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This Digest was prepared for debate. It reflects the legislation as
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CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Contact Officer and Copyright Details
Private Health Insurance Incentives Bill
1998
Date Introduced: 12 November 1998
House: House of Representatives
Portfolio: Health and Aged Care
Commencement: Upon Royal Assent
The government has introduced a trilogy of
bills, which combine to replace the current private health
insurance incentives initiative with another incentives payment
scheme aimed at reducing the decline in private health insurance
membership and restoring the balance in the health system.
The incentive will be equal to 30% of the cost
of private health insurance cover and will not be income
tested.
The Private Health Insurance Incentives Bill
1998 (the Bill) introduces incentives in the form of either direct
payments or reduced premiums.
This Bill is complimented by the introduction of
the Taxation Laws Amendment (Private Health Insurance) Bill 1998,
which provides an alternative incentive in the form of tax offsets
(rebates).
The Private Health Insurance Incentives
Amendment Bill 1998 completes the reform package by providing for
the closing off of the current Private Health Insurance Incentives
Scheme (PHIIS) and the repeal of the Private Health Insurance
Incentives Act 1997 on 1 July 2000.
The current PHIIS has operated from 1 July 1997.
The benefit is provided by way of either reduced premiums or tax
offset. The scheme is income tested and is therefore not available
to singles with incomes above $35,000 nor couples or families with
combined incomes in excess of $70,000. The threshold is increased
for those with dependent children.
The current incentive amount is dependent upon
the type of policy held, but a guide to the benefits available
would be $250.00 to a couple with hospital and ancillary cover and
$450.00 for families.
There have been dramatic changes in the
proportion of the population covered by private health insurance
over the last decade or so. In relation to hospital cover, at 30
June 1984, 50.0% of the population had private health cover. In
1998 coverage had fallen to 30.6%.
In 1996 the coverage was 33.6% and in 1997
31.9%. The 1998 figures showed a continued decline in membership to
30.6% but the rate of decline had apparently slowed.
Private Health Insurance
Incentives Bill 1998
1. Chapter 2 - The incentive payments
scheme
1.1 Summary
Chapter 2 establishes a scheme under which
people who, or whose employers on their behalf, pay premiums under
an appropriate private health insurance policy are entitled to an
incentive payment. The payment generally represents the greater of
30% of the amount of premium paid or an incentive amount which is
specified in table form in Chapter 4.
1.2 Part 2 - Entitlement to, and calculation of,
payments
1.2.1 Entitlement
New section 4-5 states that a
person is entitled to a payment under Chapter 2 if:
-
- the person has paid a premium under an appropriate private
health insurance policy; or
-
- an employer has paid, as a fringe benefit, a premium for the
person under an appropriate private health insurance policy.
A person is not entitled to a payment under the
Chapter if the premium paid by the person has already been reduced
pursuant to the premiums reduction scheme set out in Chapter 3.
New section 4-5(2)
The terms appropriate private health
insurance policy and fringe benefit are defined in
Chapter 4, new section 20-5.
1.2.2 Calculation
New section 4-10 determines the
amount payable under Chapter 2. Basically the amount payable is the
greater of:
-
- 30% of the amount of the premium paid by the person or by the
person's employer as a fringe benefit on behalf of the person for
the financial year; or
-
- the incentive amount for the policy for the financial
year.
It should be noted that if a person was not
registered or eligible to apply for registration before 1 January
1999 under the Private Health Insurance Incentives Act
1997 in respect of a policy for the financial year that
began on 1 July 1998, the amount payable is 30% of the amount of
the premium paid by the person or the person's employer.
New subsection 4-10(7) states
that the amount payable under the Chapter is reduced by the amount
of any tax offset received by the person.
1.3 Part 3 - Claims for payments under the incentive
payments scheme
Pursuant to new section 6-5
payment for entitlement under new section 4-5 is
conditional upon the making of a proper claim for payment of the
amount.
New section 6-10 sets out the
requirements which must be followed in order for the claim to be a
proper claim. These include lodging the appropriate form, together
with all information required by the form with the Health Insurance
Commission ("HIC") in the financial or following financial year in
which payment of the premium was made.
