Bills Digest No. 24  1998-99 Private Health Insurance Incentives Amendment Bill 1998


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WARNING:
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 Bill.

CONTENTS

Passage History
Purpose
Background
Main Provisions
Contact Officer and Copyright Details

Passage History

Private Health Insurance Incentives Amendment Bill 1998

Date Introduced: 12 November 1998

House: House of Representatives

Portfolio: Health and Aged Care

Commencement: On Royal Assent and for Schedule 2, 1 July 2000

Purpose

The government has introduced a trilogy of bills, which combine to replace the current private health insurance incentives initiative with another incentives payment scheme aimed at reducing the decline in private health insurance membership and restoring the balance in the health system.

The incentive will be equal to 30% of the cost of private health insurance cover and will not be income tested.

The Private Health Insurance Incentives Bill 1998 introduces incentives in the form of either direct payments or reduced premiums.

The Taxation Laws Amendment (Private Health Insurance) Bill 1998 provides an alternative incentive in the form of tax offsets (rebates).

The Private Health Insurance Incentives Amendment Bill 1998 (the Bill) completes the reform package by providing for the closing off of the current Private Health Insurance Incentives Scheme (PHIIS) and the repeal of the Private Health Insurance Incentives Act 1997 on 1 July 2000

Background

The current PHIIS has operated from 1 July 1997. The benefit is provided by way of either reduced premiums or tax offset. The scheme is income tested and is therefore not available to singles with incomes above $35,000 nor couples or families with combined incomes in excess of $70,000. The threshold is increased for those with dependent children.

The current incentive amount is dependent upon the type of policy held, but a guide to the benefits available would be $250.00 to a couple with hospital and ancillary cover and $450.00 for families.

There have been dramatic changes in the proportion of the population covered by private health insurance over the last decade or so. In relation to hospital cover, at 30 June 1984, 50.0% of the population had private health cover. In 1998 coverage had fallen to 30.6%

In 1996 the coverage was 33.6% and in 1997, 31.9%. The 1998 figures showed a decline in membership to 30.6% but the rate of decline had apparently slowed.

Main Provisions

Private Health Insurance Incentives Amendment Bill 1998

1. Summary

Schedule 1 introduces transitional provisions that allow the closing off of the current PHIIS.

Schedule 2 provides for the repeal of the Private Health Insurance Incentives Act 1997 (the Principal Act) on 1 July 2000. This should permit the finalisation of administrative matters associated with the current scheme.

2. Schedule 1 - Amendment of the Private Health Insurance Incentives Act 1997

2.1 Applications for registration

Currently subsection 4-3(6) of the Principal Act states that an application for registration under the current PHIIS may be made at any time before or during the relevant financial year.

People who intend to apply for a tax offset at the end of the financial year but find they have insufficient tax assessed to allow them to claim the full rebate need a mechanism to allow them to make a retrospective application to their health fund to claim, via the premium reduction, the balance of the tax offset they are unable to claim.

Item 1 repeals existing subsection 4-3(6) and inserts a new subsection. New subsection 4-3(6) extends the period of registration in respect of a policy for the financial year that began on 1 July 1997 to 31 December 1998 and in respect of a policy for the financial year that began on 1 July 1998 to 31 December 1999.

2.2 Reduction of insurance premiums - current system ceases to apply

Section 5-1(1) of the Principal Act provides for a reduction in premiums by the reduction amount, which is basically by the incentive amount.

Item 3 inserts new subsection (1A) which states that if a person has received a tax offset and the amount of the tax offset is less than the reduction amount, the reduction amount is to be reduced by the amount of the offset. Otherwise the amount of the premium is not to be reduced under subsection (1).

Item 4 inserts new paragraphs 5-1(2)(e) and 5-1(2)(f) which describe additional circumstances where a reduction of premium is not permitted. Advance payments made on or before 31 December 1998 that relate to a period after 30 June 1999 and all payments made after 31 December 1998 are excluded from the current premium reduction scheme. The new scheme takes over.

2.3 Amounts payable to health funds

Item 5 inserts new paragraph 8-4(1)(c) which provides for an adjustment to amounts payable to a health fund in situations where there was no reduction in premium for the relevant month or the reduction in premium for the relevant month was reduced under new subsection 5(1A), such as in the situation of insufficient tax offset compensated for by partial reduction in premium.

3. Schedule 2 - Repeal of the Private Health Insurance Incentives Act 1997

Item 1 repeals the whole of the Private Health Insurance Incentives Act 1997. The repeal takes effect on 1 July 2000.

Private Health Insurance Incentives Bill 1998

The Private Health Insurance Incentives Bill 1998 establishes a scheme under which persons are entitled to an incentive payment by way of direct payment or reduced premiums. The payment generally represents the greater of 30% of the amount of premium paid or an incentive amount which is predetermined.

Please refer to the Bills Digest in respect of the Private Health Insurance Incentives Bill 1998 for further detail.

Taxation Laws Amendment (Private Health Insurance) Bill 1998

The amendments contained in Schedules 1 & 2 to the Taxation Laws Amendment (Private Health Insurance) Bill 1998 provide a refundable tax offset as an alternative form of incentive for persons who take out private health insurance.

The offset is designed to mirror the incentive payments in the Private Health Insurance Incentives Bill 1998.

Please refer to the Bills Digest in respect of the Taxation Laws Amendment (Private Health Insurance) Bill 1998 for further detail.

Contact Officer and Copyright Details

Lesley Lang
23 November 1998
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

IRS staff are available to discuss the paper's contents with Senators and Members
and their staff but not with members of the public.

ISSN 1328-8091
© Commonwealth of Australia 1998

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1998.

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