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.

Financial and regulation impact statement

FINANCIAL IMPACT STATEMENT

The Health Legislation Amendment Bill (No 3) 1999 will have no significant impact upon the finances of the Commonwealth.

REGULATION IMPACT STATEMENT

This Regulation Impact Statement relates to Schedules 1 and 2 of the above legislation.

The Office of Regulation Review has advised that no Regulation Impact Statement is required in relation to Schedule 3.

Background

In 1989 the Private Health Insurance Administration Council (PHIAC) was established under the National Health Act 1953 (the Act) to assist the Government in the prudential regulation of the private health insurance industry.

Problem

PHIACs powers are limited in that it is essentially an administrative and advisory body and may generally only make recommendations to the Minister for Health and Aged Care.

In February 1997 the Industry Commission delivered its report on Private Health Insurance to the Treasurer (Industry Commission Report No.57). In this report the Industry Commission raised a number of issues regarding the prudential regulation of private health insurance funds in Australia including concerns that there should be:

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an independent regulator;

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improved capacity of the regulator to respond in an effective way to health funds in financial difficulty; and

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a stronger commercial focus to bring prudential regulation of the health insurance industry in line with other prudential bodies.

The report also expressed concerns in relation to the current reserve requirements of $1 million or two months contributions (whichever is greater).

Objectives

This legislation addresses these and a number of the other concerns raised by the Industry Commission Report No. 57. The changes are the result of the Departments subsequent investigation into the Industry Commission Report and address Government, consumer and health industry concerns regarding current inefficient regulation and the poor process in regulation.

Options

In response to the Industry Commission report and as part of the Governments microeconomic reform objectives to move towards minimum effective regulation, the Department undertook an investigation into the regulatory powers and functions of PHIAC and compared these arrangements with other prudential regulatory schemes.

After exhaustive investigation, three options were considered:

1.

Maintain current arrangements.

2.

Transfer all prudential regulatory responsibilities to PHIAC so as to ensure that PHIACs responsibilities are consistent with other Australian prudential regulation regimes and to:

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enable PHIAC to set new, flexible solvency and capital adequacy standards that put private health funds on a more commercial footing;

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streamline processes so that when a health fund is close to insolvency PHIAC can expediently appoint an Administrator who will work in the interests of the contributors; and

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introduce new winding up provisions that give greater protection for contributors in the distribution of assets.

1.

Transfer all prudential regulatory responsibilities to the Australian Prudential Regulation Authority and ensure that those responsibilities are consistent with other Australian prudential regulation regimes.

Impact analysis

In considering the impact of these changes three major groups were considered, the private health insurance industry, consumers (i.e. contributors to private health funds), and Government.

Option 1 - Maintain current arrangements

Impact on industry

The current prudential regulation arrangements are ineffectual in relation to small and large health funds. Current arrangements are too inflexible and decision-making in regard to prudential regulation slow. In cases where there is a threat of insolvency the current arrangements are cumbersome and inefficient. To maintain and reinforce their confidence in private health funds other industry stakeholders e.g. contributors, are demanding a more responsive and relevant prudential regulation regime.

Impact on contributors

This option does not provide effective or efficient arrangements for adequate contributor protection as present minimum reserve requirements are not suitable for the wide range of organisations that run health funds.

Impact on the Commonwealth Government

This option is not supported by the Government because it would perpetuate the currently inefficient prudential regulatory regime.

Option 2 - Transfer all prudential regulatory responsibilities to PHIAC

Impact on industry

Over time health funds have developed a sound relationship with PHIAC. They believe that PHIAC is best placed to respond to the prudential regulatory needs of both consumers (contributors), government and the industry. Further, with an ability to determine meaningful prudential standards, monitor adherence to those standards, and respond quickly and effectively to enforce those standards PHIAC is considered the most appropriate body to take on full regulatory functions.

