Bills Digest No. 109, 2017–18
PDF version [509KB]
Amanda Biggs
Social Policy Section
21
May 2018
Contents
Purpose of the Bill
Structure of the Bill
Background
Committee consideration
Policy position of non-government
parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human
Rights
Key issues and provisions
Concluding comments
Date introduced: 28
March 2018
House: House of
Representatives
Portfolio: Health
Commencement: Schedules
1 and 2, and Parts 1 and 2 of Schedule 5 of the Private
Health Insurance Legislation Amendment Bill 2018 commence
on 1 April 2019; Schedule 3 commences 1 July 2018; Schedule 4 and
Part 4 of Schedule 5 commence the day after Royal Assent; and Schedule 5, Part
3 commences 1 January 2019. The substantive provisions of the other two
Bills commence on 1 April 2019.
Links: The links to the
Bills, their Explanatory Memoranda and second reading speeches can be found
on the Bills’ home pages for the Private Health Insurance Legislation Amendment Bill 2018, the A New Tax System (Medicare Levy Surcharge—Fringe Benefits)
Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018 and the Medicare Levy Amendment (Excess Levels for Private Health
Insurance Policies) Bill 2018, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent,
they become Acts, which can be found at the Federal Register of Legislation
website.
All hyperlinks in this Bills Digest are correct as
at May 2018.
Purpose of
the Bill
The purpose of the Private Health Insurance Legislation
Amendment Bill 2018 (the Bill) and two related Bills is to amend legislation to
implement a package of reforms around private health insurance. Specifically,
the Bill amends the Private
Health Insurance Act 2007 (PHIA), the Age Discrimination
Act 2004 (ADA) and the Ombudsman Act 1976
(OA), to:
- allow
for age-based premium discounts for hospital cover
- allow
private health insurers to cover travel and accommodation costs for regional
Australians as part of a hospital treatment
- strengthen
the powers of the Private Health Insurance Ombudsman
- improve
information provision for consumers
- reform
the administration of second tier default benefits arrangements for hospitals
- allow
insurers to terminate products and transfer affected policy-holders to new
products
- increase
maximum voluntary excess levels for products providing individuals an exemption
from the Medicare levy surcharge and
- remove
the use of benefit limitation periods in private health insurance policies.[1]
Two related bills A New Tax System (Medicare Levy
Surcharge—Fringe Benefits) Amendment (Excess Levels For Private Health
Insurance Polices) Bill 2018 and Medicare Levy Amendment (Excess Levels For
Private Health Insurance Policies) Bill 2018 make minor amendments that give
effect to the increased maximum excess levels that are proposed in Schedule 1
of the Bill. Provisions relating to these two related bills will also be
discussed in this Bills Digest.
Structure of
the Bill
The Bill is divided into five schedules:
- Schedule
1 increases maximum excess levels on private health insurance policies
- Schedule
2 allows health insurers to offer age-based discounted private health insurance
policies
- Schedule
3 enhances the powers of the Private Health Insurance Ombudsman
- Schedule
4 removes benefit limitation periods from private health insurance policies and
makes transitional arrangements so that consumers who purchased benefit
limitation period inclusive policies since 2007 are exempt from repayments and
liabilities and
- Schedule
5 contains miscellaneous provisions:
- Part
1 allows for health insurers to offer travel and accommodation benefits as part
of hospital treatment cover
- Part
2 introduces a new Private Health Information Statement to replace the Standard
Information Statement
- Part
3 proposes administrative reforms to a private hospital’s eligibility for
second tier default benefits and
- Part
4 allows insurers to terminate a product and to transfer all people insured
under that product to new policies.
Background
Australia's health system is a mix of publicly and privately
financed health care. All Australians are eligible for the national health
insurance scheme Medicare. Medicare subsidises the cost of many medical and
allied health services. In addition, public hospital treatment is provided free
to public patients. However, private health insurance is available to assist
with the cost of medical treatment provided in a private hospital, ancillary
treatments not covered by Medicare such as dental, optical and physiotherapy
and allows for a choice of doctor.[2]
There are two types of private health insurance: private hospital
and general (sometimes called ancillary or extras)—or a combination.[3]
Private health insurance is not mandatory. However, membership is encouraged through
government incentives, such as the private health insurance rebate (the rebate),
and penalties such as the Medicare Levy Surcharge (MLS) and Lifetime Health
Cover (LHC) loadings.[4]
One of the key features of private health insurance in
Australia is that, unlike other forms of insurance, it is not risk rated.
Instead, it uses community rating, which requires that private health insurers
offer policies in the same jurisdiction at the same price irrespective of an
individual’s risk factors such as age,[5]
health status, previous claiming history or how frequently they need health
care. Private health insurers participate in a risk equalisation scheme which
partially compensates insurers with a riskier membership profile.[6]
There are 37 registered private health insurers comprising
a mix of not-for-profit insurers (mutual organisations), for-profit insurers
and restricted membership funds (which provide cover to members of a specified
industry or group).[7]
Private health insurers are regulated under the Private Health
Insurance Act 2007 (PHIA) and the Private Health
Insurance (Prudential Supervision) Act 2015, and related rules and
regulations. The Australian Prudential Regulation Authority (APRA) is
responsible for overseeing the sector, while the Private Health Insurance
Ombudsman (PHIO) aims to protect consumers.
Private health insurance funds around 8.8 per cent of
Australia's total health expenditure.[8]
Issues
A number of issues around private health insurance have
emerged in recent years. In 2015–16, the Government undertook an extensive
consultation process involving consumers and other stakeholders.[9]
As well as an online survey, which attracted some 40,000 responses, targeted
industry stakeholder roundtables were held and an issues paper released.[10]
The consultation process revealed consumer concerns around the cost of private
health insurance and value for money.[11]
Other issues raised by consumers included complexity of policies and a lack of
information.[12]
These and similar issues were also canvassed in the 2016 Senate Committee
inquiry into the Value and affordability of private health insurance and
out-of-pocket medical costs.[13]
Membership
trends
In recent years, a decline in private health insurance
membership has raised concerns. As a proportion of the population, private
hospital membership has been in decline for some time. In June 2014, 47.2 per
cent of the population were covered for private hospital treatment; by June 2017
this had declined to 46.1 per cent.[14]
There are concerns that unless this decline in membership
is arrested it will have a negative impact on the viability of private health
insurance (as fewer people are insured premiums will need to rise to cover the
cost of those making claims; it is feared that higher premiums would drive
further declines in membership), and on public hospital waiting times.[15]
Geoff Summerhayes from APRA recently explained the impact
this trend is likely to have on policy holders and premiums:
After growing steadily for the past decade, the percentage of
the population covered by insurance for hospital treatment has declined over
the past two years to 46 per cent. But those choosing to leave the private
system and rely on Medicare aren’t equally distributed across the population;
they are typically the younger and healthier policyholders needed in a
community-rated system to subsidise the old and sick. Remaining policyholders
must carry an increasing share of these costs through higher premiums, adding
further pressure to their household budgets and raising the risk of them also
leaving the system.[16]
The Government blames the decline in membership on the
increasing cost to consumers of taking out private health insurance and
consumer confusion over product offerings.[17]
Private health insurance membership tends to be higher
among older age cohorts. More detailed data on membership by age is provided in
the Explanatory
Memorandum (EM).[18]
Unfortunately, membership data by electorate is not published.
Costs
Consumer concerns around the cost of private health
insurance were raised in the consultation process and with the Senate
Committee. Costs can include the annual premiums paid for private health
insurance. Premium increases have been higher than the Consumer Price Index
(CPI) for many years, although the latest average increase at 3.95 per cent was
the lowest since 2000.[19]
Costs can also include out of pocket costs such as patient co-payments,
excesses and higher than expected medical fees not fully covered by private health
insurance.
