolly
12 August 2009
Bills Digest Service
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