1.4 Part 4 - Notification requirements and information
to be provided to the HIC
Under new section 8-5 where an
event or circumstance occurs, including a change in premium, which
affects a person's entitlement to a payment, the person must notify
the HIC, in writing, within 30 days.
Pursuant to new section 8-10
the HIC may, in writing, require a health fund to provide certain
information relevant to the operation of Chapter 2 about a person
who is covered by an appropriate private health insurance policy or
paid premiums under such policy.
Under new subsection 8-10(4)
criminal responsibility attaches to any failure to provide
notification or information required by Part 4.
2. Chapter 3 - The premium reduction
scheme
2.1 Summary
The premiums reduction scheme contained in
Chapter 3 of the Bill permits a person who is covered by an
appropriate health insurance policy to register with the person's
participating health fund in order to obtain a reduction in the
premiums payable under the policy. The premium reduction is
generally the greater of 30% of the amount of premium payable or an
incentive amount which is specified in table form in Chapter 4.
2.2 Part 5 - Participation in the premiums reduction
scheme
2.2.1 Eligibility
New section 10-5 states that a
person is eligible to participate in the premiums reduction scheme
if:
-
- the policy is an approved private health insurance policy;
and
-
- the health fund is a participating fund; and
-
- the person is eligible to apply for registration under the
scheme.
The terms health fund, private
health insurance policy and participating fund are
defined in Chapter 4, new section 20-5
2.2.2 Participation
To participate in the premium reduction scheme a
person must apply to the health fund that issued the policy to be
registered by the HIC in respect of the policy for that year. The
HIC must in turn give notice of registration to the health fund.
New section 11-5
The application for registration must be in a
form approved by the Minister and specify certain details.
New section 11-15
If a detail in an application for registration
changes in a way that would affect the incentive amount for the
policy, notification must be given to the health fund within 30
days. Failure to do so attracts a criminal penalty. New
section 11-30
2.2.3 Effect of the premiums reduction scheme on insurance
premiums
Under new section 12-5 the
amount of premium is reduced by the greater of:
-
- 30% of the amount of the premium payable for the financial
year; or
-
- the incentive amount for the policy for the financial
year.
A reduction of premium is not allowable if an
amount has been received under Chapter 2 in respect of the payment.
New subsection 12-5(4)
In working out the reduction of premium under
Chapter 3 any part of the amount of premium payable that relates to
a period before 1 January 1999 is to be disregarded. New
subsection 12-5(5)
2.3 Part 6 - Reimbursement of health funds
2.3.1 Participating funds
Part 6 concerns health fund participation in the
premiums reduction scheme and the manner in which the Commonwealth
reimburses a fund for the reductions in premiums that they make
under the scheme.
A health fund must make an application to the
Minister no later than 2 months before the start of the financial
year to become a participating fund. If a fund becomes registered
during a financial year, the application must be made as soon as
practicable after the fund was registered. New section
14-10
A health fund that was for the financial year
that began on 1 July 1998, a participating fund for the purposes of
the Private Health Insurance Incentives Act 1997, will be
taken to be a participating fund for that year for the purposes of
the Bill. New section 14-5
2.3.2 Reimbursement
A health fund may claim reimbursement from the
HIC on a monthly basis for the sum of the amounts by which premiums
for that month were reduced because of the operation of the
premiums reduction scheme. New sections 15-5 and
15-15
2.3.3 Audits by the Health Insurance Commission
Pursuant to new section 16-5
the HIC may at any time, audit the accounts and records of a health
fund that is, or has been, a participating health fund. The audit
must only relate to accounts and records dealing with the premiums
reduction scheme.
3. Chapter 4 - Provisions applying both
to the incentive payments scheme and the premiums reduction
scheme
3.1 Summary
Chapter 4 contains general provisions that
relate to both the incentive payments and premium reduction
schemes. It deals with recovery of debts owed by either individuals
or health funds, secrecy provisions and includes a dictionary of
defined terms.
3.2 Part 7 - Recovery of payments and other
miscellaneous provisions
3.2.1 Recovery
Briefly the following amounts are recoverable
under new section 18-5 as debts due to the
Commonwealth:
-
- a payment made to a person under the incentives payment scheme
to which the person was not entitled; and
-
- so much of a payment that was made pursuant to a claim by a
health fund in relation to a reduction in premiums that was not
payable.