While gap insurance (known as ‘no gap’, or ‘known gap’)
can help protect patients against high medical fees, not all medical
practitioners participate in these arrangements.[20]
Nationally, the proportion of in-hospital services with no medical gaps was
88.1 per cent in the December 2017 quarter.[21]
The proportion of medical services with no gap payments
has been relatively stable in recent years; however, the level of gap payments
where a gap is payable has been rising. Statistics from the regulator APRA show
that in the December quarter 2016, the average out of pocket payment by
patients for services where there was a gap was around $125.53. By the December
quarter 2017, this amount had risen to $165.28.[22]
The recent Senate Committee inquiry into the Value
and affordability of private health insurance and out-of-pocket medical costs,
heard evidence on patient co-payments and ‘gaps’:
The committee heard evidence regarding the influence that
co-payments and 'gaps' have on driving up medical costs. While some health
funds have 'no gap' arrangements with certain providers, these may not be the
providers the patient is referred to. A patient diagnosed with breast cancer
experienced the financial impact of this gap:
“I queried the gap with the private health fund and they said
to me: 'Well you've got the wrong surgeon' and I said: 'Well when you're told
you've got breast cancer, you don't say "hold on a minute, I'll go find
another surgeon"'. You're sort of overwhelmed by the diagnosis and you
want to get the treatment. I had confidence in him (the surgeon) but not in his
bills. It was a lot of money we weren't expecting to pay”.[23]
The Committee concluded that the excessive fees charged by
some specialists warranted further attention and called for doctors’ fees to be
available via a publicly searchable database.[24]
A recent survey Out of pocket pain conducted by the
Consumers Health Forum (CHF) found that among the 1,200 respondents,
significant numbers reported incurring high out of pocket costs over the past
two years.[25]
Some 38 per cent of respondents with autoimmune conditions, 27 per cent
with breast cancer and 18 per cent with chronic conditions reported out of
pocket costs associated with their condition in excess of $10,000.[26]
Consumers may face other costs in using their health
insurance, for example depending on their policy they may be required to pay an
excess up-front or a co-payment for some services. Some policies exclude
certain procedures (known as exclusions) or restrict benefits for these.[27]
Complexity
of products
The consultations revealed that consumers often found the
range and number of private health insurance products complex and difficult to
compare. Compounding this is that the number of policies available in any
jurisdiction at any one time is large, although the precise number is difficult
to determine.
Standard Information Statements (SISs) provide a summary
of the key features of a policy and are meant to allow consumers to compare
policies.[28]
As such they can be a crude measure of the numbers of policies available. The Private
Health Insurance Ombudsman (PHIO) estimated there were more than 40,000 SISs on
the Privatehealth.gov.au website as at January 2017, although PHIO argued that policies
that were no longer available should be deducted from this total. Deducting
these brings the number down to 27,281. However, according to PHIO ‘this number
does not take into account that one product available for purchase will
generate several SISs, as a new SIS must be generated for each premium
variation: for example, different excess options, seven state/territories
(noting ACT-NSW is counted as one state), four main scales (single, couple,
family, single parent family, plus single/young adults, couple/young adults and
children only) and three types of policy (Hospital, General treatment,
Combined)’.[29]
The Australian Medical Association (AMA) claims there is ‘a
bewildering number of policy options out there for patients; we've counted
20,000 variations’.[30]
Consumers consistently report finding it difficult to
compare policies. According to the findings of a 2017 Consumer’s Health Forum
awareness campaign:
A strong theme arising from the comments was that complexity
of policies makes comparing and moving between policies a significant
challenge. Consumers report that they find the process of comparing policies
time consuming and difficult. When they are able devote sufficient time and
effort to compare policies they often find they are able to purchase a comparable
product for a considerably lower price.[31]
Package of
reforms announced
A package of reforms to private health insurance was
announced on 13 October 2017. This package was described by the Health Minister
Greg Hunt as making private health insurance ‘simpler and more affordable’.[32]
The major reforms proposed included:
- requiring insurers to categorise products as
gold/silver/bronze/basic, and use standardised definitions for treatments to
make it clear what is and isn’t covered in their policies;
- upgrading the privatehealth.gov.au website to make it easier
to compare insurance products, and allowing insurers to provide personalised
information to consumers on their product every year;
- boosting the powers of the Private Health Insurance
Ombudsman and increasing its resources to ensure consumer complaints are
resolved clearly and quickly;
- reducing the benefits paid for implanted medical devices
under an agreement with the Medical Technology Association of Australia;
- requiring insurers to allow people with hospital insurance
that does not offer full cover for mental health treatment to upgrade their
cover and access mental health services without a waiting period on a once-off
basis;
- allowing insurers to discount hospital insurance premiums
for 18 to 29 year olds by up to 10 per cent, with the discount phasing out
after people turn 40;
- allowing insurers to expand hospital insurance to offer
travel and accommodation benefits for people in regional and rural areas that
need to travel for treatment;
- increasing the maximum excess consumers can choose under
their health insurance policies for the first time since 2001;
- preventing insurers from offering benefits for a range of
natural therapies, such as Bowen therapy or Rolfing;
- continuing to support private hospitals, including
transferring administration of the second tier default benefit, which provides
a safety net for consumers attending non-contracted hospitals, to the
Department of Health.[33]
In addition to these reforms, the Government added two
further reforms to the package:
- The Improved Models of Care Working Group will consider how
to better support privately insured people’s access to efficient and clinically
appropriate mental health and rehabilitation services.
- The Ministerial Advisory Committee on Out-of-pocket costs
will provide options to improve the transparency of medical out-of-pocket
costs.[34]
A series of fact sheets on of these reforms was published
on the Department’s website at the time.[35]
Some of the proposed reforms, such as the creation of
gold/silver/bronze/basic categories, removal of natural therapies and standard
clinical definitions are yet to be finalised and are likely to be enacted
through legislative instruments. Some reforms have already been enacted. The
removal of the two month waiting period for mental health treatment has been enacted
through a legislative instrument, while the cost of implanted medical devices (prostheses)
has been lowered under an agreement with the medical devices industry.
Previously
unannounced measures
The Bill includes two previously unannounced measures
relating to benefit limitation periods (BLPs) and closed policies.
Benefit limitation
periods
A BLP can be variously defined, but ‘commonly (but not
definitively) a benefit limitation period is a period (often of 12 or 24
months, but sometimes longer) during which a private health insurer will pay
minimum benefits for a treatment, and after which it will pay the full benefits
available under the policy’.[36]
Policies with BLPs have been offered by some insurers in return for lower
premiums. However, it has recently emerged that such policies may not comply
with the PHIA. The Bill proposes to remove all BLPs from policies and
includes provisions to ensure that policy holders of such products do not incur
repayments or liabilities.
Closed
policies
A closed policy is one which is no longer available for
sale, but which continues to cover existing members.[37]
The Bill proposes provisions that would allow a health insurer to terminate a
policy so that it would no longer be available to anyone, even to those who
currently hold a product and transfer them to a new policy.
Committee
consideration
Senate
Standing Committee for Selection of Bills
The Bills have not been referred to a committee for
inquiry, with the Senate Standing Committee for the Selection of Bills deferring
consideration of the Bills at its last two meetings.[38]
Senate
Community Affairs References Committee
The Senate Community Affairs References Committee
considered the Government’s package of private health insurance reforms in its
inquiry, Value and affordability of private health insurance and
out-of-pocket medical costs. In its final report, the Committee commended
some of the proposed changes, including travel and accommodation benefits for
consumers in rural and regional areas, allowing patients with limited mental
health benefits to upgrade their cover without serving a waiting period and reforms
to the Prostheses List to constrain the cost of medical devices.[39]
The Committee approached some of the other proposed
reforms ‘with caution’. In terms of increasing the maximum excess, the
Committee was concerned it ‘may compound’ the difficulty consumers face in
understanding what their policy covers them for.[40]
Although the Committee noted support among submitters of a
product categorisation system such as the proposed Gold, Silver, Bronze and
Basic categories, it received conflicting advice on the role of ‘junk
policies’.[41]
It recommended an evaluation of the fourth product category, ‘Basic’ be
undertaken before including it in the product categorisation system.[42]
Senate
Standing Committee for the Scrutiny of Bills
The Senate Standing Committee for the Scrutiny of Bills
raised a number of concerns with Schedule 3 to the Bill, which proposes
amendments to the Ombudsman Act 1976 (OA) to provide the PHIO
with enhanced investigatory powers.[43]
The first area of concern relates to the amendment to
allow the PHIO to enter premises occupied by a private health insurer or
broker, or where documents or other records relating to the business of a private
health insurer or broker are kept, without warrant or consent.[44]
Noting that A Guide to Framing Commonwealth Offences, Infringement Notices
and Enforcement Powers provides that ‘legislation should only authorise
entry to premises by consent or under a warrant. Any departure from this
general rule requires compelling justification’,[45]
the Committee sought the Minister's advice as to why it is considered necessary
to allow the PHIO to enter premises and inspect documents without consent or a
warrant.
