Bills Digest no. 168 2009–10
Health Legislation Amendment (Australian Community
Pharmacy Authority and Private Health Insurance) Bill
Note: This Digest replaces an earlier version dated 9
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
Health Legislation Amendment (Australian
Community Pharmacy Authority and Private Health Insurance) Bill
Date introduced: 12 May 2010
Portfolio: Health and Ageing
Commencement: Schedule 1 and formal provisions: on Royal Assent;
Schedule 2: 1 July 2010
links to the Bill, its Explanatory Memorandum and second
reading speech can be found on the Bills page, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
The Health Legislation Amendment
(Australian Community Pharmacy Authority and Private Health
Insurance) Bill 2010 (the Bill) proposes amendments to the
National Health Act 1953 (National Health Act) and the
Private Health Insurance Act 2007 (Private Health
The amendments to the National Health Act would extend the
operation of the Pharmacy Location Rules and the Australian
Community Pharmacy Authority to 30 June 2015; and the amendments to
the Private Health Insurance Act would ensure that arrangements for
lifetime health cover are consistent for all for new migrants.
As part of the negotiations of the Fifth Community Pharmacy
Agreement (5CPA), the Pharmacy Guild of Australia (the Guild) and
the Australian Government agreed that current pharmacy location
rules will be maintained. These rules prescribe where a pharmacy
that supplies pharmaceutical benefits can be located and prevent
the co-location of a pharmacy in a supermarket. The current
location rules were first introduced in 2000 by the Coalition
Government as part of the Third Community Pharmacy Agreement and
were amended in 2004 to prevent supermarkets from operating
These rules are administered by the Australian Community
Pharmacy Authority (the Authority) and are due to expire at the end
of 30 June 2010. The 5CPA comes into effect on 1 July 2011 for five
years. The Authority will operate for the duration of the agreement
until 30 June 2015.
The location rules have attracted criticism for being
anti-competitive, limiting access and choice in rural and remote
areas and preventing young pharmacists from owning their own
business as a result of the high cost. Due to the location rules, there are
limited opportunities to open a pharmacy in most capital cites and
major towns, resulting in a concentration of ownership and a
relatively constant number of pharmacies across Australia since
there was speculation that the Government might
‘reassess’ the location rules prior to the negotiations
of the 5CPA, they remained unchanged. Since the announcement of the 5CPA,
there has been little commentary about the retention of the
Currently, people are encouraged to take up private health
insurance through three main mechanisms: a rebate on the cost of
private health insurance premiums, a Medicare levy surcharge
applied to high income earners who opt to not purchase health
insurance and a loading on premiums for persons over 31 years of
age for every year they delay purchasing private health insurance.
These arrangements, sometimes characterised as ‘carrots and
sticks’, were introduced by the Howard Government to reverse
a decline in private health insurance membership. This Bill relates
to the third of these mechanisms.
Lifetime health cover (LHC) was introduced in July 2000 to
encourage young people to purchase private health insurance whilst
young and to maintain that coverage. Under LHC, health insurers are
permitted to charge different premiums depending on the age at
which people first purchase private health insurance (specifically,
hospital cover). If a person opts to not purchase hospital cover by
a specified date (defined as the ‘lifetime health cover base
day’), but instead purchases it in later years, health
insurers can charge a 2 per cent loading on the premium for every
year the person is aged over 30. Purchasing hospital cover by the base day, allows
a person to ‘lock in’ the lowest premium. The base day
for Australian citizens is set at the 1st of July after
the person turns 31.
The lifetime health cover base day for migrants is different.
Currently, for ‘new arrivals’ the base day is set at
the later of the 1 July after their 31st birthday or the
first anniversary after they become registered for Medicare
benefits (defined as their Medicare eligible day). The Private
Health Insurance Act currently limits the definition of a
‘new arrival’ to either someone who entered Australia
for the first time on or after 1 July 2000, or someone who was not
a citizen or permanent resident at the time of entry. This has the
unintended effect of excluding some migrants from LHC arrangements,
for example people who migrate to Australia with a permanent
residence visa. The Bill proposes amendments to the definition of
‘new arrival’, which would ensure that the calculation
of the lifetime health cover base day would be consistently applied
to all non-Australian citizens.
LHC arrangements also allow health fund members to drop their
hospital cover for a limited period without affecting their
lifetime health cover loading, for example where there is a change
in personal circumstances. These are referred to as
‘permitted days without cover’. The maximum number of permitted days
without cover is 1094 days.
Currently, there is an anomaly that allows some migrants to
accrue permitted days without cover without them ever having
purchased hospital cover. Migrants who turned 31 on or before 1
July 2000 and who were overseas on that day are deemed to have
hospital cover on their lifetime health cover base day. The
unintended effect of this is that such migrants have a longer
period of permitted days without cover, and thus have been able to
delay incurring the LHC loading. The Bill proposes a new subsection
that defines the specific circumstances under which someone who was
overseas on 1 July 2000 is deemed to have had hospital cover on the
person’s lifetime health cover base day. The proposed
provisions do not affect Australian citizens or migrants who have
had a lifetime health cover base day on or before 30 June 2010.
