Bills Digest no. 171 2008–09
Private Health Insurance Legislation Amendment Bill
2009
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
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Date
introduced: 3 June
2009
House: House of Representatives
Portfolio: Health and Ageing
Commencement:
Sections 1 3 on Royal
Assent; Schedule 1 items 1 3 and item 13, on the later of 1 July
2009 or Royal Assent; Schedule 1 items 4 12 and item 14, at the
same time as sections 3 9 of the Private Health Insurance
(National Joint Replacement Register Levy) Act
2009.
Links: The 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
at http://www.comlaw.gov.au/.
The purpose of this Bill is
twofold. First, the Bill proposes to amend the Private Health
Insurance Act 2007 (PHIA 2007) and the Age Discrimination
Act 2004 (Age Discrimination Act), to permanently allow
private health insurers to offer extended family policies that
cover single 18 24 year olds who are not studying full-time.
Second, the Bill proposes consequential amendments to the PHIA
2007 to make it consistent with the Private Health Insurance
(National Joint Replacement Register Levy) Bill 2009, which seeks
to establish cost recovery arrangements for the maintenance of the
National Joint Replacement Register.
Currently, the PHIA 2007 requires that private health insurers
are only allowed to offer complying health insurance policies to
individuals or persons that are specified as belonging to a
particular category of insured groups.
These insured groups are not specified in the PHIA 2007, but are
specified in private health insurance rules which are legislative
instruments.[1]
Categories of insured groups that are specified in the rules
include singles, couples and families with dependent children.
Since late 2007, the private health insurance rules have also
included a category known as a dependent child non-student , being
a person who is aged between 18 and 24, is single and not in full
time education. This has allowed health insurers to offer extended
family policies that include health cover to these dependent child
non-students . These policies were developed by health insurers to
encourage young adults to maintain their health cover into
adulthood.[2]
Health insurers can charge a higher premium for these extended
family policies compared to the premiums they charge for other
family policies that cover younger children or older children who
are students. However, the premium of an extended family policy is
usually less than that charged for a separate health insurance
policy for a single adult child combined with a family policy. This
makes this type of policy more attractive for families with older
single children not in full time education. The Minister s second
reading speech notes the current lower participation rate of young
adults in private health insurance arrangements.[3]
The arrangements allowing health insurers to offer these
policies for dependent child non-students have been temporary,
although they have been extended on a number of occasions since
their introduction in late 2007. Most recently, the Private Health
Insurance (Complying Product) Amendment Rules 2008 (no.3) specified
the insurance category dependent child non-student be extended
until December 2009.[4]
The Bill proposes amendments to insert the category of dependent
child non-student into the PHIA 2007. This will allow health
insurers to offer these extended family policies covering this
specific category of insured group on a permanent basis, rather
than on the temporary basis currently specified in the private
health insurance rules. No other category of insured group is
similarly specified in the PHIA 2007. The Bill also proposes
amendments to the Age Discrimination Act
Statistics from the industry regulator, the Private Health
Insurance Administration Council (PHIAC) show that the percentage
of persons in the 20 24 age cohort covered by private hospital
insurance has declined in recent years from 5.2 per cent in 2006 to
3.98 per cent in 2008.[5] The Government intends that the proposed provisions in
this Bill will make private health insurance for young adults more
attractive.[6]
The Bill also proposes consequential amendments to PHIA 2007 to
allow for the administration of the NJRR levy proposed in the
Private Health Insurance (National Joint Replacement Register Levy)
Bill 2009. This latter Bill proposes to impose a levy on sponsors
of joint replacement prostheses in order to recover costs
associated with the maintenance of the NJRR.[7]
The 2009 10 Portfolio Budget Statement for Health and Ageing
flagged that legislation allowing extended family policies to
continue to be offered would be introduced in 2009.[8]
The introduction of cost recovery arrangements for the NJRR was
announced in the 2009 10 Budget as a cost saving measure.[9]
The main provisions of the Bill have been referred to the
Community Affairs Legislation Committee for inquiry and report by
16 June 2009, in accordance with Senate resolutions of 14 May 2009
to refer certain budget-related bills to Senate Committees.