The Committee’s second point of concern relates to proposed
section 20ZIA of the OA, at item 5 of Schedule 3. This
provision will require the PHIO to issue an identity card to a person
exercising powers under proposed sections 20SA or 20TA (discussed
above) and require that person to carry the card when exercising powers under
those sections. Proposed subsection 20ZIA(4) requires a person who
ceases to be entitled to an identity card to return it to the PHIO within 14
days. Failure to comply with this requirement is an offence of strict liability,
with a maximum penalty of one penalty unit ($210).[46]
Proposed subsection 20ZIA(5) provides that the offence does not apply if
the identity card was lost or stolen, but places an evidential burden on the
defendant in relation to this matter. This means that the defendant will be
required to adduce or point to evidence that suggests a reasonable possibility
that the identify card was lost or stolen.[47]
If the defendant does so, the prosecution must then discharge its legal burden
to disprove the matter beyond reasonable doubt.[48]
The Committee was concerned that the burden of proof placed on the defendant by
proposed subsection 20ZIA(5) impinges on the common law right to be presumed
innocent, by removing the need for the prosecution to prove an element of the
offence.[49]
The Committee stated that any such reversal should be justified, but is not
addressed in the Explanatory Memorandum to the Bill. Accordingly, the Committee
considers that it would be appropriate for the Explanatory Memorandum to be amended
to incorporate such a justification, which should ‘explicitly address’ the
relevant principles set out in A Guide to Framing Commonwealth Offences,
Infringement Notices and Enforcement Powers.[50]
The final issue raised by the Committee concerned the
broad delegation of administrative power proposed by item 6 of Schedule
3. Subsection 34(2C) of the OA allows the PHIO to delegate most of
his or her powers to a member of staff. Item 6 of Schedule 3 proposes to
amend subsection 34(2C) to allow the PHIO to delegate most of his or her powers
to ‘a person’ rather than a member of staff. The Committee sought the
Minister’s advice as to:
- why it is considered necessary to
allow for the delegation of the PHIO's functions or powers, including powers of
entry and inspection, to any person, including persons outside the APS; and
- the appropriateness of amending
the bill to require that the PHIO be satisfied that persons performing
delegated functions and exercising delegated powers have the expertise
appropriate to the function or power delegated.[51]
At the time of writing, the Committee had not received a
response from the Minister.[52]
The Committee had no comment on the other two Bills in the
package.[53]
Policy
position of non-government parties/independents
Labor
When the Government’s package of reforms was announced in
October 2017, Labor acknowledged there were ‘some positive things in this
announcement’ including savings from reducing the cost of medical devices on
the Prostheses List, the removal of the rebate for natural therapies and
getting more young people into private health insurance.[54]
However, it criticised the proposal for higher permitted excesses, arguing it
would expose vulnerable and low income people to unexpected medical costs:
The Government has traded off increases in excesses for the prospect
of slightly lower premiums. Maximum permitted excesses for private hospital
insurance will increase from $500 to $750 for singles and from $1,000 to $1,500
for couples/families. As a result, vulnerable and low-income people could face
unexpected medical expenses when they need their private health insurance.[55]
Labor also criticised the Government for failing to act on
‘junk policies’ and that ‘as a result, patients will continue to be caught out
by products that don’t cover essential procedures’.[56]
More recently in relation to the Bill, Opposition Health
spokesperson Catherine King raised concerns around the issue of policies with
non-compliant benefit limitation periods and the Government’s decision to write
to health insurers before advising the public of the issue:
This is another example of Turnbull putting his big business
mates ahead of Australian consumers - the Government wrote to insurers but hid
it from the Australian public. It reeks of a cover-up.[57]
Labor is also concerned there are ‘serious consequences
and unanswered questions’ around these non-compliant policies.[58]
Greens
No specific commentary from the Greens on this Bill was
identified at the time of writing. The Greens have been calling for the removal
of the private health insurance rebate with savings to be reinvested into the
public health system.[59]
Cross
benchers
No specific commentary from cross bench Senators on this
Bill was identified at the time of writing.
Position of
major interest groups
There was broad support overall for the package of private
health insurance reforms that was announced in October 2017, although concerns
linger among some stakeholders over so-called ‘junk policies’ and some remain
unconvinced of the decision to offer premium discounts to young people. There
has been less commentary on the contents of this Bill.
When the package was announced in October 2017, the
Australian Medical Association (AMA) said it welcomed the reforms as ‘a long
overdue opportunity to bring much-needed transparency, clarity, and
affordability to the private health sector.’[60]
President Dr Michael Gannon said he welcomed the introduction of Gold, Silver,
and Bronze categories and the application of standard clinical definitions. While
previously calling for so-called ‘junk policies’ to be banned, Dr Gannon said
the AMA ‘will watch closely to ensure that any junk policies that remain on the
market are clearly described so that people know exactly what they are buying
and are not subject to unexpected shocks of non-coverage for certain events or
conditions’. The removal of natural therapies, better coverage for mental
health services and for people in rural and regional Australia, and
enhancements to the Private Health Insurance Ombudsman (PHIO) were also broadly
welcomed by the organisation.
The Consumers Health Forum (CHF) described the package of
reforms as announced in October 2017, as a ‘welcome response to consumer
dissatisfaction with the current pitfalls of private health cover’ that was
‘likely to deliver not only lower premium increases in the medium term but
hopefully clearer consumer-friendly policies.’[61]
It welcomed specific measures including: the introduction of simpler categories
of policies (Gold, Silver, Bronze, Basic), the exclusion of treatments such as
natural therapies which have no evidence of efficacy, changes to allow better
access to mental health care, measures that improve inclusions for those living
in rural and regional areas and boosting the powers and resources of PHIO. It
also welcomed the establishment of the two expert committees to review out of
pocket costs and low value policies.[62]
However, it was critical of the plan to provide discounts on premiums to
younger people, arguing that it would ‘undermine the community rating principle
fundamental to Australian health insurance which is meant to treat everybody
equally regardless of age or health status’.[63]
Further, it questioned whether young people would take up the discounted
policies:
Given the cost burdens and modest wages many young people
have, it would seem likely that this measure is only likely to be taken up by a
minority of young adults who have the means, with the result that the two
tiered health system emerging in Australia is entrenched at an even earlier
time of life.[64]
Consumer group CHOICE also welcomed elements of the
Minister’s announcement last October including that mental health patients would
be able to upgrade their cover immediately, that Gold, Silver, Bronze and Basic
categories would be introduced, that price reductions for medical devices were
implemented and that additional resources would be given to PHIO. However, it
expressed concern the Government would incentivise young people to take up
private health insurance, particularly for ‘junk policies’.[65]
It has also questioned whether people under 31 or those on incomes below
$90,000 and who are fit and healthy, really need health insurance.[66]
The Australian Healthcare and Hospitals Association
(AHHA), representing public and not-for-profit hospitals, welcomed many of the
components of the health insurance reform package when it was announced.[67]
In particular AHHA welcomed the discounts offered to young people to take up
health insurance, allowing mentally ill people to upgrade their hospital cover
with no waiting period, the removal of ‘natural therapies’ and the extra
resources and powers for PHIO. However, it raised concerns that mental health
cover and obstetrics might not be included in basic and bronze category
products and called for a comprehensive Productivity Commission inquiry into
the costs and benefits of private health insurance.
The Australian Private Hospitals Association (APHA),
representing private hospitals, also welcomed key elements of the package,
including discounts to attract young people into private health insurance and
better access to mental health cover. But it continued to have concerns about
the availability of ‘junk policies’:
But Mr Roff [APHA CEO] said concerns remain about the issue
of ‘junk’ policies.