This option will result in more efficient regulation of health funds no matter what their organisation type or size. By deleting minimum reserve thresholds and liquidity and diversification of reserve levels from the Act and allowing PHIAC to set new, more appropriate solvency and capital adequacy standards private health funds will be able to operate on a more commercial footing and be more market responsive. The impact of these changes will be particularly beneficial to small health funds that have customarily been required to seek exemption from the minimum reserve requirements.

Under the proposed administration arrangements PHIAC will be able to appoint an Administrator quickly when there is a risk of insolvency. The process will be more responsive and will better safeguard the interests of both the health funds and the contributors. Health funds will be able to voluntarily merge or wind up and, where there is a risk of insolvency and an Administrator has been appointed, enter into a voluntary deed of arrangement. In addition, PHIAC will have to obtain Court approval prior to merging or winding up a fund if the fund opposes such action.

There will be minimal change in the cost of compliance and little or no additional administrative burden for health funds.

Impact on contributors

This option will increase the likelihood that private health funds remain financially sound, more accountable, and able to meet their obligations to contributors. It will provide grounds for increased contributor confidence as funds will be regulated both under the National Health Act 1953 and Corporations Law.

In addition, the existing Judicial Management provisions of the Act will be replaced with a new administration regime that seeks to promote the most optimal outcome for contributors.

Impact on the Commonwealth Government

This option provides for a move towards minimum effective regulation of the private health insurance industry and will facilitate more efficient essential regulation.

Option 3 - Transfer all prudential regulatory responsibilities to the Australian Prudential Regulation Authority

Impact on industry

There are currently sufficient differences between the health insurance market and general insurance market (eg the non-risk rated nature of health insurance) to make it impractical for a general insurance regulator to take control of the prudential regulation of the private health insurance industry at this time.

Impact on contributors

While this option offers the same benefits as option 2 in terms of increased contributor confidence it does not provide for a regulator with specific experience in acting with a comprehensive knowledge of the health industry and to work in the interest of health insurance consumers.

Impact on the Commonwealth Government

It is the Governments view that more time is required to allow the private health insurance industry to move to a more commercially oriented regulatory framework.

Consultation

The views of all relevant stakeholders were thoroughly canvassed through the inquiry conducted by the Industry Commission. Further, the Government has closely monitored the response of the industry, consumers (i.e. contributors) and investors to the Industry Commission inquiry.

The Government will continue to discuss and account for the views of all relevant parties in its implementation of the proposed arrangements.

Conclusion and Recommended Option

In view of the Industry Commissions recommendations and taking into consideration the impact on all stakeholders Option 1 is not considered a viable option.

Although Option 3 has merit, given the significant differences between the general insurance and private health insurance industries (i.e. the non-risk rated nature of health insurance), it is not considered immediately viable.

Option 2 is the preferred option as it is both viable and the most beneficial for all stakeholders at this time. It ensures essential regulation is flexible and tailored to market and client needs and that the regulator has effective market control. In addition, when there is a threat that a health fund may become insolvent, this option facilitates expedient action and an outcome that is in the best interest of contributors.

Implementation

The preferred option will be implemented through amendments to the National Health Act 1953. In addition, in the lead up to PHIAC taking on the prudential regulatory role, any necessary additional support will be provided to PHIAC to ensure that it is prepared for its extended role. Health funds will be informed of new arrangements through consultation and Commonwealth Department of Health and Aged Care circulars.

Review

The Department of Health and Aged Care will review arrangements five years after the regulatory changes take effect to assess the status of health fund regulatory dependence.

Notes on clauses

Section 1: Short Title

This section cites the short title of the proposed legislation as the Health Legislation Amendment Act (No. 3) 1999.

Section 2: Commencement

This section provides that, except for the particular commencement dates in this section, the amendments to the National Health Act 1953 (the NHA) commence on the day on which the legislation receives Royal Assent. Items with commencement dates specified as being other than the day of Royal Assent are as follows:

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Schedule 1 and Part 1 of Schedule 2 commence on a day to be fixed by Proclamation or otherwise on a day six months from the day of Royal Assent.

