When Bills have been passed and have received Royal Assent, they
become Acts, which can be found at the ComLaw
website.
Three Bills transfer responsibility for the administration
and collection of levies from PHIAC to APRA: the Private Health Insurance
Supervisory Levy Imposition Bill 2015, the Private Health Insurance (Risk
Equalisation Levy) Amendment Bill 2015 and the Private Health Insurance
(Collapsed Insurer Levy) Amendment Bill 2015.
While the majority of changes merely reflect the change in
regulator, there are some changes to the legislation intended to ensure
alignment with APRA’s existing legislation. The consultation period for the
change has been relatively short, and some industry participants have noted
concerns over a range of technical issues, with potential adverse consequences
for private health insurers.
The Government has stated that the change will not have a
fiscal or regulatory impact.
This section outlines the changes provided for in the Private
Health Insurance Bills Package, and their commencement dates.
The Private Health Insurance (Prudential Supervision) Bill
2015 (the Prudential Bill) establishes the new legislative framework for APRA’s
regulation of the private health insurance industry. If Royal Assent is
received before 1 July 2015, the Bill commences on 1 July 2015. Otherwise it
commences on a day to be fixed by proclamation in the six month period
following Royal Assent, or the day after the end of that six month period.
The Private Health Insurance Supervisory Levy Imposition
Bill 2015 (the Supervisory Levy Bill) relates to the annual supervisory levy.
It commences at the same time as the Prudential Bill.
The Private Health Insurance (Risk Equalisation Levy)
Amendment Bill 2015 (the Risk Equalisation Bill) relates to the risk
equalisation system for private health insurers. It also commences at the same
time as the Prudential Bill.
The Private Health Insurance (Collapsed Insurer Levy)
Amendment Bill 2015 (Collapsed Insurer Levy Bill) relates to the collapsed
insurer levy, which is designed to help policy holders when a fund collapses,
by levying other industry entities.
The substantive provisions in the Bill commence at the same
time as the Prudential Bill. A minor amendment in Schedule 1, Part 2 commences
on the later of the commencement date of the Prudential Bill, or Part 1 of
Schedule 2 to the Norfolk Island Legislation Amendment Act 2015 (which
will commence on 1 July 2016).[6]
The Private Health Insurance (Prudential Supervision)
(Consequential Amendments and Transitional Provisions) Bill 2015 (the
Consequential and Transitional Bill) makes a significant number
of consequential amendments (particular to the Private Health Insurance Act
2007), and includes transitional provisions:
- immediately
after the commencement of item 10 of Schedule 1 to the Private Health
Insurance Amendment Act 2015 (which will commence on 1 July 2015) (Schedule
1, item 178)[7]
- immediately
after the commencement of item 17 of Schedule 1 to the Private Health
Insurance Amendment Act 2015 (which will commence on 1 July 2015) (Schedule
1, item 179)
- immediately
after the commencement of item 19 of Schedule 1 to the Private Health
Insurance Amendment Act 2015 (which will commence on 1 July 2015) (Schedule
1, item 180)
- the
commencement of Part 1 of Schedule 2 to the Norfolk Island Legislation
Amendment Act 2015 (which will commence on 1 July 2016) (Schedule 1, item
181) and
- the
commencement of Schedule 1 to the Acts and Instruments (Framework Reform)
Act 2015 (a commencement date for which has not yet been proclaimed) (Schedule
1, item 182).[8]
The Private Health Insurance
Administration Council
The Private Health Insurance Administration Council (PHIAC) was
established in 1989, initially under the National Health Act 1953, which
required PHIAC to achieve a balance between four broad objectives:
- fostering
an efficient and competitive health insurance industry
- protecting
the interests of consumers
- minimising
the level of health insurance premiums and
- ensuring
the prudential safety of individual Registered Health Benefits Organisations.[9]
While the legislative framework was modified with the
commencement of the Private Health Insurance Act 2007 (the PHI Act)[10]
PHIAC remained the primary regulator for the private health insurance industry.
However, its current objectives do not include ‘minimising the level of health
insurance premiums’.[11]
Its most recent annual report describes the different aspects of its role as
regulator:
PHIAC is responsible for monitoring the prudential
performance of ... private health insurers ... PHIAC administers entry and exit
from the industry, oversights a range of industry transactions and calculates
and distributes the Risk Equalisation Trust Fund ...
PHIAC also provides specialist advice to the Parliament
through the Minister for Health, Senate Estimates Committee meetings, individual
requests about the operations of the industry and the annual premium round.
Private health insurance is a key element in the Australian
health industry and PHIAC plays an important role in protecting the interests
of consumers by seeking to ensure that the industry operates efficiently.[12]
The National Commission of Audit
The National Commission of Audit (NCOA), commissioned by
the current Government, undertook a wide-ranging review of Australia’s
government bodies and regulatory frameworks. In its interim report, it
recommended that a ‘Health Productivity and Performance Commission’ be formed
through a merger of a number of agencies (or their components), including
PHIAC.[13]
The 2014–15 Budget
In the 2014–15 Budget, the Government announced as part of
its ‘Smaller Government’ policy, that it would ‘implement ... ceasing the Private
Health Insurance Administration Council as a separate body, with the merger of
private health insurance price monitoring functions into the Australian
Competition and Consumer Commission, and the merger of health fund prudential
regulation functions to the Australian Prudential Regulation Authority’.[14]
Senate Economics Legislation
Committee
The Bill has been referred to the Senate Economics
Legislation Committee for inquiry and report by 15 June 2015. Details of the
inquiry are available here.[15]
At the time of writing the Committee had not yet reported.
The Australian Labor Party (ALP) Shadow Minister for
Health, Catherine King, noted that the ALP would reserve its opinion until it
had further scrutinised the Bills:
... Labor has some very serious concerns about these Bills and
why they cannot simply be waved through. As such, Labor believes that these Bills
will require, in the other place, much deeper scrutiny, and we will be seeking
to have the proposal to abolish PHIAC referred to a committee, so that that
proper scrutiny occurs and so that there can be evidence in relation to the
impact this bill will have on consumers in particular ...[16]
However, Ms King also noted concerns around the timing of
the Bills:
... whilst this intention has been around for a while, it has
taken the government some time to bring these Bills on. Now we will be hitting
the 1 July deadline very quickly.[17]
More broadly, Ms King noted concerns around the underlying
rationale for the proposed shift in regulators:
The government cites as justification for these Bills its
commitment to smaller government, an end to unnecessary duplication and claims
that this will over time result in lower costs for industry while ensuring the
private health insurance industry remains stable and well regulated.
Immediately what leaps out at you from that explanation is the complete lack of
any mention of the benefits of this for the 13.2 million Australians now
covered by private health insurance. There is no suggestion, in fact, that this
move will in any way lower premiums, improve services or achieve anything other
than the abolition of a regulator dedicated to both sides of the equation—health
insurers and health fund members.
... It must be remembered that this Bill is not in isolation,
because the Abbott government is simultaneously moving to abolish the
designated Private Health Insurance Ombudsman... Once the dedicated regulator
is gone and the dedicated ombudsman is gone, it will only be a very small step
for the minister to declare that it is now too difficult to keep tabs on health
insurance, particularly in relation to health insurance premiums, so the annual
oversight of premiums can be dropped and it is open slather for the health
funds.
... Some of course might argue that we should just leave it to
the market and they question why government should even have a role, especially
now that Medibank Private is no longer government owned. Well, the facts are:
private health insurance is very different from most other products because, by
law, most of us who have private health insurance are required by government to
take out this product, at quite considerable cost, or pay a substantial tax
penalty. And then, in recognition of this cost, the same government which
requires us to pay for this product spends well over $5 billion every year
compensating us for that enforced expense. So, when a government forces
millions of Australians to take up a very expensive product and then spends
billions of dollars a year through the rebate compensating for this decision,
this clearly requires detailed oversight to ensure both the taxpayer and the
health fund members are getting value for money in that decision.[18]
The Shadow Minister also noted concerns in relation to
industry concentration, and potential impacts on competition:
... now is not the time for the government to be removing the
few powers it has to keep downward pressure on premiums or potentially to be
restricting or narrowing the information that is available to consumers about
how they might shop around. With just five health insurers holding 83 per cent
of the market, private health insurance is a relatively concentrated market.
Whilst some people change insurers each year, inertia and a fear of waiting
periods tend to keep people with the same private health provider.[19]
An additional factor was the regulator’s role in
addressing the complexity of the system, to improve consumer outcomes:
... PHIAC collates and disseminates financial and statistical
data regarding health funds to enable consumers to make informed choices... It
is a website that includes all private health insurers, not just those that pay
fees to a private supplier of that information, where you will not get all of
the information. So it is a really important service ...
Does anyone seriously think that a generic regulator of all
insurance products can, in any way, provide the level of expertise needed to
keep tabs on 40,000 different products? And all this comes at a minuscule
administrative cost, which PHIAC estimates adds about 60c per person to the
cost of an average premium. As PHIAC's CEO stated recently, in the context of a
$3,000, $4,000 or $5,000 annual premium, 'That ain't a lot to ensure that
people are protected.'
... And health insurance is not just another form of insurance.
As mentioned earlier, it is an extremely complicated product, with 40,000
different premiums on offer, with a bewildering combination of excesses,
inclusions and exclusions that insurers can charge, almost at will and often,
despite some of the regulations, with very little notice. As the current CEO of
PHIAC said, in what he billed as likely his valedictory address to the Health
Insurance Restricted and Regional Membership Association of Australia in
Canberra just last month: ‘The Australian version of private health insurance
is a highly idiosyncratic beast, with curiosities such as community rating,
risk equalisation, taxation surcharges, rebates and membership incentives, all
interacting to form a cauldron of regulatory and commercial complexity. Private
health insurance is a mystery for many Australians. They do not really have the
capacity or the time to deeply understand the product, yet they know the day
will likely come when they will depend on it. And of course, very often, that
day is a day full of other stress as well—illness, injury, psychiatric
disturbance, and the list goes on.’[20]
At the time of writing the policy positions of other non-government
parties and independents were not yet known.
Private Healthcare Australia
In a submission to the Senate Economics Committee, industry
organisation Private Healthcare Australia was highly critical of both the substance
of the proposal, and the consultation process undertaken by Government. Its submission
stated:
We note that the PHIAC-APRA transition is a "machinery
of government” change with no intended impact on the industry, apart from
reducing the impost on the industry.
Throughout the consultation process regarding the PHIAC-APRA
transition, the industry has maintained a strong position that our preference
is to retain the status quo. This position has been backed by all stakeholders,
including APRA.
APRA has, however, asked for legislative changes to ensure
"consistency'' with other industries that it regulates. Wherever possible,
and for the most part, the private health insurance industry has compromised
and accepted APRA's "consistency" positions. Unfortunately, the drive
for "consistency" with other industries regulated by APRA is likely
to result in an increase in red tape for the private health insurance (PHI)
industry.[21]
The Private Healthcare Australia submission provided
details of a number of concerns with the Bills as introduced. Its main concerns
related to:
1) Data provision and confidentiality;
2) Continued transparency of prudential decisions;
3) Increased regulation, including new custodial penalties
related to information;
4) Increased scope for confusion; and
5) Important questions unanswered.[22]
Data provision and confidentiality
In relation to data provision and confidentiality, Private
Healthcare Australia stated that:
We believe there should be a simple legislative provision to
ensure that the regulator continues to provide detailed quarterly data provided
for over 25 years to the individual health funds and Private Healthcare
Australia, while ensuring this data remains confidential and unable to be the
subject of any Freedom of Information requests ...