“It’s disappointing. Not only has the Government not
addressed the issue of junk policies, it has, in fact, entrenched them with the
new ‘basic’ category. Junk policies are a major cause of consumer
dissatisfaction when they discover they don’t have cover for private hospital
treatment when they need care.
“If the intent of the private health insurance rebate is to
take pressure off public hospitals, then there is no policy justification for
applying the rebate to junk policies,” he said.[68]
Catholic Health Australia (which operates a number of
private not for profit hospitals) was also broadly supportive of the package.
While welcoming the reforms to mental health access, standardised product
categories, travel and accommodation benefits for rural Australians, and
discounts on premiums to young people, CHA expressed concerns over the decision
to allow ‘junk policies’ to continue to be available, describing them as ‘unfit
for purpose’.[69]
The private health insurance peak body, Private Healthcare
Australia (PHA), indicated broad support for the package when it was announced.
Today’s announcement is a major step in ensuring the
sustainability of Australia’s highly regarded mixed private public health
system, by improving the value proposition for people at all stages of life.
84% of Australians with private health insurance value the product and want to
keep it, however their main concern is affordability. There are 13.5 million
Australians with private health insurance and almost half of them have an
annual income of less than $50 000. The measures announced by the Government
with cooperation from industry and other stakeholders will go a long way
towards addressing consumer concerns.[70]
More recently PHA has described the issues around non-compliant
benefit limitation periods as ‘fake news’ and ‘conspiracy laden’ and argues
that no consumers will be negatively affected.[71]
According to a recent article in an industry newsletter,
the Government’s decision to act on BLPs was due to a ‘recent reinterpretation
of legislative changes introduced in 2007’. The article claims that some
private health insurers are ‘furious and seeking an explanation over the
Department of Health’s handling of changes impacting policies with benefit
limitation periods’.[72]
Financial
implications
According to the EM, the total financial impact of the
measures in the Bill is $6.2 million over the period 2017–18 to 2020–2021.[73]
The Mid-Year
Economic and Fiscal Outlook 2017–18 provided $4.0 million in funding to
the Commonwealth Ombudsman (which is responsible for PHIO) and $32.8 million to
the Department of Health over the period 2017–18 to 2020–21 to implement the entire
package of reforms. These expenses were to be offset by $39.4 million in savings
from the Department of Veterans’ Affairs.[74]
There are likely to be regulatory costs on industry,
although as the EM notes, many of these will be ‘one off’ costs primarily
involving system changes and changes to information for consumers.[75]
The EM also notes there may be regulatory savings for the industry. Estimates
of these costs are provided in Attachment A of the EM. In total, the regulatory
cost to private health insurers over ten years is estimated to be $3.3 million,
and to health insurance brokers $1.9 million.[76]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bills’ compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bills are compatible.[77]
However, the Statement notes that in relation to amendments
proposed in Schedule 5, Part 4 (closed and terminated products), these
provisions ‘may limit choice in access to health services for people who hold a
terminating product and do not wish to transfer to a new product’. It further
notes that ‘these people will still be eligible to receive the benefits of
universal health care under the Australian public health system and may
continue to access the private health system as privately self-funded
patients’.[78]
Parliamentary
Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights
considers that the Bills do not raise human rights concerns.[79]
Key issues
and provisions
Schedule
1—Increasing maximum excess levels
The Medicare Levy Act
1986 (MLA) specifies the operation of the Medicare Levy
Surcharge (MLS). The MLS applies to higher income earners who do not purchase
private hospital cover.[80]
Subsection 3(5) of the MLA specifies the type of private health
insurance that is required to be held in order to be exempt from paying the MLS.
Paragraph 3(5)(b) specifies that if any excess is payable under a complying health
insurance policy, it must be no higher than $500 per annum for coverage of a
single person, and no more than $1,000 per annum for other types of cover
(couples or families). These voluntary maximum excess levels have not been
adjusted since 2000.[81]
An excess is an amount of money the policy holder agrees
to pay for a hospital stay before benefits from health insurance are payable.
An excess is sometimes also called a ‘front end deductible’.[82]
Private health insurers can offer a policy with an excess,
usually in return for charging a lower premium. However, consumers who purchase
products with an excess will face up-front costs when they are admitted to
hospital. Typically a policy with a higher excess is best suited to healthier
consumers, who are less likely to be hospitalised.[83]
It is recommended that policies with an excess be regularly reviewed,
particularly as the policy holder ages.[84]
As of June 2017, just under 83 per cent of policies included an excess or
co-payment, up from 77.2 per cent in 2012.[85]
Because consumers will be able to choose a policy with a
higher excess in exchange for a lower premium, it is expected to result in an
increase in health insurance participation and put downward pressure on
premiums.[86]
The EM notes that if the number of consumers taking out policies with higher
excesses increases as expected from this measure, it will result in $8 million
in additional expenditure over four years on the Private Health Insurance
Rebate.[87]
Amendments
to the Private Health Insurance Act 2007
Item 1 of Schedule 1 to the Bill inserts new
Division 45 in the PHIA, which sets out the increased maximum
voluntary excess that can be applied is $750 in any 12 month period for a
policy covering a single person, and $1,500 in any 12 month period for other
types of cover.
Item 2 specifies that the new excess levels apply
to the 2018–19 income year and later income years.
Associated amendments are proposed for the MLA and A
New Tax System (Medicare Levy Surcharge–Fringe Benefits) Act 1999, in the
two related Bills.
Medicare
Levy Amendment (Excess levels for Private Health Insurance Policies) Bill 2018
Schedule 1 of the Medicare Levy Amendment (Excess Levels
for Private Health Insurance Policies) Bill 2018 proposes to replace paragraph 3(5)(b)
of the MLA (discussed above) to specify that, to qualify for an exemption
from the MLS any excess payable under the policy is not more than the amount
set out in new section 45-1 of the PHIA.
A New Tax
System (Medicare Levy Surcharge—Fringe Benefits) Amendment (Excess Levels for
Private Health Insurance Policies Bill 2018
The A New Tax System
(Medicare Levy Surcharge—Fringe Benefits) Act 1999 imposes the MLS on
the reportable fringe benefits of higher income earners. Paragraph 4(1)(b) of
that Act currently provides that a person will be exempt from paying the MLS on
reportable fringe benefits if they are covered by a private health insurance
policy under which any excess payable is no higher than $500 per annum for
coverage of a single person, and no more than $1,000 per annum for other types
of cover.
Schedule 1 of A New Tax System (Medicare Levy
Surcharge—Fringe Benefits) Amendment (Excess Levels for Private Health
Insurance Policies) Bill 2018 proposes to replace paragraph 4(1)(b) of the A
New Tax System (Medicare Levy Surcharge—Fringe Benefits) Act to specify that,
to qualify for an exemption from the MLS any excess payable under the policy is
not more than the amount set out in new section 45-1 of the PHIA.
Schedule 2—Age-based
discounts for hospital cover
Declining private health insurance membership,
particularly among young people, has emerged as a key issue of concern, given
that younger members cross subsidise the premiums of older, less healthy members.[88]
Figure 1 from the Explanatory Memorandum clearly shows the
decreasing rates of participation among young people:
Source: Explanatory
Memorandum, Private Health Insurance Legislation Amendment Bill 2018, p. 6.
