House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Health and Aged Care, The Hon. Dr Michael Wooldridge, MP)

Outline

This Bill makes a number of amendments to the National Health Act 1953 , the Private Health Insurance Incentives Act 1998 and the Health Insurance Commission Act 1973 .

The reforms contained in Schedules 1 and 2 of this Bill amend the National Health Act 1953 and will improve the prudential regulation applied to the private health insurance industry, allowing it to be more flexible and responsive to market changes. These amendments will also strengthen the financial accountability of those who manage health insurance businesses. In addition, the day to day regulation of the industry will be simplified through the transfer of key registration, de-registration and merger functions to the Private Health Insurance Administration Council. Lastly, the Bill introduces a new regime for dealing with registered organizations in difficulty which is focussed on producing outcome that are in the best interests of contributors.

Schedule 3 of the Bill amends the Private Health Insurance Incentives Act 1998 , the National Health Act 1953 and the Health Insurance Commission Act 1973 . In particular, the amendments to the Private Health Insurance Incentives Act 1998 will enable the private health insurance incentives scheme created under that Act to operate more smoothly. The changes relate to the day to day implementation or operation of the scheme and will assist the Health Insurance Commission to better fulfil its role under the Act. The amendments set out in Schedule 3 are designed to operate retrospectively so as to ensure the smooth operation of the incentive scheme from 1 January 1999.

Schedule 1 - Registration of registered organizations and related matters

The main items contained in this Schedule of the Bill will:

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transfer responsibility for registration, cancellation of registration and merger approval from the Minister to the Council;

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restrict new registrations to companies whose primary purpose is the operation of a health benefits fund;

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require any current registered organizations that are unincorporated associations to become incorporated as a company within a time period established by the Minister;

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require registered organizations, in taking any action relating to the application, investment or management of the assets of the health benefits fund conducted by it, to give priority to the interest of the contributors to the fund;

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require payments from the health benefits funds to only be used for health insurance business purposes;

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allow the Court to set aside certain transactions that are manifestly not in the interests of contributors;

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create a new civil penalty regime that make directors liable for serious contraventions of the Act by registered organizations unless those directors have taken reasonable steps to ensure that the organization would not make such a contravention; and

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create a part-time Deputy Commissioner position (to be held by a member of Council).

Schedule 2 - The prudential regulation of registered organizations

The main items contained in this Schedule of the Bill will:

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repeal the current minimum reserve requirements and replace them with scheme providing for solvency standards and capital adequacy standards;

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allow both the Minister and the Council to appoint inspectors to examine the affairs of registered organizations where illegal or inappropriate conduct is suspected;

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repeal the Court ordered judicial management, compulsory transfer and winding up of funds provisions and replace them with a new administration and winding up scheme;

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allow the Council to appoint an administrator to either a fund or an organization in difficulty, have the administrator operate in the interests of contributors, and require the administrator to make a recommendation to Council as to the most appropriate options for the fund or registered organization;

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require Court approval before a fund or registered organization in difficulty can be forced to comply with a scheme of arrangement or be wound up;

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give health benefit fund contributors priority over other unsecured creditors in the distribution of fund assets upon winding up;

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make directors liable for any loss to the fund if the loss was related to a contravention of the Act and the fund or organization was subsequently wound up, unless those directors can show that they used due diligence in an attempt to prevent such contraventions;

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allow all funds and all incorporated registered organizations to enter into a solvent voluntary wind up.

Schedule 3 - Private health Insurance Incentives

The main items contained in this Schedule of the Bill will:

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allows the HIC 14 days to either grant or refuse a claim for the incentive payment and provide for internal review by the HIC of a decision refusing to pay a claim;

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enables a person who has paid a premium or whose employer, as a fringe benefit, has paid their premium, to register for the premiums reduction scheme;

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removes the requirement for annual registration in the premiums reduction scheme for individuals and health funds;

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introduces a new section that provides that the Minister may revoke the status of a participating fund;

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requires a health fund, when given notice, to produce a certificate in writing by a registered company auditor as to the correctness of its accounts and records in relation to the 30% Rebate;

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specifies additional categories that are debts due to the Commonwealth and who the money is recoverable from and allows the HIC to set off debts against amounts that are payable;

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requires a health fund to provide the HIC, when given notice, information in relation to people who have had a policy issued by the fund or have paid premiums in relation to a policy;

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introduces a new section that enables the Minister to make principles relating to personal information which a health fund must comply with; and

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makes consequential amendments to the Health Insurance Commission Act 1973 and National Health Act 1953.