APRA's proposals are a fundamental change to longstanding,
accepted practice (over 25 years). The Private Health Insurance Act 2007 (PHI
Act) was drafted to permit existing practice to continue (with some specific
exclusions that are not relevant to data provision). We believe that APRA's
current interpretation of the PHI Act is overly narrow.
Please introduce a simple legislative provision to ensure this longstanding practice continues and that the data shared continues to be confidential [emphasis in original].[23]
Reduced transparency of prudential
decisions–reduction in AAT reviewable decisions
Private Healthcare Australia also argued that:
The number of decisions that are [Administrative Appeals
Tribunal] AAT reviewable has decreased while regulatory powers have increased.
As stated in our submissions to date, we believe that all existing decisions
that are AAT reviewable should remain so and new regulatory powers should be
AAT reviewable ... Please reinstate the current AAT reviewability of decisions [emphasis in original].[24]
Increased regulation, including new
custodial penalties
Private Healthcare Australia stated that:
... the Financial Sector (Collection of Data) Act introduces
custodial sentences, of up to 5 years, for certain offences relating to
information, including sections 13B and 17D ... We do not understand why these
new custodial sentences have been introduced to a compliant industry that has
had no major failures to the detriment of consumers. We would like to see these additional penalties removed from the PHI industry..
At a minimum, ensure section 13B and its new custodial sentence for disclosing an APRA regulatory standard does not apply to private health insurers - the provision reduces transparency [emphasis in original].[25]
Additional Scope for Confusion
Between APRA/Health/Treasury roles
Private Healthcare Australia also argued that:
Some of the APRA Rules deal with areas that we have been
informed come under the Department of Health’s (DoH) responsibility. To have an
area of DoH responsibility dealt with by an APRA Rule introduces unnecessary
scope for confusion. We need to be careful to ensure that policy lines are
clear and respected to avoid unnecessary overlap that doesn't correspond with
APRA's prudential supervision role.
For example, we are concerned that clause 85(4) of the [Prudential
Bill] requires APRA to consult with the Health Secretary. However, newly
inserted words provide that failure to consult does not affect the validity of
APRA's rules.
This introduces significant uncertainty for the industry,
which is now subject to three separate regulatory regimes that have the
potential to interact in new and complex ways.[26]
Important questions unanswered
Private Healthcare Australia’s submission also identified a
number of areas where further clarification would be beneficial, including in
relation to:
- standard
operating procedures
- risk
equalisation
- impost
reduction for industry and
- industry’s
work on streamlining rules.[27]
Australian Dental Association
The Australian Dental Association (ADA) cautioned against
passing the Bills without further consideration. A press release by ADA stated:
The Australian Dental Association (ADA) urges the Australian Parliament
to spend more time scrutinising the Private Health Insurance Bills currently
before them to ensure that regulators are empowered to help consumers make
informed choices about their private health insurance.[28]
The statement particularly highlighted the implications
for market efficiency, and hence consumer protection, of removing an important
source of information. Dr Rick Olive, President of the ADA, stated:
Markets only operate well for consumers if there is easily
accessible and transparent information about the products available. Private
health insurance has lacked adequate transparency in the details of policies
for consumers, yet premiums continue to rise year after year. Whether or not
the Australian Government likes more or less regulation, it must develop the
right kind of regulation in the interests of consumers. Should the Bills as
they stand pass, consumers stand to have even less information to help them
make informed choices.
We urge the Australian Parliament to heed the warnings we have
provided in submissions and to take more time to scrutinise these Bills and
consider more evidence on the potential impact on consumers. These Bills must
be referred to a committee or be suitably amended.[29]
In a previous submission on the exposure legislation, ADA
also noted similar concerns.[30]
Bupa Australia
In its submission to the Senate Economics Committee, Bupa
Australia noted a number of specific concerns in relation to the Bills.[31]
However, it also noted broader concerns on the length of the consultation
period:
Bupa acknowledges that Treasury has done its best to provide
industry with the opportunity to contribute feedback. Rather, Bupa has a
general concern regarding the period of time afforded to industry consultation
on the Bill package. The transfer of prudential supervision to APRA represents
a substantial change for the industry. While it was announced as part of the
2014/15 Budget measures in May 2014, industry consultation on the legislative
package commenced in mid January 2015. The timeframes have been extremely
tight, which constrains a comprehensive and best practice review. For example,
consultation on both the [Prudential Bill] and the remaining four Bills was
less than 3 weeks consultation. Finally, the industry has not been provided with
the proposed changes to the subordinate legislation that the Department of
Health will continue to manage, but which require amendment due to the
transition.[32]
In addition, it noted broader concerns over the proposed
regulatory restructure. These concerns are discussed further under the heading
‘Key Issues’.
Bupa Australia also noted concerns that no clear reduction
in regulation for industry had been identified, and it was possible that
regulation might in some cases increase.[33]
hirmaa
hirmaa, a health insurance industry organisation which
primarily represents not-for-profit insurers, provided a submission to the
Senate Economics Committee Inquiry. It noted that throughout the consultation
process following the exposure draft of the legislation, ‘hirmaa highlighted a
limited number of areas that we considered needed review or further
clarification and we are satisfied that our key concerns have been addressed in
the Bills as presented to the Parliament’.[34]
The Explanatory Memorandum states that the package of
Bills will have ‘nil’ financial impact.[35]
While the initial ‘Smaller Government’ Budget measure specified savings of
‘$19.4 million over four years from 2014–15’ were expected from the entire
measure, it appears that the incorporation of PHIAC into APRA is not expected
to result in any net savings.[36]
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act.
The Explanatory Memorandum discusses in particular:
- the
right to health
- fair
trial and fair hearing rights and
- the
right against arbitrary interference.[37]
The Government considers that the Bill is compatible.[38]
At the time of writing, the Parliamentary Joint Committee
on Human Rights had not yet reported on the Bill.
The package of Bills involves both a change in the regulator
from APRA to PHIAC, but also a number of adjustments to the regulatory regime,
through aligning the legislation with APRA’s existing framework. This means
that some of the key issues are related to the organisational change, while
others relate to specific legislative changes.
This section outlines some of the key issues associated with
the change.
Regulatory impact
As noted above, the rationale for the change appears to be a
reduction in the number of government entities, rather than a reduction in
industry regulation. The Explanatory Memorandum notes that:
As the policy involves a machinery of government change, the
Office of Best Practice Regulation considered that a Regulation Impact Statement
was not required. The measure will not change the regulatory costs on business,
community organisations or individuals and the compliance costs under the
package are substantively the same as the costs under the PHI Act.[39]
Similarly, Bupa Australia commented:
Bupa is uncertain how the changes to the PHI industry
regulators, [Private Health Industry Ombudsman] PHIO and PHIAC, will deliver
cost savings to the Government or how efficient it is to move regulatory
responsibility for the PHI industry from one Department and one Minister to
three Departments and three Ministers. In fact it would seem to Bupa that the
effect of both this Bill package and the merger of PHIO may be to create more
distinctly separate governance arrangements for the industry with no discernible
benefits for the industry or consumers.[40]
(emphasis added)
Organisational change
The transfer of the dedicated regulator (PHIAC) into a
prudential regulator with responsibility for multiple industries (APRA)
inevitably involves a merger of different corporate cultures. A key issue is
the retention of the current expertise among PHIAC’s staff.
This was explicitly addressed in APRA’s submission to the
Senate Economics Committee, which stated:
- Of PHIAC’s 34 [Full-time equivalent] FTE staff:
-
20 staff in the following teams will transfer permanently to
APRA: Supervision, Actuarial, Policy, Premiums Research, Data
Collection/Statistics, Legal, Enforcement, IT;
-
5 staff in the following teams will temporarily transfer to APRA
for 6-12 months to assist with transition: Finance, Human Resources, Web and
Records Management;
-
Remaining staff, and statutory office holders, will be retrenched
by PHIAC, or by operation of the legislation, on dissolution of PHIAC,
including the Commissioner and Council members, Council Secretary, CEO,
Personal Assistant, Director of Research and Research Officer.
-
APRA has indicated that work will be transferred from the
Canberra office over a period of up to 3 years. APRA is encouraging permanent
staff to move to Sydney or Melbourne and will provide appropriate support for
this. APRA will give 6 months' notice to each person when their role is to
transfer from Canberra to either Sydney or Melbourne. If they choose not to
transfer, they will be made redundant.[41]
hirmaa commented in its submission that it was:
... satisfied that the package of legislation as presented to
the Parliament, will not ... Materially impact the overall effectiveness of
prudential supervision of private health insurers through the transition
(particularly by ensuring that there is not a loss of “corporate memory” and
regulatory expertise as a result of discontinuity of personnel) ... We have
arrived at these positions through our extensive consultations with APRA, the
Department of Health and the Treasury.[42]
Information on private health
insurance
One of the major issues in relation to the proposal is the
potential for reducing the availability of information, as a result of PHIAC’s
merger into APRA. This relates to both statistics published by PHIAC, as well
as information available currently through the website of the Private Health
Insurance Ombudsman (PHIO).[43]
While the initial exposure draft did not carry over
requirements from the PHI Act for the publication of a report on private
health insurers,[44]
there is now a requirement in the Bills that matches the requirement in the
current PHI Act.[45]
hirmaa commented that:
... hirmaa is satisfied that these provisions ensure PHIAC’s
public information functions are carried over by APRA. This will enable consumers
to continue to make informed decisions about their private health insurance
coverage.[46]
In relation to information currently available on the
Private Health Insurance Ombudsman’s website, APRA noted in its submission that
this would still be available:
In addition to statistical publications, PHIAC currently
provides a variety of consumer information on its website. Much of this
information is provided via a click-through link to the PHIO website,
www.privatehealth.gov.au. These arrangements will be continued. For example,
the link to the "comparison tool" for consumers to compare private
health insurers on www.privatehealth.gov.au will be maintained as will the link
to FAQs on www.privatehealth.gov.au. Much of the remaining consumer information
will continue to be provided directly by APRA. For example, the list of
registered private health insurers will continue to be published; and the
consumer statistics will continue to be provided. The responsibilities for the
update and hosting of the www.privatehealth.gov.au website will transfer to the
Office of the Commonwealth Ombudsman ('OCO'). The OCO will retain all consumer
information on the www.privatehealth.gov.au website as is.[47]
A footnote in the submission also noted that:
... the comparison [in the ‘comparison tool’] is not based on
PHIAC data but instead on the Standard Information Statements ... private health
insurers are required to make available to the public.[48]
Other industry concerns
Submissions on an exposure draft[49]
identified particular concerns in relation to:
-
The offences in the Bill, particularly the severity of penalties
and the inconsistencies between penalties; and
-
The breadth of APRA’s powers, including its powers to monitor and
investigate and take action where it has prudential concerns.[50]
Submissions made to the Senate Economics Committee provide
conflicting evidence on the extent to which these and other detailed concerns
have been addressed. Private Healthcare Australia, which ‘represents 21 health
funds throughout Australia and collectively covers approximately 97 per cent of
the private health insurance industry,’[51]
strongly criticised the consultation process, and the Bills as introduced. Its submission
stated that:
... due to the rushed nature of the consultation process, which
only began in January this year, some important issues have not been addressed.