The proposed provisions in this Bill relating to extended family
policies have not attracted significant commentary, which contrasts
with recent debate over changes to the private health insurance
rebate. This is probably because, unlike the proposed changes to
the private health insurance rebate, the effects of this Bill are
not expected to reduce private health insurance membership; on the
contrary, the stated aim is to bolster private health insurance
uptake for young adults where declines have been observed.
The proposed consequential amendments to the PHIA 2007 contained
in this Bill along with the proposed provisions in the Private
Health Insurance (National Joint Replacement Register Levy) Bill
2009, introducing a levy, are estimated to realise savings of $5
million over four years.[10]
The Explanatory Memorandum to this Bill does not predict any
financial implications for the proposed provisions to allow health
insurers to offer permanently extended family policies covering the
dependent child non-student . However, as the proposed provisions
are intended to support the maintenance of private health insurance
there may be financial implications if higher than expected
Government expenditure on the private health insurance rebate
occurs as a result.
The private health insurance rebate is a discount on private
health insurance premiums paid by the Government. Those under 65
with private health cover currently receive a 30 per cent rebate on
their health insurance premiums.[11] If the proposed provisions in this Bill result in
increasing numbers of extended family policies being purchased (at
a higher premium cost than a normal family policy), then it could
be expected that Government expenditure on the rebate may also
increase.
Item 1 proposes to replace a reference to Part
2 3 in Schedule 2 with a reference to Part 2 3 and subsection
63-5(4) . This will allow the provisions of proposed
subsection 63-5(4) of the PHIA 2007 to be lawful under the
Age Discrimination Act.
Item 2 proposes to insert new words or
subsection 63-5(4) after lifetime health cover into existing
paragraph 55-5(2)(c). This will exclude premiums charged for the
purchase of extended family policies from being discriminatory
under the PHIA 2007.
Item 3 proposes to insert two new subsections.
Proposed subsection 63-5(4)
allows for a higher premium to be charged for a health insurance
policy that includes a dependent child non-student than the premium
charged for the same policy that includes dependent children.
Proposed subsection 63-5(5)
defines the meaning of dependent child
non-student as being a dependent child who is aged
between 18 to 24 (inclusive) and who is not in full time education.
A dependent child is already defined in
the PHIA 2007 as one who is single, so marital status is not
required to be specified in this proposed section.
Items 4 and 6 propose to insert definitions of
the proposed national joint replacement levy. Item
4 inserts the definition at the end of section
304-10, which lists private health insurance levies;
item 6 inserts the definition at the end of
paragraph 307-1(1)(a) which deals with collection and recovery of
levies.
Items 7 and 8 propose to
substitute references to private health insurers at
subsection 307-5(1) with a reference to a person
so as to include sponsors of joint replacement prostheses.
Item 9 proposes to insert the national joint
replacement levy and late payment penalty for the levy, into a list
of levies payable to the Commonwealth at subsection
307-10(1).
Item 10 proposes to add the national joint
replacement levy into a list of levies for which the Minister may
choose to waive liability.
Items 11 and 12 propose changes to the headings
of divisions 310 and 313 so as to
include private health insurers.
Item 13 proposes to insert a definition of
dependent child non-student into the
dictionary at Schedule 1. Item 14
proposes to insert a definition of national joint
replacement register levy into the Dictionary at
Schedule 1.
Concluding comments
This Bill proposes amendments that will insert a dependent child
non-student as a recognised category of insured person into the
PHIA 2007. This will allow health insurers to continue to offer
extended family policies covering young adults and to charge higher
premiums for this category without being subject to unlawful
discrimination provisions. These amendments are intended to bolster
private health insurance membership among young adults. The Bill
also proposes consequential amendments to the PHIA 2007 relating to
the proposed establishment of the National Joint Replacement
Register levy.
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277 2514.
Amanda Biggs
15 June 2009
Bills Digest Service
Parliamentary Library
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