The Government argues that if no changes are made to
address participation levels ‘private health insurance premiums will continue
to increase and people may choose to downgrade or cancel their health insurance
or not take out private health insurance at all’.[89]
This issue was also highlighted in the Senate Committee
report on the value and affordability of private health insurance. Some
submitters to the inquiry warned of a ‘death spiral’ if younger people failed
to take up private health insurance, although this view was not shared by the
regulator, APRA.[90]
It was suggested to the Committee that discounted premiums for people under 30
would be an incentive for young people to take up private health insurance.[91]
Some commentators have questioned whether age-based
discounts will be effective in attracting enough young people to private health
insurance. For example, Stephen Duckett from the Grattan Institute has
cautioned that many young people might still be unable to afford health
insurance:
The big winner from the changes is a 25-year-old, living in a
small rural town, who already has health insurance. They could get a 10%
discount and improved benefits. But of course, few Australians fall into this
category. And whether a 10% discount is enough to increase health insurance
take up by young people, many of whom are in precarious employment arrangements
or unemployed, is a question for the marketeers.[92]
Schedule 2 proposes provisions to allow insurers to
offer age-based discounted private health insurance. Details of the age-based
discounts are not detailed in the Bill but will be specified in the Complying
Product Rules. The Minister has previously indicated that discounts of up to ten
per cent will be permitted and will phase out after people turn 40.[93]
Items 1 and 2 propose amendments to the Private
Health Insurance Act 2007. As explained above, the private health insurance
system incorporates the principle of community rating, which prevents private
health insurers from discriminating between people on the basis of their health
or for any other reason set out in Part 3-2 of the PHIA.[94]
Such action is termed ‘improper discrimination’ and is defined at subsection
55-5(2) of the PHIA to include discrimination based on gender, race and
the frequency with which a person needs health treatment. Within this
definition, paragraph 55-5(2)(c) provides that discrimination that relates to the
age of a person is improper discrimination, except to the extent allowed under
Part 2–3 of the PHIA (which deals with LHC[95])
and subsection 63–5(4), which allows a higher premium to be charged for a policy
that includes a dependent child aged between 18 and 24 who is not studying. Item
1 amends paragraph 55-5(2)(c) to also permit discrimination based on age to
the extent allowed under new paragraph 66-5(3)(ea). Item 2
inserts new paragraph 66-5(3)(ea), which specifies that an age-based
discount as set out in the Private Health
Insurance (Complying Product) Rules is allowed.
Because the provisions propose an age-based component, items
3 and 4 propose amendments to the Age Discrimination Act 2004,
which, as currently relevant, makes it unlawful to discriminate against someone
on the basis of age in the provision of goods, services and facilities unless
an exemption applies.[96]
Currently an exemption exists for action taken in compliance with specified provisions
of the PHIA, including Part 2–3 and subsection 63–5(4). This will be
extended to also exempt action taken under new paragraph 66-5(3)(ea) and
the Complying Product Rules.
Schedule
3—PHIO’s powers
The Private Health Insurance Ombudsman (PHIO) has been an
office under the Ombudsman Act 1976 (OA) since 2015. The
office had existed before that time as a separate statutory agency, with its
functions and powers then set out in the Private Health Insurance Act 2007.
The office was merged into the office of the Ombudsman to give effect to a 2014
budget commitment to streamline the number of government agencies.[97]
While the PHIO was abolished as a statutory agency in
2015, the PHIO, as with a number of other Ombudsman roles under the OA,[98]
remains a separate statutory office. Thus its particular functions and powers
are also specified separately in the OA, rather than just sharing the
general powers of the Ombudsman. The primary purpose of Schedule 3 of
the Bill is to strengthen the PHIO’s powers. It will have no effect on any
other statutory office in the OA.
A basic role of the PHIO is to investigate complaints
about private health insurers.[99]
To perform this task effectively, the PHIO needs adequate powers to force
private health insurers to co-operate with the PHIO’s investigations.
Currently the OA allows the PHIO to investigate a
complaint that has been made (normally by a consumer),[100]
or to initiate an investigation him or herself (commonly called an ‘own motion
investigation’).[101]
To assist the PHIO in an investigation, he or she can require a person, by notice
in writing given to the person, to give information or access to records of an
insurer.[102]
However, while the OA ‘requires’ a person to provide such information,
it is silent on what happens if they do not.
The proposals in Schedule 3 enhance the PHIO’s ability to
gain relevant information in the course of investigations, by giving the PHIO
the power to enter the premises of private health insurers or of brokers of
such products, and to examine and copy records at those premises (proposed
sections 20SA and 20TA of the PHIA, at items 1 and 2
of Schedule 3). Item 4 contains penalties for persons who fail to assist
the PHIO in the exercise of the PHIO powers under proposed sections 20SA
and 20TA.[103]
To safeguard the private health insurers and brokers, and to ensure that it is
only PHIO staff who enter premises and examine documents, item 5 also
introduces identity card provisions for PHIO staff.[104]
The ‘right to entry’ provisions are similar to powers
already available to the Commonwealth Ombudsman,[105]
although the Commonwealth Ombudsman’s powers are not underpinned by specific penalty
provisions. This difference can be explained by the Commonwealth Ombudsman’s
powers basically only giving the power to enter the premises of a Commonwealth
agency or a Commonwealth service provider. Specific penalty provisions are
presumably deemed unnecessary, as staff of those agencies could be penalised
for non-compliance under code of conduct provisions in the Public Service
Act 1999. However, the proposed provisions will give the PHIO the power to
enter the premises of private businesses in the health insurance sector. The
proposed maximum penalty is 30 penalty units – a penalty unit is currently a
fine of $210.[106]
The penalty could only be applied by a court.
Schedule 4—Transitional
provisions relating to the treatment of certain health insurance policies
Some health insurers impose Benefit Limitation Periods
(BLPs) which are periods of cover, usually from one to three years, during
which time only a minimal benefit is paid for treatment.[107]
Division 75 of the PHIA specifies maximum waiting
periods for hospital benefits that apply for certain conditions. A maximum 12
month waiting period normally applies to pre-existing conditions and to
obstetrics, while for most other conditions (including psychiatric care) the
maximum waiting period is two months.[108]
Waiting periods apply at the start of a new private health insurance policy or if
the level of cover is increased. The Government committed to removing the two
month waiting period for psychiatric treatment when it announced its package of
reforms in October 2017.[109]
This was implemented by the Private Health Insurance (Complying Product)
Amendment (Psychiatric Care) Rules 2018, which commenced on 1 April 2018.[110]
It has recently emerged that policies with BLPs may be non-compliant
with the waiting period requirements of the PHIA. The Government
acknowledges the legal status of these BLPs is ‘confusing’, so is proposing to
remove all such BLPs from future use.[111]
Transitional provisions will make existing policies with BLPs, so-called ‘irregular’
policies sold between 1 April 2007 and 30 June 2018, compliant with PHIA,
so that consumers remain eligible for the private health insurance rebate and
exempt from the Medicare Levy Surcharge (MLS) and Lifetime Health Cover (LHC) loadings
and will not be required to repay any rebate they may have received or be
liable for the MLS or LHC.[112]
It would appear that policies with BLPs that cover the time period between the
Bill’s introduction and the BLP withdrawal date of 1 July 2018 would remain in
force. The Bill does not specify that these policy holders be exempted from BLP
provisions during this period.
According to a media report, some 12 health funds have
been asked by the Department to withdraw their irregular BLP policies.[113]
However, it is not clear how many policy holders have purchased such
non-compliant policies over the years. Another media report suggests that some
25,000 current policy holders will have their BLPs removed.[114]
It has also been suggested that the removal of BLPs from
the market could result in a ‘marginal increase’ in premiums in 2019.[115]
Items 1–2 of Schedule 4 to the Bill provide
a simplified outline and definitions, including a definition of benefit limitation
periods, which is broadly defined as ‘having the meaning generally accepted
within the health insurance industry’. This is intended to cover all possible definitions
of BLPs in use, as there are many. Item 3 re-defines a health insurance
policy with one or more benefit limitation periods as an irregular policy, for
transitional purposes. Subitem 3(3) applies to policies with BLPs for
psychiatric care applying between 1 April 2018 and 30 June 2018 and relates to the
Government’s (already implemented) measure to remove the two month waiting time
for psychiatric care from 1 April 2018. Item 4 provides that an
irregular policy be treated as if it were a compliant policy during the period
1 April 2007 to 30 June 2018. The effect of making these policies
retrospectively compliant is to protect the holders of those policies from
legal risk. If it was found that these persons had not held complying health
insurance policies in that period, they could become liable, at least
theoretically, to pay the Medicare Levy Surcharge and to attract penalties
under Lifetime Health Cover, among other things. Making the policies
retrospectively compliant removes that risk to consumers.
Item 5 operates to waive any debts arising from
payments to an insurer under the Premium Reduction Scheme, which allows an
insurer to offer a discounted premium to a consumer for which they are then
reimbursed. Similarly, item 6 waives any debts arising from rebate payments
to a person under the Private Health Insurance Incentives Scheme, that might
otherwise be payable.