A number of new provisions that significantly impact industry compliance costs
have been introduced since the Exposure Draft legislation, without
consultation.[52]
However, one industry organisation, hirmaa, stated that:
... hirmaa has been an active participant in the consultation
sessions over this package of legislation and in summary, we are satisfied that
the Bills as presented to the Parliament, achieve the Government’s over-arching
aim of ensuring a smooth transition from PHIAC to APRA.[53]
The Private Health Insurance (Prudential Supervision) Bill
2015 (the Prudential Bill) establishes the new prudential framework for APRA’s
supervision of private health insurers. This section outlines the contents of the
Prudential Bill.
Part 1—Introduction
Part 1 of the Prudential Bill specifies the commencement
date (clause 2), provides a simplified outline (clause 3),
specifies how particular terms are to be interpreted (clause 4), and
specifies that APRA has general administration of the proposed Act (clause 5).
It also deals with a number of constitutional matters in Division 2,
with clause 7 providing that the proposed Act does not apply to State
insurance that does not extend beyond the limits of the state concerned.
Part 2—Registration of private
health insurers
Part 2 of the Prudential Bill specifies the requirements for
registration of private health insurers.
Clause 10 mirrors the current wording of the PHI
Act in requiring persons carrying on a health insurance business to be
registered health insurance providers, but imposes a significantly higher
maximum penalty for a contravention. Currently the PHI Act (section
118-1) specifies that a person who ‘carries on a health insurance business’ and
‘is not a private health insurer’ commits an offence,[54]
which is subject to a maximum 40 penalty units per day ($6,800) for
contraventions.[55]
However clause 10(1) of the Prudential Bill specifies a maximum penalty
of imprisonment for two years or 120 penalty units ($20,400) or both. The
current Act and the proposed legislation (clause 10(2)) both
provide that such a contravention comprises a separate offence per day.
Clause 11 allows the Federal Court to grant an
injunction, on application from APRA, where unregistered entities are providing
private health insurance. This is identical to the current wording of the
legislation, with one exception. Under the current legislation, ‘the Minister,
the Council or any other person’ may apply for an injunction, but under the
proposed legislation only APRA may apply for an injunction.[56]
Division 3 of Part 2 specifies the
registration process. This closely matches the current legislative framework,[57]
with some minor differences:
- the
current legislation requires an applicant to provide a copy of its rules to the
Secretary of the Department of Health.[58]
That requirement is not included in the Prudential Bill. The Explanatory
Memorandum notes that ‘Fund rules will be provided by APRA to the Department of
Health through an inter-departmental administrative arrangement’[59]
- whereas
the current framework specifies that the Health Minister makes Rules in
relation to applications for registration, the Prudential Bill explicitly
provides APRA with the authority to ‘set out criteria for the registration of
bodies as private health insurers’[60]
- there
are minor differences in the wording of how the decision is to be made. Both
PHIAC under the current legislation and APRA under the proposed legislation have
scope to consider a range of matters in assessing applications; however the
current legislation provides slightly more detail on the issue[61]
- APRA
is not required to notify the Secretary of the Department of Health when it
accepts or refuses applications and[62]
- while
PHIAC is required under current legislation to ‘give to a person, in writing,
such information from the record [of private health insurers on the PHIAC
website] as the person requests’, that requirement is not replicated in the
proposed framework for APRA, although the requirement to maintain an up-to-date
record of private health insurers on the internet remains.[63]
Part 3—Health benefits funds
Part 3 of the Prudential Bill relates to requirements and
regulation of health benefit funds.[64]
Division 2 specifies the requirements for a private
health insurer to have a health benefit fund; this closely replicates the current
Division 134 of the PHI Act. PHIAC has under current legislation,
and APRA will have under the proposed legislation, the power to issue
directions to a private health insurer to divest where the dominant purpose of
a health benefits fund is not ‘health insurance business’.[65]
However the proposed legislation explicitly provides APRA with the power to
revoke directions (they then cease to have effect), and specifies that
particular requirements in relation to directions apply to APRA’s directions on
divestment.[66]
Division 3 specifies requirements
in relation to the operation of health benefits funds, closely replicating sections
of the current PHI Act.[67]
There are very minor changes in relation to specifying Authorised
Deposit-taking Institutions (ADIs) rather than banks, and referring to APRA
rules rather than rules specified under the PHI Act.
Division 4 specifies restrictions on restructurings,
mergers and acquisitions in relation to health benefits funds. It parallels the
relevant sections of the PHI Act.[68]
Division 5 specifies requirements for the termination
of health benefit funds. It matches Division 149 in the current PHI
Act.
Division 6 relates to the external management of
health benefit funds. It and ‘other provisions ... relating to external
management and terminating management (flowing from external management) of
health benefits funds, are based on provisions currently in Divisions 217, 220
and Part 6.5 of the PHI Act’.[69]
There are a number of minor drafting differences in relation to particular
areas, including:
- in
relation to the requirements for appointing external managers. Under the
current legislative framework, PHIAC ‘must not appoint an external manager to a
health benefits fund unless the Council believes that the appointment of an
external manager to the fund is, in the circumstances, in the interest of the
policy holders of the fund’.[70]
While this requirement is reflected in subclause 52(1) of the Bill, the
current legislation includes a clause specifying information and reports the
PHIAC ‘may have regard to’ in relation to the best interests requirement for
appointing external managers[71]
and
- two
sub-paragraphs from the current legislation which provide clarification in
relation to court orders in respect of schemes of arrangement are omitted in
the Prudential Bill.[72]
Similarly, a paragraph of the current legislation in relation to the binding
nature of court orders is not replicated in the Prudential Bill.[73]
Division 7 relates to ordering the termination of
health benefits funds. It reflects the current provisions in the PHI Act,
while not including the current provision in relation to the binding nature of
court orders.[74]
Clause 69 ensures that where the Federal Court orders the appointment of
a terminating manager, then relevant subdivisions of the Prudential Bill apply
as if APRA had approved the termination and given notice of the appointment of
the terminating manager.
Division 8 relates to external managers and
terminating managers. An ‘external manager’ is a manager appointed by APRA
under clause 51.[75]
A ‘terminating manager’ is a person appointed either by APRA under division
5 or the Federal Court under clause 67.[76]
The provisions in the Prudential Bill broadly replicate those in the current PHI
Act, with some minor differences:
- the
current PHI Act subsection 290-1(2) specifies that the ‘rights of the
insurer, and any of its officers, to exercise any of [powers exercisable by the
external or terminating management] in relation to the fund is suspended while
the fund is under external management or terminating management’. The Prudential
Bill adds that ‘such a person may exercise powers or functions with the
manager’s written approval’.[77]
It also specifies that these provisions do not mean that the relevant
individuals cease their roles as ‘officer or employee, or an external
administrator’[78]
- the
Prudential Bill doubles the maximum penalty units (30 to 60) and imprisonment
time (six to 12 months) associated with the offence of performing functions or
dealing with property of the fund, while the fund is under management[79]
- the
Prudential Bill specifies a situation in which a director is exempt from a
requirement to ‘deliver to the [external] manager all records in the director’s
possession’, where they are ‘entitled to retain possession of the records’[80]
- an
‘exoneration provision’ included in current section 293-15 of the PHI Act
is not reflected in the equivalent provision in Division 8 (that is,
clause 76), but the impact of the ‘exoneration provision’ still applies to
clause 76 through the operation of clause 166 of the Prudential
Bill. (Under the ‘exoneration provision’ a court may relieve a person who would
otherwise be liable to pay compensation, from that liability if it appears to
the court that the person acted honestly and ‘ought fairly to be excused from
liability’)
- the
wording in relation to funding the remuneration of terminating managers is
slightly modified from the current legislation, but reflects the substance[81]
- subclauses
78(3) and (4) specify that the Federal Court may, by order, give directions
to a terminating manager similar to those which APRA is empowered to make. An
application for an order may be made by APRA, or a terminating manager
- clause
79 of the Prudential Bill uses slightly different wording to section 296-10
of the current PHI Act in relation to terminating the appointment of
managers, but the underlying policy intent is the same
- clause
85 of the Prudential Bill includes an additional requirement that in
making rules in relation to health benefits funds under management, APRA ‘must
consult the Health Secretary’, which is a requirement not included in the
current legislation[82]
and
- section
299-20 of the PHI Act specifies that ‘the Federal Court has jurisdiction
to hear and determine applications’ under a number of sections of the current
legislation; this is not directly reflected in Division 8.
Division 9 relates to the ‘Duties and liabilities
of directors etc.’ It reflects Division 152 of the current PHI Act.
Part 4—Prudential standards and
directions
Proposed Part 4 of the Prudential Bill includes
some of the more significant changes in the package of Bills. Under the current
legislation, PHIAC has the power to make:
- solvency
standards (PHI Act Part 4-4, Division 140)
- capital
adequacy standards (PHI Act Part 4-4, Division 143) and
- prudential
standards (PHI Act Part 4-5, Division 163).
Instead, under the provisions in the Prudential Bill APRA
would have the power to make prudential standards. This provides APRA with the
power to make standards in relation to the three items listed above (although
not requiring it), but also enables APRA to set standards on other issues. This
section outlines the framework proposed for APRA’s prudential standards for
regulation of health insurers.
Part 4, Division 2 of the Prudential Bill sets out
the broad framework for prudential standards, including a number of technical
details. Subclause 92(2) defines ‘prudential matters’ as, in relation to
private health insurers, matters relating to:
(a) the
conduct of the affairs of the insurer in such a way as:
(i)
to keep the insurer in a sound financial position; or
(ii)
not to cause or promote instability in the Australian private health
insurance system; or
(b) the
conduct of the affairs of the insurer with integrity, prudence and professional
skill.
Subclause 92(3) specifies that a prudential
standard may apply to all private health insurers, a specified class of private
health insurers, or one or more specified private health insurers. Prudential
standards are legislative instruments, except where they apply to specified
health insurers (as opposed to all health insurers or a specified class of
health insurers) (subclause 92(6)). Subclause 92(8) specifies a
number of restrictions on prudential standards, such as ensuring that they cannot
‘create an offence or civil penalty’.
Division 3 of Part 4 relates to APRA’s
powers to give directions to private health insurers. Under the current PHI
Act, PHIAC may give directions to private health insurers in a number of
circumstances.[83]
Division 3 of Part 4 of the Prudential Bill sets out in more detail a
broader framework for directions from the regulator to private health insurers:
- clause 96 specifies a number of situations in which
APRA may give private health insurers directions
- clause 97 specifies the ‘kinds of direction ... that
may be given’
- clauses
98-100 specify a number of technical details relating to directions from
APRA
- clause
101 specifies that a direction from APRA is ‘not grounds for denial of
obligations’ imposed by a contract
- clause
102 specifies that APRA may publish information about a direction in the Gazette
- clause
103 specifies that the secrecy requirements imposed under the Australian
Prudential Regulation Authority Act 1998 (Cth) apply,[84]
unless ‘the information has been published in the Gazette under section
102’ of the proposed Bill and
- clause
104 sets out the penalties for non-compliance with a direction.
