Explanatory Memorandum
(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP)Chapter 2 - Introduction
Outline of chapter
2.1 Part 1 deals with the preliminary provisions. This includes:
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- the short title and commencement;
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- an outline of the Prudential Supervision Bill;
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- the definition of terms used; and
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- the constitutional basis and application.
2.2 Unless otherwise stated, all references in this Chapter relate to the Prudential Supervision Bill.
Detailed explanation of new law
Part 1 - Introduction
Division 1 - Preliminary
Short title
2.3 This Bill may be cited as the Private Health Insurance (Prudential Supervision) Bill 2015. [Part 1, Division 1, section 1]
Commencement
2.4 The Prudential Supervision Bill commences from 1 July 2015 (if the Bill receives Royal Assent before 1 July 2015) or a single day to be fixed by proclamation (if the Bill receives Royal Assent on or after 1 July 2015). [Part 1, Division 1, section 2]
2.5 If the Prudential Supervision Bill does not commence by 1 July 2015 and if the Bill does not commence within the period of six months of Royal Assent, the Bill commences on the day after the end of that period.
Simplified outline of this Bill
2.6 Only a private health insurer may carry on health insurance business. A private health insurer is a company that is registered under Part 2. [Part 1, Division 1, section 3]
2.7 A private health insurer must have at least one health benefits fund. There are regimes governing:
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- how health benefits funds are operated;
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- changing the health benefits fund to which a policy of insurance is referable;
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- terminating health benefits funds; and
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- external management of health benefits funds. [Part 1, Division 1, section 3]
2.8 Private health insurers must comply with prudential standards made by APRA, and (in an enforcement context, usually where a significant prudential concern exists) with directions given by APRA. Private health insurers and their appointed actuaries also have various other obligations. APRA has monitoring and investigative powers in relation to private health insurers. APRA may accept enforceable undertakings, and may seek remedies in the Federal Court in relation to contraventions of enforceable obligations. [Part 1, Division 1, section 3]
2.9 The PHI Act defines the key concepts of health insurance business and health benefits funds as well as other concepts that relate to health benefits funds. That Act also sets out rules governing private health insurance products and provides incentives to encourage people to have private health insurance. [Part 1, Division 1, section 3]
Interpretation
2.10 The dictionary provides definitions of terms used in the Prudential Supervision Bill. In some cases, the definitions are signposts to other provisions within the Bill or refer to definitions of terms in other Acts in which the meaning of the term is given. [Part 1, Division 1, section 4]
General administration of the Bill
2.11 APRA will have responsibility for the general administration of the Bill. [Part 1, Division 1, section 5]
Division 2 - Constitutional matters
2.12 Division 2 relates to the constitutional basis of the Bill and the Bill's application. The division is based on Division 5 of Part 1-1 of the PHI Act.
Bill binds the Crown
2.13 The Bill binds the Crown in each of its capacities. This section is subject to section 7. [Part 1, Division 2, section 6]
Bill not to apply to State insurance within that State
2.14 The Prudential Supervision Bill does not apply to State insurance that does not extend beyond that State. [Part 1, Division 2, section 7]
Compensation for acquisition of property
2.15 If the operation of the Prudential Supervision Bill would result in an unjust acquisition of property for a person otherwise than on just terms (within the meaning of paragraph 51(xxxi) of the Constitution) the Commonwealth is liable to pay a reasonable amount of compensation to the person. If agreement cannot be reached on the amount of compensation, the person may take action in the Federal Court. [Part 1, Division 2, section 8]
Legal professional privilege
2.16 There is no specific reference to legal professional privilege applying to this Bill, and therefore the common law principle of legal professional privilege will apply.