Where an amount is recoverable under the
incentives payment scheme, including interest, the amount is
recoverable from an individual or an individual's estate.
New subsection 18-5(2)
Where an amount is recoverable in relation to
the premium reduction scheme, including interest, the amount is
recoverable from the health fund. Subsection
18-5(2)
An amount is recoverable whether or not any
person has been convicted of an offence relating to the
payment.
3.2.2 Miscellaneous provisions
A person is guilty of an offence and liable to
imprisonment for a maximum of two years if they breach the secrecy
provisions contained in new section 19-5.
Pursuant to new section 19-10
application may be made to the Administrative Appeals Tribunal for
review of certain specified decisions, primarily concerning
decisions by the Health Insurance Commission in relation to
registration and claims.
3.3 Part 8 - Dictionary of defined
expressions
Part 8 contains a dictionary of defined terms
that are not previously dealt with in the Bill. Of particular
relevance for the calculation provisions is the definition of
incentive amount. For ease of reference the table
appearing at section 20-10 is reproduced
below.
|
Item
|
Number & kinds of people covered by the
policy
|
Policy provides hospital cover but not ancillary
cover
|
Policy provides ancillary cover but not hospital
cover
|
Policy provides combined cover
|
|
1
|
3 or more people
|
$350.00
|
$100.00
|
$450.00
|
|
2
|
One dependent child and one other person
|
$350.00
|
$100.00
|
$450.00
|
|
3
|
2 people neither of whom is a dependent child
|
$200.00
|
$50.00
|
$250.00
|
|
4
|
One person
|
$100.00
|
$25.00
|
$125.00
|
Taxation Laws Amendment (Private
Health Insurance) Bill 1998
1. Schedules 1 & 2 - Private health
insurance tax offset
The amendments contained in Schedules 1 & 2
to the Taxation Laws Amendment (Private Health Insurance) Bill 1998
provide a refundable tax offset as an alternative form of incentive
for persons who take out private health insurance.
The offset is designed to mirror the incentive
payments scheme in this Bill.
Please refer to the Bills Digest in respect of
the Taxation Laws Amendment (Private Health Insurance) Bill 1998
for further detail.
Private Health Insurance
Incentives Amendment Bill 1998
Schedules 1 & 2 - Amendment and
repeal of the Private Health Insurance Incentives Act
1997
Schedule 1 provides transitional provisions that
permit the closing off of the current PHIIS and Schedule 2 provides
for the repeal of the Private Health Insurance Incentives
Act 1997 from 1 July 2000. This should permit finalisation of
administrative matters associated with the current scheme.
Please refer to the Bills Digest in respect of
the Private Health Insurance Incentives Amendment Bill 1998 for
further detail.
Financial
Impacts
Administrative costs
The HIC will be responsible for administering
the direct payment and premium reduction option and will no longer
be responsible for administering the current PHIIS. Administrative
costs will increase due the inclusion of the direct payment option,
the making of determinations in relation to eligibility of
participating funds and the broader range of persons to whom the
scheme is available.
The Australian Taxation Office will be
responsible for administering the tax offset option and will incur
additional costs in modifying the existing systems to facilitate
the administration of the tax offset.
The expected administrative costs of the new
scheme are:
|
1998-99
$m
|
1999-2000
$m
|
2000-01
$m
|
2001-02
$m
|
|
14.6
|
7.8
|
7.5
|
7.5
|
Budgetary impact
The budgetary impact resulting from the new
measures is:
|
1999-2000
$bn
|
2000-01
$bn
|
2001-02
$bn
|
2002-03
$bn
|
|
-1.09
|
-1.18
|
-1.27
|
-1.36
|
The current PHIIS provides a subsidy of between
8% and 14% of the cost of private hospital insurance. This will
increase to 30% upon the introduction of the new scheme. In
addition the removal of the income test will ensure that the new
scheme is accessible to a broader range of persons.
Lesley Lang
23 November 1998
Bills Digest Service
Information and Research Services
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ISSN 1328-8091
© Commonwealth of Australia 1998
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Published by the Department of the Parliamentary Library,
1998.
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