Specifically, the penalty for non-compliance with a direction is set at a
maximum of 30 penalty units for each day in which the private health insurer
fails to comply with a direction. Under the current PHI Act, a maximum penalty
of 300 units applies for contraventions of a direction in relation to a prudential
standard.[85]
The Explanatory Memorandum to the Bill does not explain the reasoning behind
the reduction in penalties.
Part 5—Other obligations of private
health insurers
Part 5 of the Prudential Bill sets out the other
obligations of private health insurers. This largely replicates the provisions
in Part 4-5 of the current PHI Act, although the Explanatory Memorandum
notes that the Prudential Bill ‘amends the provisions to align the language
around powers and obligations of actuaries with the Life Insurance Act’ (the Life Insurance Act 1995
(Cth), or ‘LI Act’).[86]
The obligations largely relate to the requirement to appoint an actuary, and
the powers and obligations of the appointed actuary.
Clause 106 relates to the appointment of actuaries
for private health insurers. This broadly matches the requirements in the
current PHI Act, but the drafting more closely matches the LI Act.[87]
Insurers are required to appoint an actuary, who must meet the eligibility
requirements set out in the prudential standards and not be a disqualified
person. Where a person ceases to be an appointed actuary, the insurer must
appoint a new one within six weeks.
Clause 107 relates to terminating the appointment
of an actuary. While the current PHI Act leaves these issues to the Private
Health Insurer (Insurer Obligations) Rules,[88]
the proposed legislation more closely matches the LI Act, in specifying
when the appointment of an actuary must be terminated, and that the board of
directors may appoint a new actuary on an interim basis, even if not empowered
to under the relevant insurer’s constitution or rules.[89]
The proposed section also specifies the ‘statutory duties and functions’ of a
private health insurer actuary.
Clause 108 relates to the notification of
appointment. It matches the drafting of the relevant section in the LI Act,
which contains more detailed requirements than the current PHI Act.[90]
Clause 109 specifies that the ‘appointed actuary of
a private health insurer must perform the actuary’s statutory functions and
duties’ (as defined in clause 107), and then specifies that the private
health insurer must ‘make any arrangements necessary to enable the appointed
actuary to perform those functions and duties’. This matches the drafting of
the LI Act. While it broadly reflects the substance of the current PHI
Act, it appears to offer a slightly broader authority, but does not reflect
the offences and penalties currently in place.[91]
Clause 110 relates to the obligations of the
appointed actuary to inform the private health insurer, its directors, or APRA of
relevant issues. The Prudential Bill proposes to impose, broadly speaking, a
number of requirements:
- the
actuary is required to inform the private health insurer or its board of
directors of matters and action required in relation to avoiding a
contravention of relevant legislation. The Prudential Bill also imposes a
requirement to inform the private health insurer or its board where action is
required ‘to avoid prejudice to the interests of policy holders of a health
benefits fund conducted by the insurer’.[92]
This second obligation is not included in the current PHI Act, but
reflects a similar requirement in the LI Act[93]
- the
actuary is required to inform APRA of possible and actual contraventions by the
private health insurer that ‘may affect significantly the interests of policy
holders’.[94]
While the drafting matches the LI Act, the policy substance is similar
to the current PHI Act. Where the private health insurer has already notified
APRA of a relevant matter then the appointed actuary is not required to do so[95]
and
- where
the appointed actuary has informed the private health insurer of a matter, and
‘is satisfied that there has been reasonable time for the taking of the action
but the action has not been taken’, then the appointed actuary must inform
APRA. This is stronger than the current PHI Act, which only specifies
that the actuary ‘may’ inform PHIAC, but matches the provision in the LI
Act.[96]
Clauses 111 and 112 relate to the ability, and duty
when required to do so, to give information and documents to APRA. These match
closely provisions in the LI Act, which are not in the current PHI
Act.[97]
The requirement to provide APRA with information or documents differs from the LI
Act in both specifying a minimum time frame (at least seven days) within
which information must be provided and a smaller number of penalty units (30
rather than 60 or 100). The Prudential Bill also provides more specific detail
in relation to self-incrimination, which is not included in the current LI
Act. Specifically, the Prudential Bill provides that a person is not
excused from giving information or producing a document on the basis that doing
so might incriminate the person or expose them to a penalty (subclause
112(5)). However, subclause 112(6) provides that information or
documents provided by the person are not admissible in evidence against that
person in any proceedings (this is referred to as a ‘use immunity’). On the
other hand, the information or documents may be used to gather other evidence
against that person that would be admissible (that is, no ‘derivative use’
immunity applies).[98]
Clause 113 relates to the qualified privilege of
the appointed actuary, and closely matches the relevant provisions of the PHI
Act and LI Act.[99]
Clause 114 specifies that in certain circumstances
APRA may refer particular matters to professional associations. This matches an
existing provision of the LI Act, but is not currently included in the PHI
Act.[100]
Clause 115 specifies that APRA may ‘direct the removal’
of an appointed actuary. This power does not exist under the current PHI
Act, but matches an existing provision in the LI Act.[101]
Part 5-Division 3 relates to disqualified persons. There
are some differences between the current PHI Act and the Prudential Bill:
- clause
116 imposes a maximum penalty for insurers who allow a disqualified person
to act as a director or senior manager at 60 penalty units and/or 12 months
imprisonment, but notes that under subsection 4B(3) of the Crimes Act 1914 (Cth)
the court may ‘impose a fine of up to five times the penalty stated above’ for
body corporates. The relevant section of the PHI Act simply specifies a maximum
penalty of 250 penalty units.[102]
However, there is no requirement to refer to subsection 4B(3) of the Crimes
Act 1914 in order for it to apply. It will apply to any Commonwealth
offence that imposes a pecuniary penalty on a natural person unless a contrary
intention is expressly provided. (Although the offences existing at section 166-1
of the PHI Act and clause 116 of the Prudential Bill apply to ‘private
health insurers’, which must be corporations, rather than natural persons, a
natural person could be taken to commit the offences due to the operation of
Part 2.4 of the Criminal Code, which provides that a person who
aids, abets, counsels or procures the commission of an offence, is taken to
have committed the offence.)[103]
- clauses
120-121 relate to the Federal Court’s power to disqualify a person, on
application from APRA, from being an appointed actuary or an officer of the
private health insurer. This matches the current LI Act provisions, but
is different from the current PHI Act, under which the PHIAC has the
power to disqualify a person[104]
and
- clause
122 relates to the ‘Privilege against exposure to penalty’, and reflects
the provision in the LI Act.[105]
Clause 123 matches an existing provision in the PHI
Act, restricting the use of health benefit funds in relation to the payment
of pecuniary penalties.[106]
Clauses 124-125 specify that APRA may require copies of reports provided
to policy holders, and the names of officers of the insurer.
Part 6—Monitoring and investigation
Part 6 specifies APRA’s powers to monitor and investigate
private health insurers. Those powers to some extent reflect existing
provisions in the PHI Act, but also propose new powers for APRA as the
regulator of private health insurers, in contrast to PHIAC’s current powers.
These new powers draw on or match existing powers under other legislation which
APRA enforces.
Division 2—Monitoring
Division 2 sets out the proposed monitoring powers
that will be available to APRA under the Prudential Bill. There is no existing
monitoring power for PHIAC in the current PHI Act. While Division 191 of
the current PHI Act allows the Minister or Council to write to a private
health insurer requesting information, PHIAC is only able to do so where it
‘believes that ... a private health insurer may have contravened a
Council-supervised obligation’.[107]
However APRA has monitoring powers under some of the
existing legislation it enforces. Under the Superannuation Industry
(Supervision) Act 1993 (Cth) (the SIS Act), APRA is able
to request information in relation to particular financial years, or
‘production of books’.[108]
Similarly, under the Banking
Act 1959 (Cth) APRA may require an authorised deposit-taking
institution to provide information; a failure to comply is an offence with a
maximum penalty of 200 penalty units.[109]
Division 2 provides APRA with powers in relation to
requiring information and the production of documents. Clause 127 specifies
the scope of the monitoring powers – they ‘may only be exercised’ for the
purposes of the Prudential Bill, or the ‘risk equalisation levy legislation’.[110]
Clause 128 provides APRA with the power to require
information or documents from private health insurers, and section 129 provides
APRA with the power to require documents ‘relating to the affairs of the
insurers’. Failure to comply with these requirements is an offence with a
maximum penalty of 30 penalty units.[111]
Division 3—Investigation
Division 3 specifies APRA’s powers in relation to
investigating private health insurers. Under the current PHI Act, there
are two separate powers to conduct investigations:
- Division
194 of the PHI Act allows the Minister to investigate a private health
insurer ‘at any time and for any reason’. Under the same Division 194, PHIAC
may begin an investigation if ‘for any reason it considers that a private
health insurer might have contravened a Council-supervised obligation or it
otherwise has concerns about the insurer’s compliance with a Council-supervised
obligation’.[112]
Under Division 194, the Minister or PHIAC may require individuals to provide
information or documents, or give evidence
- Division
214 of the PHI Act allows the PHIAC to appoint an inspector to
investigate the affairs of a private health insurer, where it has:
... reason to suspect that ... the affairs of the insurer are
being, or are about to be, carried on in a way that is not in the interests of
the policy holders of a health benefits fund conducted by the insurer; or ... the
insurer has contravened a provision of Part 4-4.[113]
Division 214 specifies the
powers of inspectors (including requesting information and access to premises)
and compliance requirements, and a number of other details (including
delegation and a requirement to publish reports).
Division 3 of Part 6 of the Prudential Bill
specifies an investigative framework for APRA that combines aspects of both
of the current investigative powers available to PHIAC under the PHI Act.
Clause 130 specifies that APRA will have the power to appoint an
inspector to conduct an investigation where:
APRA reasonably suspects that:
(a) the
affairs of the insurer are being, or are about to be, carried on in a way that
is not in the interests of the policy holders of a health benefits fund
conducted by the insurer; or
(b) the
insurer has contravened an enforceable obligation.
Clause 130 sets out the broad power to appoint an inspector.
It reflects the current powers to investigate in relation to breaches of
obligations, or where there is a risk to the interests of policy holders.
However, the drafting of the Prudential Bill only specifies that an
investigation may be initiated where APRA ‘reasonably suspects that...the insurer
has contravened an enforceable obligation’ – the current PHI Act allows
PHIAC to initiate an investigation where PHIAC ‘considers that a private health
insurer might have contravened a Council-supervised obligation’, which appears
to provide slightly broader grounds.[114]
Clauses 131-145 set out a number of details in
relation to the powers and obligations of appointed inspectors. These broadly
reflect the existing provisions of the PHI Act, but specify particular
aspects in more detail, in particular in relation to obtaining consent to enter
premises (clause 135), and obtaining and executing investigation
warrants (clauses 136-140 and clause 146), the investigator’s
access to facilities and assistance (clause 141), and delegation by inspectors
(clause 147).