Subitems 4(2)–4(4) allow the Minister to seek
remedies in the Federal Court against an insurer and for common law action to
be brought by a policy holder.
Schedule
5—Miscellaneous
Part 1—Benefits
for travel and accommodation
Currently, private health insurers are unable to offer
benefits for the cost of travel and accommodation when a policy holder needs to
travel for hospital treatment, meaning that the policy holder may incur
significant out of pocket costs. This particularly disadvantages people living
in rural and regional areas who often must travel significant distances to
access hospital treatment. Travel and accommodation benefits are currently only
offered under top level general (extras) treatment policies.[116]
The proposed provisions would allow insurers to offer travel and accommodation
benefits for hospital policies, and make these eligible for risk equalisation
purposes.[117]
Item 1 replaces paragraph 55-5(2)(d) of PHIA,
which bans insurers discriminating on the basis of where a person lives except
as allowed under subsection 66-10(2) or section 66-20, with a new paragraph
that includes the existing exceptions but adds new section 66-25 to the
list of exceptions.
Item 2 inserts new section 66-25 which
allows an insurer to pay different amount of hospital and general treatment
benefits based on the distance between a person’s home and the facility where
treatment is provided.
Item 3 inserts new subsection 121-5(2A) to
specify that benefits for travel and accommodation can be included in the
meaning of ‘hospital treatment’, which is defined in existing subsections 125-5(1)
or (2).
Item 4 adds a reference to new subsection
121-5(2A) in subsection 121-5(4), which allows the Minister to exclude
specified travel and accommodation benefits from the definition of hospital
treatment in the Private Health Insurance (Health Insurance Business) Rules.
Item 5 inserts new subsection 121-10(2A) to
specify that benefits for travel and accommodation can be included in the
meaning of ‘general treatment’.
Item 6 adds a reference to new subsection
121-10(2A) in subsection 121-10(3), which allows the Minister to exclude
specified travel and accommodation benefits from the definition of general
treatment in the Private
Health Insurance (Health Insurance Business) Rules.
Part 2—Information
requirements
This Part changes the nomenclature of the method used by
private health insurers to provide information to consumers about their policy.
Currently, private health insurers must provide current information about a
policy in a ‘standard information statement’. The Private Health
Insurance (Complying Product) Rules set out the requirements of these
statements and the method of their communication. This Part proposes the name
of the statement be changed from 1 April 2019 to ‘private health
information statement’.
The Rules currently specify that these statements follow a
specific format.[118]
However, it is intended that the Rules will be amended to allow for a
technology neutral format.[119]
Allowing private health insurers to provide product information in a format
such as email, or electronically, should lead to lower administrative costs for
insurers.[120]
Items 7–21 replace the term ‘standard information
statement’ with ‘private health insurance statement’ in the specified
subsections of Division 93 of the Act, which relates to giving information to
consumers.
Items 22–27 replace the term ‘standard information
statement’ with ‘private health insurance statement’ in the specified
subsections of Division 96 of the Act, which relates to giving information to the
Department of Health and the PHIO.
Items 28–30 amend Schedule 1 of the PHIA (the
dictionary). Item 28 specifies that private health information statement
is defined in section 93–5 of the Act, while item 29 repeals the
definition of standard information statement. Item 30 replaces the term
standard information statement with private health information statement in the
definition of ‘up to date’.
Part 3—Benefit
requirements according to class of hospital
Schedule 5 of the Private Health
Insurance (Benefit Requirements) Rules 2011 specifies arrangements around
second tier default benefits. A second tier default benefit is the benefit a
private health insurer must pay for an episode of hospital treatment that is
provided to a policy holder in a hospital with which the insurer does not have
a contractual arrangement.[121]
Facilities participating in second tier default benefit arrangements must
comply with certain quality and service criteria, as set out in the Rules.
Second tier benefits are calculated according to a formula
specified in the Rules. The formula requires that the benefit paid be ‘no less
than 85% of the average charge for the equivalent episode of hospital
treatment, under that insurer's negotiated agreements in force on 1 August of
the first year with all such comparable private hospitals in the State in which
the facility is located’.[122]
Currently, a facility wanting to apply for second tier
default benefit status must apply to the Second Tier Advisory Committee (STAC),
an industry body which determines the applicant’s eligibility against the
criteria set out in the Rules. The provisions in this Part propose to change
application arrangements so as ‘to streamline processes and reduce the
administrative burden on both private hospitals and health insurers’.[123]
Item 31 of Schedule 5 to the Bill specifies
the new application arrangements by inserting new sections 121-8 to
121-8D into the PHIA. Instead of applying to the STAC, a facility
wanting to be classified as second tier default benefit eligible, will be
required to apply to the Minister for Health, on the form and in the manner to
be set out in the Private
Health Insurance (Health Insurance Business) Rules 2017, and pay an
application fee. The new sections would require the Minister to make a decision
as to whether the facility satisfies the assessment criteria as specified in
the Rules within 60 days. If an application is approved, the facility must be
notified in writing of its inclusion and the time the inclusion begins and ends.
If unsuccessful the Minister must still notify the facility within 60 days and
provide reasons.
The new section also allows the Minister to revoke a
facility’s status if it no longer satisfies the assessment criteria. In
addition, Schedule 5 allows for a negative decision to be reviewed by the
Administrative Appeals Tribunal (AAT). Item 32 amends a table at section
328-5 of the PHIA, which lists decisions that are reviewable by the AAT,
to include decisions made under the new sections.
Part
4—Closed and terminated products
Currently, private health insurers are allowed to close a
policy to new policy-holders while allowing it to provide benefits for existing
members.[124]
The EM does not specify how many closed policies exist, nor is this easy to
determine. However, based on PHIO figures, it is estimated there could be some
12,791 closed SISs as at January 2017.[125]
These provisions would allow insurers to terminate a
policy, even if it is currently held by a policy holder, provided the policy
holder is informed in a reasonable timeframe. A policy holder who has their
existing policy closed may be offered an associated product. However, this
would not prevent a policy holder from changing their policy or switching
funds.
This part also relates to Schedule 4 of the Bill,
which provides transitional provisions for the removal of BLPs. Allowing
insurers to close off policies to existing policy holders, should facilitate
the removal of BLPs, as policies with BLPs could be closed to existing policy
holders altogether.
Item 33 repeals and replaces section 55-10 of the PHIA.
Proposed paragraph 55-10(a) specifies that the principle of
community rating is not breached if a private health insurer closes a complying
policy to anyone except those who are already insured under the policy. New paragraph
55-10(b) similarly specifies that the principle of community rating is not
breached if a private health insurer terminates a complying policy for those
who are insured under the policy.
Section 78–1 of the PHIA sets out the portability
requirements for health insurance policies.[126]
Item 35 inserts new subsection 78-1(5A) which allows insurers
to transfer an adult policy holder to an alternative policy if their policy is
terminated, provided the policy holder is informed in writing in a ‘reasonable
time’ of the matters set out in the Private Health Insurance (Complying
Product) Rules. However, it remains unclear if the ‘reasonable time’ would
provide a policy holder with sufficient time to shop around if they decide they
don’t want the replacement policy being offered.
Concluding comments
Private health insurance plays a major role in the
Australian health system and attracts significant government support, for
example, in the form of the private health insurance rebate. Issues around
consumer affordability, transparency and declining membership have been
identified as significant issues in recent years.
The package of private health insurance reforms announced
by the Government attracted broad support; but some stakeholders have expressed
concerns around the continued availability of ‘junk policies’ and discounts to
young people. Concerns around BLPs and closed/terminated products may also
emerge.
The Bill and the two related Bills, propose to enact some
of the reforms that were previously announced, in order to make health
insurance ‘simpler and more affordable’.[127]
While the Minister announced a package of reforms in October 2017, only some
will be enacted by the passage of this Bill. Specifically, the Bill proposes:
- to
allow maximum excess levels of products to be increased
- to
allow health insurers to offer age-based discounts for hospital insurance to
young people
- to
strengthen the powers of the Private Health Insurance Ombudsman which oversees
consumer issues
- to
remove benefit limitation periods from health insurance products and make
transitional provisions
- to
allow health insurers to offer benefits for travel and accommodation under
hospital cover
- to
enhance information provision arrangements
- to
reform second tier default benefit arrangements and
- to
allow health insurers to close terminated products and transfer policy holders
to a new policies.