The Government argues that in addition to ensuring that the LHC
provisions are applied consistently to migrants, the proposed
amendments will also benefit the private health insurance industry
through more simplified administration. These proposed amendments have been
characterised by the Government as largely technical in nature. So
far, the lack of media commentary or stakeholder response suggests
these are largely non-controversial amendments.
The Selection of Bills Committee has recommended the Bill not be
referred to a parliamentary committee for inquiry.
There are no financial impacts for the Government as a result of
Item 1 (proposed section 90(3C) deals with the
current power of the Australian Community Pharmacy Authority to
make recommendations to the Secretary of the Department of Ageing
and Health as to pharmacy locations. It will extend the operation
of this power until 30 June 2015.
Item 2 (proposed section 99Y) extends the
existence and operation of the Australian Community Pharmacy
Authority itself until 30 June 2015. Without this amendment, the
Authority would effectively cease to exist.
Item 1 proposes to substitute the entire
section 34-25 in the Private Health Insurance Act,
relating to determining the lifetime health cover base day.
Proposed subsection 34-25(1)
provides that a person’s lifetime health cover base day is
the 1 July after the person turns 31, subject to
proposed subsections 34-25(2),
(3) and (4).
Proposed subsection 34-25(2)
provides that if a person had a lifetime health cover base day
before 30 June 2010, this remains so.
Proposed subsection 34-25(3)
specifies how to determine the lifetime health cover base day for
migrants (subject to proposed subsection
34-25(4)), so that it is the later of either the 1 July
after the person turns 31 or the first anniversary of their
Medicare eligibility day. The Medicare eligibility day is defined
in proposed subsection 34-25(5)
as being the day on which the person is registered with Medicare
Australia as an eligible person within the meaning of the
Health Insurance Act 1973.
Proposed subsection 34-25(4) applies where a
person is overseas on the day determined under proposed
subsections 34-25(1) or (3). That
person’s lifetime health cover base day would be the first
anniversary of either: their first return to Australia from
overseas or their first entry into Australia.
Items 2 and 3 propose minor
technical amendments to section 34-30 of the
Private Health Insurance Act to ensure consistency.
Items 4 and 5 propose to
replace paragraph 34-30(c) with new subsection
Proposed subsection 34-30(2) specifies that if
a person’s return or entry to Australia is for a period of
less than 90 days, that person is deemed to have not returned or
entered Australia for the purposes of Part 2-3 of the Private
Health Insurance Act. In other words, the subsection
proposes that the person is to be treated as if they are still
overseas. This ensures that proposed
subsection 34-25(4) only applies if the person
returns to or enters Australia for a period greater than 90
Item 6 proposes to insert new paragraph
37-5 (aa) into the Private Health Insurance Act.
Currently, section 37-5 deals with how people aged over 31 and
who were overseas on 1 July 2000, are deemed to have hospital cover
on their lifetime health cover base day. The unintended consequence
of this section is that some new arrivals have been able to wait up
to four years after their lifetime health cover base day without
incurring a lifetime health cover loading.
Proposed subsection 37-5(aa) specifies that
from 1 July 2010, the section will only apply to those who were
Australian citizens or residents as at 1 July 2000.
Item 7 proposes to insert new
section 37-7 into the Private Health Insurance
Act, which clarifies that lifetime health cover does not apply
before the 1 July following the person’s 31st
Items 8-10 propose various consequential
amendments to definitions in Schedule 1 of the
Private Health Insurance Act that are now required as a result of
the proposed provisions in this Bill.
Item 8 proposes a definition of an Australian
citizen that is consistent with the Australian Citizenship Act
Item 9 is a technical amendment to reflect that
the definition of a Medicare eligibility day has moved to proposed
Item 10 removes the definition of ‘new
arrival’ as it is no longer relevant given the other
amendments proposed in the Bill.
The proposed amendments in relation to the Australian Community
Pharmacy Authority extend the operation of the Authority for the
duration of the 5CPA. As the location rules remain unchanged, it
ensures that the number of pharmacies in Australia will remain
relatively constant for the next five years, potentially limiting
choice and access in some rural areas and preventing young
pharmacists from owning their own business due to high costs. It
also ensures that the possibility of enhanced competition in the
pharmacy sector, through either increased numbers of pharmacies or
the operation of pharmacies in supermarkets, remains elusive for
another five years.
The proposed amendments relating to lifetime health cover are
designed to correct some anomalies in the Private Health Insurance
Act and ensure that in future, lifetime health cover provisions are
applied consistently for migrants. The proposed provisions are due
to commence on 1 July 2010 and appear to be largely
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277 2503.
Rebecca de Boer and Amanda Biggs
13 July 2010
Bills Digest Service
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