Division 4 of Part 6 of the Prudential Bill
sets out a number of miscellaneous issues in relation to APRA’s monitoring
and investigation powers. Clause 148 specifies that a failure to comply
with specific requests is an offence. Clause 149 specifies that while
individuals are not excused from responding to requests even if the information
that they provide might incriminate them or make them liable to a penalty, any information
or documents the person provides are not admissible in evidence against the
person, except in relation to offences for providing false or misleading
information or documents. (As with clause 112, discussed above, this
provides a ‘use immunity’, but not a ‘derivative use’ immunity).
Clause 150 specifies that a person who complies
with a requirement by APRA or an inspector ‘does not incur any liability to any
other person merely because of that compliance’.
Part 7—Enforceable undertakings
Part 7 specifies that APRA may accept enforceable
undertakings from private health insurers and may apply to the Federal Court if
an undertaking is contravened. The Federal Court may order a contravening
private health insurer to:
- comply
with the undertaking
- pay
to the Commonwealth any financial benefit that the insurer has obtained as a
result of the contravention
- compensate
any person who has suffered loss or damage due to the contravention and/or
- do
anything else that the Court considers appropriate.[115]
The drafting mirrors the relevant section of the LI Act,
rather than the relevant sections of the PHI Act.[116]
Part 8—Remedies in the Federal
Court
Part 8 sets out the remedies available in the Federal
Court when a private health insurer does not comply with an enforceable obligation.[117]
Enforceable obligation is defined in clause 4 of the
Prudential Bill as:
- a
provision of the Prudential Bill, the prudential standards or the APRA rules[118]
- a
direction given under the Prudential Bill (when it is enacted), the prudential
standards or the APRA rules
- a
provision of the risk equalisation legislation[119]
- any
relevant terms and conditions imposed on the insurer when it is registered
- for
restricted access insurers–the parts of the insurer’s constitution or rules
that deal with the restricted access group.
Part 8 is broadly based on Division 203 in the
current PHI Act, with some differences:
- under
the current PHI Act, either the Health Minister or PHIAC may apply to
the Federal Court for a declaration that a private health insurer has
contravened an enforceable obligation.[120]
Under the proposed changes, APRA will be able to apply in relation to contraventions
of an enforceable obligation, as defined above (which encompasses some
provisions of the PHI Act). The Health Minister will only be able to
apply in relation to contravention of enforceable obligations under the amended
PHI Act (but not the Prudential Bill)[121]
- while
the current PHI Act specifies that proceedings may be ‘started no later
than six years after the contravention’, proceedings under the Prudential Bill
‘must be made within four years of the alleged contravention’[122]
and
- under
the current PHI Act the court may only make an order to compensate an
individual if the Minister has made the application for a declaration that an
insurer has contravened an enforceable obligation. Under the Prudential Bill, the
court will be able to make an individual compensation order following a
successful application by APRA.[123]
Part 9—Miscellaneous
Part 9 of the Prudential Bill deals with a range of
miscellaneous matters.
Clause 166 allows the Federal Court to provide ‘whole
or partial’ relief from civil liability for directors or officers of private
health insurers, who the court considers have acted honestly and ‘ought fairly
to be excused from liability’. This is an option not currently available in the
PHI Act.[124]
Clause 167 requires APRA to publish information on a
number of aspects of private health insurance (including premiums for different
funds) on its website, in relation to each financial year. This is based primarily
on current section 264-15 of the PHI Act, with the inclusion of a
specific requirement not to publish personal information, which is taken from
the SIS Act.[125]
Clause 168 specifies which decisions under the Bill are
reviewable. This reflects the transfer of key components of the PHI Act
to the new framework proposed under the Prudential Bill. While the current PHI
Act merely specifies that particular decisions are reviewable by the
Administrative Appeals Tribunal (AAT), the Prudential Bill specifies that
subject to certain conditions APRA must conduct an internal review; where a
decision is not revoked, applications may then be made to the AAT.
Clause 169 specifies that where a decision is
reviewable (as per clause 168), then APRA must provide specific information in
writing to the person affected by the decision, which must advise the person of
their review rights.
Clause 170 provides powers to APRA to ‘give approval,
make a determination or do an act’ under the Prudential Bill where it is
implicitly referred to, but APRA is not given an explicit power.[126]
Clauses 171-173 relate to a number of administrative
issues, including ensuring the powers of the Federal Court are not restricted,
the ‘approved forms’ which documents must take, and delegation of the
Minister’s powers to Departmental officials.
Clause 174 specifies that APRA may make rules
prescribing matters that are ‘required or permitted’ by the Prudential Bill to
be prescribed in the rules, and sets out particular constraints in relation to
those rules (for example, that they must not create an offence or civil
penalty).
The Private Health Insurance (Collapsed Insurer Levy)
Amendment Bill 2015 (Collapsed Insurer Levy Bill) amends the Private Health Insurance
(Collapsed Insurer Levy) Act 2003 (Cth) (Collapsed Insurer
Levy Act) to ensure that APRA, rather than PHIAC, is the relevant regulator
in relation to collapsed insurer levies. This primarily relates to providing
advice to the relevant Minister, who determines if the levy will be imposed.[127]
The relevant Minister will change from the Health Minister to a Treasury
Minister.
A previous Digest prepared by the Parliamentary Library
summarised the collapsed insurer levy as follows:
This levy is designed to protect contributors to private
health insurance funds. If a fund is unable to meet liabilities to its members,
the Minister for Health may impose a levy on each other registered organisation
to help meet those liabilities.[128]
The majority of amendments in the Collapsed Insurer Levy Bill
are consequential changes that do not alter the effect of the legislation.
Specifically, items 1-3, 5, 8-9, 11 and 13 make consequential amendments
that reflect the transfer of regulatory responsibility from PHIAC to APRA.
Item 4 inserts a definition of ‘health benefits
fund’ (by reference to the PHI Act) into the Collapsed Insurer Levy
Act.
Item 6 inserts a requirement that where the
Minister determines a collapsed insurer levy applies, the determination must
specify the payment day for the levy. Item 10 amends section 10 of the
Collapsed Insurer Levy Act to require the Minister to consider APRA’s
advice in relation to the day to be specified as the payment day before he or
she makes a determination.[129]
Item 7 changes the prudential standards to which
the Collapsed Insurer Levy Act refers from those currently set by PHIAC,
to those which will be made by APRA.
Item 12 repeals a now redundant section of the Collapsed
Insurer Levy Act, relating to levies which PHIAC ‘purported to impose’
under the previous National Health Act.[130]
Item 14 is a transitional provision which ensures
that a determination made under the Collapsed Insurer Levy Act before
the amendments made by the Collapsed Insurer Levy Bill commence, continues to
have effect after that time.
The Private Health Insurance (Risk Equalisation Levy)
Amendment Bill 2015 (the Risk Equalisation Bill) makes amendments to the Private Health Insurance
(Risk Equalisation Levy) Act 2003 (the Risk Equalisation Act) relating
to the risk equalisation levy to reflect the transfer of regulatory
responsibility from PHIAC to APRA.[131]
The second reading speech for the Bill describes the risk
equalisation levy as follows:
The purpose of the Risk Equalisation Levy is to ensure that
no insurer is unduly impacted by costly claims because of the risk profile of
its members. It does this by allowing for cross-subsidisation for aged, chronic
and long-term acute care patients and other high-cost policy holders across
different private health insurers. The Risk Equalisation Levy assists insurers
to offset the effects of complying with the principle of community rating
established under the Private Health Insurance Act.[132]
Items 1-2, 5-7 and 9 make consequential amendments
to the Risk Equalisation Act, reflecting the transfer of regulatory
responsibilities from PHIAC to APRA.
Item 3 repeals the definition of ‘registered health
benefits organization’ in section 5 of the Risk Equalisation Act. This
term is used only in relation to transitional provisions which are no longer
required, and are repealed by item 8.
Item 4 repeals the definition of the Risk
Equalisation Trust Fund, which is not referred to elsewhere in the Risk
Equalisation Act and will be replaced with the Private Health Insurance
Risk Equalisation Special Account.[133]
Item 9 repeals transitional provisions relating to
previous amendments which are no longer required.
Item 10 is a transitional provision which ensures
that a determination made under the Risk Equalisation Act before the
amendments made by the Risk Equalisation Bill commence, continues to have
effect after that time.
The Private Health Insurance Prudential Supervisory Levy
Imposition Bill 2015 (Supervisory Levy Bill) establishes a new framework for
supervisory levies in the private health insurance industry. This draws on the
framework established by the Financial Institutions
Supervisory Levies Collection Act 1998 (Cth) and replaces the Private Health Insurance
(Council Administration Levy) Act 2003 (Cth), which will be repealed by
item 183 of the Private Health Insurance (Prudential Supervision)
(Consequential Amendments and Transitional Provisions) Bill 2015 (see below).[134]
Clause 6 of the Supervisory Levy Bill imposes the
levy that is payable in accordance with proposed subsections 8(4A) and
8(4C) of the Financial Institutions Supervisory Levies Collection Act,
to be inserted by item 12 of the Private Health Insurance (Prudential
Supervision) (Consequential Amendments and Transitional Provisions) Bill 2015.
These new subsections provide that a body corporate that is a private health
insurer at any time during a financial year is liable to pay a levy in respect
of that financial year. (See further details below under the Private Health
Insurance (Prudential Supervision) (Consequential Amendments and Transitional
Provisions) Bill 2015.)
While under the current Private Health Insurance (Council
Administration Levy) Act the Minister may make rules which apply
consistently over time, the proposed framework will require the Minister to
determine annually the levy that applies. The same ceilings apply under both
the current and proposed legislation ($2 ‘for a complying health insurance
policy under which only one person is insured’, and $4 for other policies).[135]
There are some minor differences between the current and
proposed frameworks. Under the Private Health Insurance (Council
Administration Levy) Act, rules may set out requirements for four levy days
in a financial year, and the Minister may by determination specify up to two ‘supplementary
levy days’.[136]
The proposed legislation provides that the levy will (after 2015–16) be
collected annually.
Subclause 8(6) specifies that ‘the levy determination
for a financial year may determine a levy amount by ... specifying the levy
amount; or ... specifying a method for calculating the levy amount’, which
provides more flexibility than the current legislation.
The Private Health Insurance (Prudential Supervision)
(Consequential Amendments and Transitional Provisions) Bill 2015 (the Consequential
and Transitional Bill) sets out the consequential amendments and transitional
provisions, associated with the package of Bills.
Schedule 1—Consequential amendments
Schedule 1 of the Consequential and Transitional Bill
makes consequential amendments to multiple Acts.