Other promised reforms have been, or will be, enacted
through legislative instrument or other means.
Although the provisions in this Bill may address some
concerns around private health insurance it seems likely the debate on private
health insurance and its role in funding our healthcare needs into the future
is set to continue. This will also be driven by concerns over funding the
health needs of our ageing population into the future.
[1]. Explanatory
Memorandum, Private Health Insurance Legislation Amendment
Bill 2018, p. 1.
[2]. A
Biggs, Private
health insurance: a quick guide, Research paper series, 2017–18,
Parliamentary Library, Canberra, 2017.
[3]. Private
hospital insurance only covers services for which a Medicare benefit is payable;
it does not cover services that are provided out of hospital and which are
covered by Medicare, such as general practitioner (GP) services.
[4]. The
private health insurance rebate is an income-tested government rebate on the
cost of private health insurance premiums for hospital, general treatment and
ambulance policies. The MLS is an additional levy (on top of the two per cent
Medicare levy) imposed on high-income earners who decline to purchase private
health insurance. LHC is a two per cent annual loading on the cost of premiums
for people over 31 who delay taking out private health insurance. See Biggs, Private
health insurance: a quick guide, op. cit.
[5]. Other
than the age-based LHC loadings that are permitted.
[6]. Biggs,
Private
health insurance: a quick guide, op. cit.
[7]. Australian
Prudential Regulatory Authority (APRA), ‘Register
of private health insurers’, APRA website.
[8]. Australian
Institute of Health and Welfare (AIHW), ‘Private
health insurance expenditure 2015–16’, AIHW, Canberra, March 2018.
[9]. S
Ley (Minister for Health), Half-a-million
Australians downgrade private health cover, media release, 8 November
2015.
[10]. Department
of Health (DoH), ‘Private
health insurance consultations 2015–16’, DoH website,
last updated 18 October 2016.
[11]. Ibid.
[12]. Department
of Health (DoH), ‘Issues
for consideration at roundtables on private health insurance - November 2015’,
DoH website, last updated 13 November 2015.
[13]. Senate
Community Affairs References Committee, Value
and affordability of private health insurance and out-of-pocket medical costs,
The Senate, Canberra, December 2017.
[14]. Explanatory
Memorandum, op. cit., p. 5.
[15]. Ibid.,
p. 7.
[16]. G
Summerhayes, Health
insurer, heal thyself: APRA’s prescription for financial sustainability,
speech, Sydney, 7 February 2018.
[17]. Explanatory
Memorandum, op. cit., p. 5.
[18]. Ibid.,
pp. 5–6.
[19]. DoH,
‘Average
premium increases by insurer by year’, DoH website, last updated 10
February 2017. See also A Biggs, Private
health insurance premium increases—an overview and update, Background
note, Parliamentary Library, Canberra, 1 March 2012.
[20]. Private
Health Insurance Ombudsman (PHIO), ‘Out
of pocket expenses (gap cover)’, PrivateHealth.gov.au website for further
information. See also, U Mihm, ‘How
to avoid surgery out-of-pocket costs’, Choice, 11 December 2017.
[21]. Australian
Prudential Regulation Agency (APRA), ‘Medical
gap’, APRA website, 17 May 2018, Table TA.
[22]. Ibid.,
Table TB.
[23]. Senate
Community Affairs References Committee, Value
and affordability of private health insurance and out-of-pocket medical costs,
op. cit., pp. 8–9.
[24]. Ibid.,
Recommendation 3 “The committee recommends that the Minister for Health
instruct the Department of Health to publish the fees of individual medical
practitioners in a searchable database”, p. 64.
[25]. Consumers
Health Forum (CHF), Out of pocket pain,
Research report, CHF, Canberra, 5 April 2018.
[26]. E
Han, ‘Patients
hit with huge out-of-pocket care costs’, The Age, 5 April 2018, p.
8.
[27]. Commonwealth
Ombudsman, ‘Policy
exclusions and restrictions’, Commonwealth Ombudsman website, see also
PHIO, Choosing
a health insurance policy, brochure, PHIO, Canberra, August 2014.
[28]. PHIO,
‘Standard information statements’,
PrivateHealth.gov.au website.
[29]. PHIO,
‘Clarification
on the number of policies available to consumers’, Private Health
Insurance Ombudsman Quarterly Bulletin 81, 1 October–31 December 2016, p.
4.
[30]. Dr
M Gannon (AMA President), Interview
with Gareth Parker, 6PR Mornings, Private Health Insurance, transcript,
Canberra, 21 August 2017.
[31]. R
Randall, ‘Low
value, confusing and time consuming - findings from CHF's 2017 Awareness
campaign’, Health Voices, 13 April 2017, p. 2.
[32]. G
Hunt (Minister for Health), Major
reforms to make private health insurance simpler and more affordable,
media release, 13 October 2017.
[33]. Department
of Health (DoH), ‘Private
health insurance reforms: summary’, DoH website, last updated 16 October
2017.
[34]. Explanatory
Memorandum, op. cit., p. 11.
[35]. DoH,
‘Private
health insurance reforms - fact sheets’, DoH website, last updated 22
December 2017.
[36]. Explanatory
Memorandum, op. cit., p. 47.
[37]. PHIO,
‘“Closed policy”
Glossary’, PrivateHealth.gov.au website.
[38]. Senate
Standing Committee for the Selection of Bills, Report,
4, 2018, The Senate, Canberra, 28 March 2018; Senate Standing Committee for the
Selection of Bills, Report,
5, 2018, The Senate, Canberra, 10 May 2018.
[39]. Senate
Community Affairs References Committee, Value
and affordability of private health insurance and out-of-pocket medical costs,
op. cit., pp. 62–4.
[40]. Ibid.,
p. 62.
[41]. Ibid.,
p. 14. The term ‘junk policies’ is widely used, but broadly refers to policies
that offer cheap premiums and minimal benefits (often only in a public
hospital) but that exempt the policy holder from incurring a MLS liability.
[42]. Ibid.,
pp. 62–3.
[43]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 5, 2018, The Senate, Canberra, 9 May 2018, p. 47.
[44]. Proposed
sections 20SA and 20TA of the OA, at item 1 of Schedule
3 to the Bill.
[45]. Attorney-General’s
Department (AGD), A
guide to framing Commonwealth offences, infringement notices and enforcement
powers, [AGD], [Canberra], September 2011, p. 76.
[46]. Under
section 4AA of the Crimes
Act 1914 a penalty unit is currently equal to $210. The prosecution is
not required to prove fault for any of the physical elements of a strict
liability offence, but the defence of mistake of fact is available: see
sections 6.1 and 9.2 of the Criminal Code Act
1995.
[47]. Section
13.3 of the Criminal
Code Act 1995.
[48]. Subsection
13.1(2) of the Criminal
Code Act 1995.
[49]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 5, 2018, op. cit., p. 49.
[50]. Ibid.
[51]. Ibid.,
p. 51.
[52]. Senate
Standing Committee for the Scrutiny of Bills, Ministerial
responses, Australian Parliament website.
[53]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 5, 2018, op. cit., pp. 1, 33.
[54]. C
King (Shadow Minister for Health and Medicare), Turnbull’s
private health fail - 70 cents a week for young people, premiums to increase
for everyone else, media release, 13 October 2017.
[55]. Ibid.
[56]. Ibid.
[57]. C
King (Shadow Minister for Health and Medicare), Turnbull’s
private health cover up to protect big insurers, media release,
29 March 2018.
[58]. Ibid.
[59]. M
Davey, ‘Greens
want Labor's help to tackle “unfair” private health insurance’, The
Guardian, 7 March 2018.
[60]. Australian
Medical Association (AMA), AMA
welcomes government reforms as good start to bringing much-needed transparency,
clarity, and affordability to private health insurance, media release,
13 October 2017.
[61]. Consumers
Health Forum (CHF), At
last, good news on health insurance, media release, 13 October
2017.
[62]. Ibid.
[63]. Ibid.
[64]. Ibid.
[65]. CHOICE,
Federal
Government to push young people into junk policies, media release, 12
October 2017.