Australian Prudential Regulation
Authority Act 1998
The Consequential and
Transitional Bill amends the Australian Prudential Regulation Authority Act
1998 (APRA Act) to ‘provide for matters relating to secrecy of
information concerning private health insurers, and to provide for the
administration of industry levies’.[137]
Item 4 adds private health insurers to the list of
bodies regulated by APRA. This has the effect, in conjunction with other minor
amendments, of ensuring that information provided by private health insurers is
subject to secrecy provisions under section 56 of the APRA Act, and
requirements under the Financial
Sector (Collection of Data) Act 2001 (Cth).[138]
Item 5 amends subsection 8(1) of the APRA Act
to broaden APRA’s legislated purpose, by changing the wording from ‘APRA exists
for the following purposes’ to ‘The main purposes for which APRA exists are as
follows’. It does not specifically outline additional purposes related to
private health insurance. The Explanatory Memorandum notes that this is a
reflection of the fact that ‘APRA will have functions in relation to the risk
equalisation Special Account’.[139]
Proposed sections 54F-54H establish the Private
Health Insurance Collapsed Insurer Special Account (see discussion above in
relation to the collapsed insurer levy).[140]
Financial Institutions Supervisory
Levies Collection Act 1998
The Consequential and Transitional Bill amends the Financial
Institutions Supervisory Levies Collection Act 1998 to ‘cater for the
collection of the private health insurance supervisory levy and the collection
of the collapsed insurance levy’.[141]
Specifically, item 10 adds private health insurer to
the list of ‘leviable bodies’ at section 7 of the Financial
Institutions Supervisory Levies Collection Act. Item 12 inserts proposed
subsections 8(4A)-8(4C), which set out the levy liability, including
ensuring that the current regime continues to apply in the 2015–16 financial
year. The Explanatory Memorandum notes in relation to proposed subsection
8(4A) that ‘This, and associated definitions in subsection 8(4B), have been
inserted to ensure that in 2015–16, the Private Health Insurance Supervisory
Levy is collected in the same way as the Private Health Insurance Council Administration
Levy would have been collected had the Council continued to operate’.[142]
After the 2015–16 financial year, private health insurers
will pay their levies annually, similarly to other institutions under APRA’s
supervision.[143]
Item 16 inserts proposed subsection 10(3) which
ensures that where a late payment penalty rate applies, the rate will be 15 per
cent (reflecting the current regime), rather than the 20 per cent which other
APRA regulated entities are subject to.[144]
Item 18 inserts proposed Part 3B into the Financial
Institutions Supervisory Levies Collection Act ‘to empower APRA to collect
and administer any levy payable under the Private Health Insurance
(Collapsed Insurer Levy) Act 2003’; this was previously included in the
PHI Act.[145]
Financial Sector (Collection of
Data) Act 2001
The Consequential and Transitional Bill makes minor
amendments to the Financial Sector (Collection of Data) Act 2001,
including amending the object of the Act (paragraph 3(1)(a), amended by item 21
of the Consequential and Transitional Bill) to ensure that APRA is able to
collection information for the purposes of administering the risk equalisation
trust fund.[146]
Income Tax Assessment Act 1997
The Consequential and Transitional Bill amends the Income Tax Assessment Act
1997 (Cth)[147]
to reflect that some of the definitions and provisions previously contained
in the PHI Act will be transferred to the Prudential Bill, and that APRA
will assume regulatory functions relating to demutualisation previously held by
PHIAC.[148]
Life Insurance Act 1995
The Consequential and Transitional Bill amends the LI Act
to include an additional reference to the Prudential Bill.
Medibank Private Sale Act 2006
The Medibank
Private Sale Act 2006 (Cth)[149]
includes a number of references to the regulatory framework for private health
insurance; primarily to ensure that actions taken in relation to the
privatisation are not in breach of the regulatory framework. The Consequential and
Transitional Bill makes a number of amendments to ensure that an exemption is
also provided where appropriate from the requirements imposed under the Prudential
Bill.[150]
Private Health Insurance Act 2007
The Consequential and Transitional Bill makes a large number
of amendments to the PHI Act. This includes repealing significant
sections of the Act, to reflect the transfer to the Prudential Bill, as well as
numerous consequential amendments to remove references to the current
regulator, PHIAC. This section summarises where the amendments reflect minor
changes in the framework.
Item 51 removes references to PHIAC from the list of
entities to which private health insurers must provide information in relation
to new or updated products, or on request. The Explanatory Memorandum notes that
APRA will not have the same powers to receive or request information under the PHI
Act as PHIAC currently does.[151]
Item 58 inserts proposed section 115-5. Proposed
subsection 115-5(2) creates a new requirement that the Health Minister must
consult with APRA before making Private Health Insurance (Health Insurance
Business) Rules. Similarly, item 63 inserts proposed section 131-5,
which includes a requirement that the Minister consult with APRA before making
the Private Health Insurance (Health Benefits Fund Policy) Rules.
Item 64 inserts proposed section 131-20. This
specifies that the Private Health Insurance (Health Benefits Fund Policy) Rules
may specify risk equalisation jurisdictions, and in particular may
specify ‘circumstances in which a private health insurer may ... have more than
one health benefits fund in respect of a particular risk equalisation
jurisdiction’ (proposed subsection 131-20(2)). Such a rule (if
made) will operate despite subclause 23(2) of the Private Health Insurance
(Prudential Supervision) Bill 2015, which provides:
A private health insurer may have more than one health
benefits fund, but must not have more than one in respect of a particular risk
equalisation jurisdiction.
Items 73 and 75 repeal sections 169-1, 169-5
and 169-15 of the PHI Act, which impose requirements on private health
insurers to provide PHIAC with copies of reports to policy holders, annual
financial statements and accounts, and notify PHIAC and the Secretary of the
Department of Health of new chief executive officers. These requirements are
not provided for elsewhere, although the Explanatory Memorandum notes that
‘insurers will still be required to notify the Secretary of the Department of
Health about any proposed changes to their rules under section 169-10’.[152]
Item 102 amends paragraph 197-1(1)(a) of the PHI
Act to slightly narrow one of the grounds on which the Minister may accept
an enforceable undertaking from a private health insurer. Under the current
legislation the Minister may accept an undertaking if the Minister ‘considers
that compliance with the undertaking will ... be likely to improve the
performance of the insurer’. The proposed change would specify that the
Minister may accept an undertaking where the Minister considers that ‘compliance
with the undertaking will ... be likely to improve the performance of the insurer
in relation to one or more matters of a kind regulated by this Act’. (As set
out above in relation to Part 7 of the Private Health Insurance (Prudential
Supervision) Bill 2015, APRA may also accept enforceable undertakings from
private health insurers.)
Item 147 repeals current Part 6-7 of the PHI Act,
and replaces it with proposed Part 6-7, setting out the framework for
the Private Health Insurance Risk Equalisation Special Account, replacing the
existing Private Health Insurance Risk Equalisation Trust Fund.
Ombudsman Act 1976
The Consequential and Transitional Bill makes minor
amendments to the Ombudsman
Act 1976 (Cth) to reflect the transfer of responsibilities from
PHIAC to APRA.[153]
Additionally, items 179 and 180 make consequential amendments to
the PHI Act, to clauses relating to the Commonwealth Ombudsman.[154]
Repeal of the Private Health
Insurance (Council Administration Levy) Act 2003
Reflecting the transfer of the supervisory levy to APRA (see
the Private Health Insurance Supervisory Levy Imposition Bill 2015 above), item
183 repeals the Private Health Insurance (Council Administration Levy)
Act 2003.
Schedule 2—Transitional provisions
Schedule 2 of the Consequential and Transitional Bill
contains a significant number of transitional provisions. The Explanatory
Memorandum notes that these are ‘needed to ensure that legal actions undertaken
or deemed to be undertaken under the PHI Act immediately before the
transition time are taken to be undertaken under equivalent provisions in the
Prudential Supervision Bill.’[155]
Schedule 2, Part 1 provides definitions, and
specifies that where particular provisions are held to continue to apply in
relation to a particular matter, then ‘rules, determinations or other
instruments as in force’ are also applied.
Part 2 of Schedule 2 (items 2 to 20) contains
specific transitional provisions.
Item 2 of Schedule 2 specifies that proceedings
brought under the PHI Act by PHIAC or the Health Minister will continue
under the Prudential Bill, with APRA substituted as a party.
Item 3 specifies that private health insurers
registered under the PHI Act will continue to be registered under the Prudential
Bill. Item 4 allows for a similar transition in relation to applications
for registration and item 5 relates to approvals for conversion to for-profit
status.
Division 2 (items 6 to 8) relates to health benefits
funds. Items 6 and 7 ensure the transition of restructure and
merger and acquisition approvals given prior to the amendments. Item 8 relates
to applications and approvals for the termination of health benefits funds, and
the appointment of external and terminating managers.
Division 3 (items 9 to 11) relates to ‘other
obligations’ of private health insurers. Specifically, item 9 ensures
that directions from the regulator continue to apply after APRA assumes
regulatory responsibility; item 10 ensures the appointment of actuaries
continues to have effect, and item 11 ensures that disqualified persons
remain disqualified after the change in legislation.
Division 4 (items 12 to 15) relates to enforcement. Item
12 ensures that investigations in progress under the PHI Act may
continue, and that APRA can investigate breaches of enforceable obligations
formerly supervised by PHIAC. Item 13 ensures that enforceable
undertakings accepted before the transition remain in force. Item 14 ensures
that Federal Court proceedings about breaches of enforceable obligations underway
before the transition continue with ‘APRA substituted for the Council as a
party’, and item 15 ensures that proceedings for injunctions in relation
to non-complying policies continue with the Health Minister substituted for
PHIAC.
Division 5 (items 16 to 18) specifies the transition
process for PHIAC’s finances. Specifically, item 16 specifies that
appropriate amounts can be transferred to the Risk Equalisation Special
Account, and item 17 ensures that if a levy is applied before the
transition, but the funds are not yet collected, then APRA will collect the
funds. Item 18 specifies that where an insurer has an unpaid entitlement
from the current Risk Equalisation Trust Fund, then after the transition APRA
will be responsible for the payment.
Division 6 (items 19 to 20) relates to a number of
other matters. Item 19 deals with secrecy provisions, and preserves:
... secrecy in relation to information transferred to APRA,
and/or known by employees of the Council who have been transferred to APRA,
while ensuring that, if the information can be disclosed under a provision in
APRA’s secrecy provision, it may be disclosed without having to also be an
‘authorised disclosure’ under the PHI Act.[156]
Item 20 ensures that where PHIAC has not fulfilled
a statutory requirement to report in relation to a given year before the
transition, APRA is responsible for that report.
Part 3 of Schedule 2 (items 21 to 37) relates
to general transitional provisions. Division 1 specifies that during the
‘transition period’ (defined as the period between Royal Assent and the
commencement date), the functions of APRA and PHIAC are expanded to include
steps related to the transfer. Division 2 ensures the appropriate
transfer of assets and liabilities between PHIAC and APRA.
Division 3 includes a number of provisions to
ensure continuity between PHIAC and APRA, including in relation to instruments
(item 27), legal proceedings (item 28), transferring records and
documents (item 29) and Ombudsman investigations (item 30).
Division 4 relates to transferring personnel
between PHIAC and APRA. Item 31 relates to employee transfers, item
32 specifies the terms and conditions transferring staff will receive at
APRA, item 33 specifies the recognition of accrued leave and prior
service, and item 34 relates to staffing procedures initiated but not
completed at the transition. Item 35 provides for the continuing
application of the Safety,
Rehabilitation and Compensation Act 1988 (Cth) to injuries suffered prior
to the transition, while item 36 specifies that consultants and Council
officers are not transferred to APRA.
Division 5 specifies that APRA has responsibility
for preparing the final annual report for PHIAC.
Part 4 of Schedule 2 (items 38 to 43) includes
a number of miscellaneous provisions, including specifying an exemption from
stamp duty or other state and territory taxes (item 39), delegation by
the APRA Minister (item 41), and authority for the APRA Minister to
make transitional rules (item 43).
Members, Senators and Parliamentary staff can obtain
further information from the Parliamentary Library on (02) 6277 2500.
[1]. Parliament
of Australia, ‘Private
Health Insurance (Prudential Supervision) Bill 2015 homepage’, Australian
Parliament website, accessed 12 June 2015.
[2]. Parliament
of Australia, ‘Private
Health Insurance (Prudential Supervision) (Consequential Amendments and
Transitional Provisions) Bill 2015 homepage’, Australian Parliament
website, accessed 12 June 2015.
[3]. Parliament
of Australia, ‘Private
Health Insurance Supervisory Levy Imposition Bill 2015 homepage’, Australian
Parliament website, accessed 12 June 2015.
[4]. Parliament
of Australia, ‘Private
Health Insurance (Risk Equalisation Levy) Amendment Bill 2015 homepage’, Australian
Parliament website, accessed 12 June 2015.
[5]. Parliament
of Australia, ‘Private
Health Insurance (Collapsed Insurer Levy) Amendment Bill 2015 homepage’,
Australian Parliament website, accessed 12 June 2015.
[6]. Norfolk Island
Legislation Amendment Act 2015, accessed 15 June 2015.
[7]. Private Health Insurance
Amendment Act 2015, accessed 15 June 2015.
[8]. Acts and Instruments
(Framework Reform) Act 2015, accessed 15 June 2015.
[9]. Private
Health Insurance Administration Council (PHIAC), Annual report
2004–05, PHIAC, Canberra, 2005, p. 6, accessed 15 June 2015.
[10]. Private Health Insurance
Act 2007, PHIAC, Annual report
2007–08, Canberra, 2008, p. 5, accessed 15 June 2015.
[11]. Section
264-5 of the PHI Act.
[12]. PHIAC,
Annual
report 2013–14, PHIAC, Canberra, 2014, p. ii, accessed 15 June 2015.
[13]. National
Commission of Audit (NCOA), Towards
responsible Government: the report of the National Commission of Audit,
phase one, NCOA, February 2014, pp. 210–211, recommendation 53, accessed 10
June 2015.
[14]. Australian
Government, Budget
measures: budget paper no. 2: 2014–15, pp. 70–71, accessed 15 June
2015.
[15]. Senate
Standing Committee on Economics, Inquiry
into the Private Health Insurance (Prudential Supervision) Bill 2015
[Provisions] and related bills, The Senate, Canberra, 2015, accessed 10
June 2015.
[16]. C
King, ‘Second
reading speech: Private Health Insurance (Prudential Supervision) Bill 2015,
Private Health Insurance (Prudential Supervision) (Consequential Amendments and
Transitional Provisions) Bill 2015, Private Health Insurance Supervisory Levy
Imposition Bill 2015, Private Health Insurance (Risk Equalisation Levy)
Amendment Bill 2015, Private Health Insurance (Collapsed Insurer Levy)
Amendment Bill 2015’, House of Representatives, Debates, 4 June
2015, p. 39, accessed 12 June 2015.
[17]. Ibid.,
p. 37.
[18]. Ibid.,
pp. 37–39.
[19]. Ibid.,
p. 38. See also PHIAC, ‘Competition
in the Australian Private Insurance Health Market’, Research paper, 1, 3
June 2013, pp. 6 and 32, accessed 12 June 2015. PHIAC reported that five health
insurers – Medibank Private, BUPA, HCF, HBF and NIB - account for 83 per cent
of the market.
[20]. Ibid.,
pp. 37–39.
[21]. Private
Healthcare Australia, Submission to the Senate Economics Legislation Committee,
Inquiry
into the Private Health Insurance (Prudential Supervision) Bill 2015
[Provisions] and related bills, n.d., p. 1, accessed 14 June
2015.
[22]. Ibid.,
p. 2.
[23]. Ibid.,
pp. 2–3.
[24]. Ibid.,
p. 3.
[25]. Ibid.,
pp. 3–4.
[26]. Ibid.,
p. 4.
[27]. Ibid.,
pp. 4–6.
[28]. Australian
Dental Association, Private
health insurance reform bills forget to help consumers make informed choices,
media release, 5 June 2015, accessed 14 June 2015.
[29]. Ibid.
[30]. Australian
Dentists Association, Re:
Private Health Insurance (Prudential Supervision) Bill 2015, 28
January 2015, accessed 14 June 2015.
[31]. Bupa
Australia, Submission to the Senate Economics Legislation Committee, Inquiry
into the Private Health Insurance (Prudential Supervision) Bill 2015
[Provisions] and related bills, 10 June 2015, pp. 1–4, accessed 14 June
2015.
[32]. Ibid.,
pp. 4–5.
[33]. Ibid.,
pp. 6–7.
[34]. hirmaa,
Submission to the Senate Economics Legislation Committee, Inquiry
into the Private Health Insurance (Prudential Supervision) Bill 2015
[Provisions] and related bills, 10 June 2015, p. 2, accessed 15 June
2015.
[35]. Explanatory
Memorandum, Private
Health Insurance (Prudential Supervision) Bill 2015, p. 7, accessed 15 June
2015.
[36]. Australian
Government, Budget
measures: budget paper no.2: 2014–15, pp. 70–71, accessed 14 June 2015.
[37]. Explanatory
Memorandum, Private
Health Insurance (Prudential Supervision) Bill 2015, op. cit., pp. 209–212.
[38]. The
Statement of Compatibility with Human Rights can be found at page 209 of the Explanatory
Memorandum to the Bill.
[39]. Explanatory
Memorandum, Private Health Insurance (Prudential Supervision) Bill 2015, op.
cit., p. 8.
[40]. Bupa
Australia, Submission to the Senate Economics Legislation Committee, Inquiry
into the Private Health Insurance (Prudential Supervision) Bill 2015
[Provisions] and related bills, op. cit., p. 5.
[41]. Australian
Prudential Regulation Authority (APRA), Submission to the Senate Economics Legislation
Committee, Inquiry
into the Private Health Insurance (Prudential Supervision) Bill 2015
[Provisions] and related bills, 10 June 2015, p. 7, accessed 15 June
2015.
[42]. hirmaa,
Submission to the Senate the Economics Legislation Committee, Inquiry
into the Private Health Insurance (Prudential Supervision) Bill 2015
[Provisions] and related bills, op. cit., pp. 3–4.
[43]. Private
Health Insurance Ombudsman (PHIO), ‘PrivateHealth.gov.au’,
PHIO website, accessed 11 June 2015.
[44]. See
section 264-15 of the PHI Act; Private
Health Insurance (Prudential Supervision) Bill 2015: Exposure Draft,
accessed 14 June 2015.
[45]. Specifically
clause 167 of the Private Health Insurance (Prudential Supervision) Bill
2015.
[46]. hirmaa,
Submission to the Senate Economics Legislation Committee, Inquiry into the
Private Health Insurance (Prudential Supervision) Bill 2015 [Provisions] and
related bills, op. cit., p. 4.
[47]. APRA,
Submission to the Senate Economics Legislation Committee, Inquiry
into the Private Health Insurance (Prudential Supervision) Bill 2015
[Provisions] and related bills, op. cit., p. 6.
[48]. Ibid.,
fn. 1, p. 6.
[49]. Consultation
on the Exposure Draft Private Health Insurance (Prudential Supervision) Bill
2015 and explanatory materials was conducted between 12 January and 30
January 2015 (Treasury, Private
Health Insurance (Prudential Supervision) Bill 2015: cessation of the Private
Health Insurance Administration Council—summary of consultation process,
2015, p. 1, accessed 15 June 2015).
[50]. Ibid.,
p. 1.
[51]. Private
Healthcare Australia, Submission to the Senate Economics Legislation Committee,
Inquiry
into the Private Health Insurance (Prudential Supervision) Bill 2015
[Provisions] and related bills, op. cit., p. 1.
[52]. Ibid.,
pp. 1–2.
[53]. hirmaa,
Submission to the Senate Economics Legislation Committee, Inquiry into the
Private Health Insurance (Prudential Supervision) Bill 2015 [Provisions] and
related bills, op. cit., pp. 1–2.
[54]. The
Prudential Bill defines a ‘private health insurer’ as ‘a body registered under
Division 3of Part 2’ of the Prudential Bill (clause 4).
[55]. A
penalty unit is $170 – see section 4AA of the Crimes Act 1914 (Cth),
accessed 4 March 2015. Section 4D of the Crimes Act provides that a
penalty specified for a Commonwealth offence is to be taken as the maximum
penalty unless the contrary intention appears.
[56]. Private Health Insurance
Act 2007 (PHI Act), section 118-5.
[57]. PHI
Act, Division 126.
[58]. PHI
Act, subsection 126-10(3).
[59]. Explanatory
Memorandum, Private
Health Insurance (Prudential Supervision) Bill 2015, op. cit., p. 22.
[60]. PHI
Act section 333-20; clause 14. The Explanatory Memorandum notes that
‘Section 14 is based on subsection 12(1B) of the Insurance Act 1973 (Cth)
and is similar to a number of provisions in current Acts administered by APRA ...
the criteria will be matters to which APRA have regard, rather than a check
list of preconditions that automatically determine whether an application will
be granted or refused’ (Explanatory Memorandum, Private Health Insurance
(Prudential Supervision) Bill 2015, op. cit., pp. 22–23).
[61]. Specifically,
PHI Act subsection 126-20(2) specifies items the PHIAC must consider,
subsection 126-20(3) states that PHIAC may consider ‘such other matters as it
thinks fit’ except those ruled out by the Minister, and subsection 126-20(4)
states that PHIAC must refuse applications where the proposed health fund’s
rules permit ‘improper discrimination’.
[62]. PHIAC
is required to do so under PHI Act paragraphs 126-25(1)(b) and
126-25(2)(b).
[63]. PHI
Act, subsection 126-35(2).
[64]. A
‘health benefit fund’ is defined in PHI Act section 131-10 as ‘a fund
that: (a) is established in the records of a private health insurer; and (b)
relates solely to: (i) its health insurance business, or a particular part of
that business; or (ii) its health insurance business, or a particular part of
that business, and some or all of its health-related businesses, or particular
parts of those businesses’.
[65]. Subclause
25(2); PHI Act, subparagraph 134-10(2).
[66]. Clauses
98, 101, 102 and 103 specify requirements that apply to directions
from APRA.
[67]. PHI
Act, sections 137-1 to 137-20.
[68]. PHI
Act, sections 137-25 and 146-1 to 146-10.
[69]. Explanatory
Memorandum, Private Health Insurance (Prudential Supervision) Bill 2015, op.
cit., p. 45.
[70]. PHI
Act, subsection 217-15(1).
[71]. Specifically,
PHI Act subsection 217-15(3) does not appear to be replicated in the
Prudential Bill.
[72]. PHI
Act, subsections 217-60(3) and (4) do not appear to be replicated in the
Prudential Bill.
[73]. PHI
Act, section 220-10 does not appear to be replicated in the Prudential
Bill.