[66]. CHOICE,
Private
health pain critical, media release, 29 March 2018.
[67]. Australian
Healthcare and Hospitals Association (AHHA), Private
health insurance shake up welcome, but should only be the beginning of reforms,
media release, 12 October 2017.
[68]. Australian
Private Hospitals Association (APHA), Better
access: private health insurance reform, media release,
13 October 2017.
[69]. Catholic
Health Australia (CHA), Private
health insurance reforms improve value and access, media
release, 13 October 2017.
[70]. Private
Healthcare Australia (PHA), PHI
Reform delivers value to Australians young and old, media release, 13
October 2017.
[71]. PHA,
PHI
rebate keeps Australia's health system sustainable, media release, 2
April 2018.
[72]. HealthDispatch,
‘Industry
furious over handling of benefit limitation periods’ Daily Dispatch,
5 April 2018.
[73]. Explanatory
Memorandum, op. cit., p. 4.
[74]. Australian
Government, Mid-year
economic and fiscal outlook 2017–18, p. 160. The savings from
Veterans Affairs may be due to the expected significant savings from the
lowering of the cost of implanted medical devices.
[75]. Explanatory
Memorandum, op. cit., p. 23.
[76]. Ibid.,
p. 33.
[77]. The
Statement of Compatibility with Human Rights can be found at pages 34–38 of the
Explanatory
Memorandum to the Bill. The Statement of Compatibility with Human Rights
for the two related Bills can be found at pages 39–40.
[78]. Ibid.,
p. 35.
[79]. Parliamentary
Joint Committee on Human Rights, Human
rights scrutiny report, 4, 8 May 2018, p. 96.
[80]. The
surcharge is calculated at the rate of between 1 to 1.5 per cent of income for
Medicare Levy Surcharge purposes. The MLS is in addition to the Medicare Levy
of 2 per cent, which is paid by most Australian taxpayers. See PHIO, ‘Medicare
Levy Surcharge’, PrivateHealth.gov.au website.
[81]. Explanatory
Memorandum, op. cit., p. 21.
[82]. PHIO,
‘Managing
your policy’, PrivateHealth.gov.au website.
[83]. B
Drury, ‘At
the heart of the matter’, The Age, 20 June 2012, p. 1.
[84]. The
Sunday Times, ‘Health
insurance: cut or keep?’ Sunday Mail Adelaide, 18 March 2018, p. 6.
[85]. APRA,
Operations
of private health insurers annual report 2016–17, ‘Policies by type’, 8 November 2017.
[86]. Department
of Health, Private
health insurance reforms: increasing maximum excess levels, Fact sheet,
Department of Health, Canberra.
[87]. Explanatory
Memorandum, op. cit., p. 21.
[88]. Ibid.,
p. 6.
[89]. Ibid.
[90]. Senate
Community Affairs References Committee, Value
and affordability of private health insurance and out-of-pocket medical costs,
op. cit., p. 35.
[91]. Ibid.
NIB and BUPA were both cited as having made this suggestion.
[92]. S
Duckett, ‘Changes
to lure young people into private health insurance won’t slow increase in
premiums’, The Conversation, 13 October 2017.
[93]. Hunt,
Major
reforms to make private health insurance simpler and more affordable, op.
cit.
[94]. Section
55–1 of the Private
Health Insurance Act 2007.
[95]. LHC
imposes a two per cent annual loading on the cost of premiums for people over
31 who delay taking out private health insurance. See Biggs, Private
health insurance: a quick guide, op. cit.
[96]. See
section 28 of the Age
Discrimination Act 2004.
[97]. The
2014–15 Budget: Smaller Government - additional reductions in the number of
Australian Government bodies, included an announcement that the Office of
the PHI Ombudsman would be merged with the Office of the Commonwealth Ombudsman
from 1 July 2015. See M Neilsen, Private
Health Insurance Amendment Bill (No. 2) 2014, Bills digest, 68,
2014–15, Parliamentary Library, Canberra, 2015, p. 3.
[98]. For
example the Defence Force Ombudsman and the Postal Industry Ombudsman.
[99]. Ombudsman Act 1976,
section 20.
[100]. Ombudsman
Act 1976, section 20P.
[101]. Ombudsman
Act 1976, section 20T.
[102]. Ombudsman
Act 1976, section 20ZE.
[103]. Proposed
section 20ZHB.
[104]. Proposed
sections 20HZA and 20ZIA.
[105]. Ombudsman
Act 1976, section 14.
[106]. Crimes Act 1914,
section 4AA. Accordingly, the maximum penalty is $6,300.
[107]. Explanatory
Memorandum, op. cit., p. 47. See also PHIO, ‘Waiting
periods’, PrivateHealth.gov.au website. Following the limited benefits
period, benefits revert to the full amount. BLPs are in addition to mandated
waiting periods.
[108]. PHIO,
‘Waiting
periods’, op. cit.
[109]. Hunt,
Major
reforms to make private health insurance simpler and more affordable, op
cit.
[110]. Private Health
Insurance (Complying Product) Amendment (Psychiatric Care) Rules 2018.
[111]. Department
of Health, ‘Private
health insurance benefit limitation periods – changes to improve information
for private health insurance members’, DoH website, last updated 16 March
2018. The waiting period requirements specified in the Act will remain
unchanged.
[112]. Ibid.
[113]. R
Baxendale, ‘“Cover
up” claims on health’, The Australian, 2 April 2018. p. 5. Insurers
will have until 30 June 2018 to remove benefit limitation periods from their
policies, see Explanatory
Memorandum, op. cit., p. 48.
[114]. S
Parnell, ‘Health
cost pain after rules glitch’,
The Australian, 29 March 2018, p. 1.
[115]. Ibid.
This is because the removal of these longer waiting times will allow consumers
to make claims for full benefits when the legally mandated waiting periods have
expired. Consequently, claims outlays could increase.
[116]. Department
of Health, Private
health insurance reforms: improved access to travel and accommodation benefits
for regional and rural areas, Fact sheet, Department of Health, Canberra.
Around half of all health insurers offer benefits for travel and accommodation.
[117]. Risk
equalisation is a key component of the ‘community rating’ principle, as it
balances the cost of high claiming hospital policy holders across the sector
through the operation of the Risk Equalisation Trust Fund (RETF). All private
health insurers participate in the RETF. The Private Health
Insurance (Risk Equalisation Policy) Rules 2015 specify what benefits are
eligible for risk equalisation purposes.
[118]. As
set out in Schedules 1–4 of the Private Health
Insurance (Complying Product) Rules 2015, the format of the statement is
required to fit on an A4 page (except for combined hospital/general treatment).
[119]. Explanatory
Memorandum, op. cit. p. 51.
[120]. Department
of Health, Private
health insurance reforms: information provision, Fact sheet,
Department of Health, Canberra.
[121]. Private
health insurers may enter contractual arrangements with hospitals where the
fund agrees to meet the cost of treatment so that the patient has no or minimal
out of pocket costs. See PHIO, Choosing
a health insurance policy, op. cit., p. 2.
[122]. Schedule
5, section 3(4) of the Private Health Insurance
(Benefit Requirements) Rules 2011.
[123]. Department
of Health, Private
health insurance reforms: second tier administrative reforms, Fact
sheet, Department of Health, Canberra.
[124]. PHIO,
‘“Closed policy”
Glossary, op. cit.
[125]. PHIO,
‘Clarification
on the number of policies available to consumers’, op. cit., p. 4. This
calculation was made using estimates of the number of available Standard Information
Statements (SISs) which describe the key features of a policy. SISs can act as
a crude proxy measure of the number of policies available. However, PHIO
cautions against relying on this methodology for accuracy as it is likely to
overstate the number.
[126]. Portability
rules mean that if a policy holder transfers to a policy with the same or lower
benefits no additional waiting periods apply. However, if the policy they
transfer to has higher benefits waiting periods may need to be served. PHIO, ‘Leaving
or moving funds’, PrivateHealth.gov.au website.
[127]. G
Hunt, ‘Second
reading speech: Private Health Insurance Legislation Amendment Bill 2018’, House of
Representatives, Debates, 28 March 2018, p. 3031.
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