[74]. It
reflects the current PHI Act, Division 220, but does not replicate
current section 220-10 of the PHI Act.
[75]. Under
clause 52 of the Prudential Bill APRA ‘must not appoint an external
manager to a health benefits fund unless APRA considers that the appointment ...
is ... in the interests of the policy holders of the fund’, and particular
grounds have been met (although APRA may specify these in rules).
[76]. APRA
may appoint a terminating manager when it accepts an application for
termination by a private health insurer (division 5 of the Prudential
Bill), and the Federal Court may appoint a terminating manager under clause
67 of the Prudential Bill, where an external manager is directed by APRA to
apply ‘for the appointment for a terminating manager of the health benefits
fund’ (clause 66).
[77]. Subclause
70(2).
[78]. Subclause
70(3).
[79]. Clauses
71 and 75 of the Prudential Bill impose a maximum penalty of 60
penalty units and/or 12 months imprisonment for the offences they contain,
compared to 30 penalty units and/or six
months imprisonment in the comparable provisions of the PHI Act–sections
290-5 and 293‑10.
[80]. Subclause
73(6) of the Prudential Bill–this is not included in the current PHI
Act. A note to the proposed clause in the Prudential Bill notes that ‘A
defendant bears an evidential burden in relation to the matter in this
subsection (see subsection 13.3(3) of the Criminal Code).’ The proposed
subsection reflects a similar sub-paragraph in relation to other individuals
(not directors) in the current PHI Act subsection 293-5(6).
[81]. Clause
77 of the Prudential Bill reflects the substance of section 296-1 of
the PHI Act.
[82]. PHI
Act, section 299-10 does not currently include this requirement.
[83]. Section
163-15 of the PHI Act allows PHIAC to give directions in relation to
prudential standards. Section 200-1 allows PHIAC to give directions if ‘the
Council considers that it will assist in the prevention of contraventions of
Council-supervised obligations to do so’.
[84]. Australian Prudential
Regulation Authority Act 1998, Part 6, accessed 15 June 2015.
[85]. Section
163-20 of the PHI Act specifies the penalty for breaches of a direction
given by PHIAC under section 163-15.
[86]. Explanatory
Memorandum, Private Health Insurance (Prudential Supervision) Bill 2015, op.
cit., p. 79. Life
Insurance Act 1995, accessed 15 June 2015.
[87]. See
sections 160-1 and 160-5 of the PHI Act and section 93 of the LI Act.
[88]. Private Health Insurance
(Insurer Obligations) Rules 2009, accessed 15 June 2015.
[89]. Section
160-15 of the PHI Act and section 94 of the LI Act relate to the
termination of the appointment of an actuary.
[90]. Section
160-10 of the PHI Act and section 95 of the LI Act relate to the
notification of appointment of an actuary.
[91]. Section
160-25 of the PHI Act specifies maximum penalties of 30 penalty units
for a private health insurer, or employee, who does not answer questions or
produce documents the appointed actuary requires for their ‘functions and
duties’. LI Act section 97 sets out the actuary’s role, but does not
specify offences or penalties for non-compliance; neither does clause 109 of
the Prudential Bill.
[92]. Paragraph
110(1)(b) of the Prudential Bill.
[93]. Section 160-30 of the PHI Act relates to the
actuary’s obligations to report; the LI Act section 98 contains a
similar provision.
[94]. Paragraph
110(2)(b).
[95]. Subclause
110(3) of the Prudential Bill.
[96]. Subclause110(5) of the Prudential Bill; PHI Act,
subsection 163-30(4); LI Act, subsection 98(3).
[97]. Sections
98A and 98B of the LI Act.
[98]. Thanks
to Cat Barker for this succinct explanation of ‘use’ and ‘derivative use’
immunity.
[99]. Section
160-35 of the current PHI Act and section 99 of the LI Act relate
to qualified privilege of the appointed actuary.
[100]. Section
125 of the LI Act.
[101]. Section
125A of the LI Act.
[102]. Section
166-1 of the PHI Act specifies the penalty for private health insurers.
[103]. Criminal Code Act 1995,
accessed 15 June 2015.
[104]. Sections
166-20 and 166-25 of the PHI Act specify the PHIAC’s power to
disqualify; sections 245A and 245B of the LI Act relate to the Federal
Court’s power of disqualification.
[105]. Section
245C of the LI Act.
[106]. PHI
Act, section 172-15.
[107]. PHI
Act, section 191-1.
[108]. Superannuation Industry
(Supervision) Act 1993 (SIS Act), subsection 254(2) and section
255, accessed 16 June 2015.
[109]. Banking Act 1959
(Cth) section 62, accessed 15 June 2015.
[110]. Clause
4 of the Prudential Bill specifies that ‘risk equalisation levy
legislation means any of the following: (a) the Private Health
Insurance (Risk Equalisation Levy) Act 2003; (b) the provisions of the Private
Health Insurance Act 2007, as they apply in relation to: (i) levy imposed
under the Private Health Insurance (Risk Equalisation Levy) Act 2003; or
(ii) the Risk Equalisation Special Account’.
[111]. Clause
148 of the Prudential Bill.
[112]. PHI
Act, subsections 194-1(1) and 194-1(2).
[113]. PHI
Act, paragraph 214-1(1). Part 4-4 of the PHI Act specifies
obligations in relation to health benefits funds.
[114]. PHI
Act, subsection 194-1(2).
[115]. Subclause
152(5) of the Prudential Bill.
[116]. Section
133A of the LI Act; see also sections 197-1 and 197-5 of the PHI Act.
[117]. Explanatory
Memorandum, Private Health Insurance (Prudential Supervision) Bill 2015, op.
cit., p. 109.
[118]. This
Act is defined at clause 4 of the Prudential Bill to include
prudential standards and APRA rules.
[119]. Clause
4 of the Prudential Bill specifies that ‘risk equalisation levy
legislation means any of the following: (a) the Private Health
Insurance (Risk Equalisation Levy) Act 2003; (b) the provisions of the Private
Health Insurance Act 2007, as they apply in relation to: (i) levy imposed
under the Private Health Insurance (Risk Equalisation Levy) Act 2003; or
(ii) the Risk Equalisation Special Account’.
[120]. Section
203-1 of the PHI Act.
[121]. Explanatory
Memorandum, Private Health Insurance (Prudential Supervision) Bill 2015, op.
cit., p. 109.
[122]. PHI
Act, section 203-30; subclause 154(2) of the Prudential Bill.
[123]. Explanatory
Memorandum, Private Health Insurance (Prudential Supervision) Bill 2015, op.
cit., p. 110; PHI Act, section 203-15; clause 157 of the
Prudential Bill.
[124]. Explanatory
Memorandum, Private Health Insurance (Prudential Supervision) Bill 2015, op.
cit., p. 117.
[125]. Section
264-15 of the PHI Act and section 348A of the SIS Act (Explanatory
Memorandum, Private Health Insurance (Prudential Supervision) Bill 2015, op.
cit., p. 120).
[126]. Explanatory
Memorandum, Private Health Insurance (Prudential Supervision) Bill 2015, op.
cit., p. 122.
[127]. Private Health Insurance
(Collapsed Insurer Levy) Act 2003, accessed 16 June 2015.
[128]. P
Prince, National
Health Amendment (Private Health Insurance Levies) Bill 2003, Bills
Digest, 139, 2002–03, Parliamentary Library, Canberra, 2003, p. 1, accessed 15
June 2015.
[129]. A
note in proposed subsection 7(3) of the Collapsed Insurer Levy Act (at
item 6 of the Bill) highlights that ‘The payment day is the day on
which the levy is due and payable under Part 3B of the Financial
Institutions Supervisory Levies Collection Act 1998’.
[130]. For
background see P Prince, National
Health Amendment (Private Health Insurance Levies) Bill 2003, op.
cit.
[131]. Private Health Insurance
(Risk Equalisation Levy) Act 2003, accessed 16 June 2015.
[132]. J
Frydenberg, ‘Second
reading speech: Private Health Insurance (Risk Equalisation Levy) Amendment
Bill 2015’, House of Representatives, Debates, 27 May 2015, p. 16.
The risk equalisation framework is complex; for a summary see A Biggs and L
Buckmaster, Private
Health Insurance Bill 2006, Bills digest, 81, 2006–07, Parliamentary
Library, Canberra, 2007, p. 7, both accessed 15 June 2015.
[133]. See
proposed section 318–1 of the PHI Act, inserted by Item 147 of
the Private Health Insurance (Prudential Supervision) (Consequential Amendments
and Transitional Provisions) Bill 2015.
[134]. Financial Institutions
Supervisory Levies Collection Act 1998 (Cth); Private Health Insurance
(Council Administration Levy) Act 2003 (Cth), accessed 15 June 2015.
[135]. Paragraph
8(7)(d) of the Supervisory Levy Bill; Private Health Insurance
(Council Administration Levy) Act 2003, paragraph 7(2)(d).
[136]. Private
Health Insurance (Council Administration Levy) Act 2003, section 6.
[137]. Australian Prudential
Regulation Authority Act 1998 ; Explanatory Memorandum, Private
Health Insurance (Prudential Supervision) (Consequential Amendments and
Transitional Provisions) Bill 2015, p. 125, accessed 15 June 2015.
[138]. Ibid.,
p. 129; Financial
Sector (Collection of Data) Act 2001 (Cth), accessed 15 June
2015.
[139]. Explanatory
Memorandum, Private
Health Insurance (Prudential Supervision) (Consequential Amendments and
Transitional Provisions) Bill 2015, p. 130, accessed 15 June 2015.
[140]. See proposed section 318–1 of the PHI
Act, inserted by item 147 of the Private Health Insurance
(Prudential Supervision) (Consequential Amendments and Transitional Provisions)
Bill 2015.
[141]. Financial Institutions
Supervisory Levies Collection Act 1998, accessed 16 June 2015.
Explanatory Memorandum, op. cit., p. 125.
[142]. Explanatory
Memorandum, op. cit., p. 133.
[143]. Ibid.,
p. 133.
[144]. Ibid.,
p. 133.
[145]. Ibid.,
p. 134.
[146]. Financial Sector
(Collection of Data) Act 2001; Explanatory Memorandum, op. cit., p.
136.
[147]. Income Tax Assessment Act
1997 (Cth), accessed 15 June 2015.
[148]. Explanatory
Memorandum, op. cit., p. 138.
[149]. Medibank Private Sale Act
2006 (Cth), accessed 15 June 2015.
[150]. Explanatory
Memorandum, op. cit., p. 138.
[151]. Ibid.,
p. 143.
[152]. Ibid.,
p. 147.
[153]. Specifically,
item 178 amends subsection 35(6D) of the Ombudsman Act 1976,
which will be inserted when the Private Health Insurance
Amendment Act 2015 commences on 1 July 2015; Ombudsman Act 1976
(Cth), accessed 15 June 2015.
[154]. These
amendments similarly make changes to clauses that will be introduced after the
commencement of the Private
Health Insurance Amendment Act 2015 (Cth),
accessed 15 June 2015.
[155]. Explanatory
Memorandum, Private
Health Insurance (Prudential Supervision) (Consequential Amendments and
Transitional Provisions) Bill 2015, op. cit., p. 169.
[156]. Ibid.,
p. 179.
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