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Part 2 of Schedule 2 (which removes references to friendly societies from the NHA as amended) will commence on the latter of either:

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a day that is the transfer day for the purposes of the Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999; or

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immediately after the commencement of Part 1 of Schedule 2.

The sole purpose of Part 2 of Schedule 2 is to remove from Part 1 of Schedule 2 any references to friendly societies after the Proclamation of the transfer date in the Financial Sector Reform (Amendments and Transitional Provisions) Bill (No. 1) 1999.

The primary purpose of the Financial Sector Reform (Amendments and Transitional Provisions) Bill (No. 1) 1999 is to transfer regulatory responsibility for State and Territory based financial institutions, including friendly societies, to a Commonwealth regulatory regime. Upon transfer, friendly societies previously registered or incorporated under State or Territory law will become companies under the Corporations Law and will be dealt with as such by the National Health Act 1953 (as amended).

A further consequence of the Financial Sector Reform (Amendments and Transitional Provisions) Bill (No. 1) 1999 will be the amendment of a large number of Commonwealth Acts (including the National Health Act 1953) to remove any reference to friendly societies (as entities registered or incorporated under State and Territory law). However, as the Financial Sector Reform (Amendments and Transitional Provisions) Bill (No. 1) 1999 and this Bill are expected to be in Parliament at the same time, it is desirable that a mechanism be put in place in this Bill to prevent it from operating contrary to the intent of the Financial Sector Reform Bill.

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Schedule 3 is taken to have commenced on 1 January 1999.

The amendments in Schedule 3 are amendments to the Private Health Insurance Incentives Act 1998, the Health Insurance Commission Act 1973 and the National Health Act 1953. These amendments are retrospective and will be taken to have commenced on the same day as the Private Health Insurance Incentives Act 1998, ensuring that the Act, as amended, is fully operative as of 1 January 1999. In addition, retrospective operation will offer greater overall effectiveness and efficiencies for the relevant Commonwealth agencies involved in the administration of the Rebate, for the private sector and for the community. Advantages of the amendments having retrospectivity are as follows:

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there will be internal review by the Health Insurance Commission of its decision not to pay the incentive payment (item 4: clause 6-25);

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there will be no annual registration for participants in the premiums reduction scheme or for health funds (items 10 and 29, 30 and 31; subclause 11-5(1) and clause 14-5);

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a person who pays a premium but is not covered by the policy will be able to participate in the premiums reduction scheme (item 14: clause 11-10);

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there will be certainty in the notification requirements of the Health Insurance Commission (items 17 and 25: subclauses 11-25(1) and 11-40(3));

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the Health Insurance Commission will have the ability to set off debts due to the Commonwealth (item 56: clause 18-20); and

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visitors from countries with whom Australia has entered into a Reciprocal Health Care Agreement will be eligible for the Rebate from 1 January 1999 (item 65: section 20-5).

The length of time for the period of retrospectivity will be relatively short.

Section 3: Schedules

This section notes that each Act that is specified in the Schedules is to be amended as set out in the applicable items in the Schedule concerned.

Schedule 3 - Private health insurance incentives

Part 1 - Private Health Insurance Incentives Act 1998

Introduction - Items 1 to 6

These amendments make it clear who is entitled to receive an incentive payment and that a receipt will be issued by the health fund concerned. Under the new arrangements the HIC will have 14 days to pay a claim for the incentive payment and a decision to refuse payment will be reviewable by the HIC before it is reviewable by the Administrative Appeals Tribunal.

Item 1

This item repeals subsection 4-5(1) and replaces it with a new subsection. The new subsection 4-5(1) provides that a person is entitled to receive the incentive payment if they have paid a premium under an appropriate private health insurance policy and the policy was issued by a health fund. A health fund is defined in section 20-5 as a "registered organization within the meaning if Part VI of the National Health Act 1953".

Item 2

This item inserts new section 4-6.

4-6 - Receipt for payment of premium

The new section 4-6 requires a health fund to issue a receipt to a person who pays a premium. The receipt must contain information and be in such form as determined in writing by the Managing Director of the HIC (subsection 4-6(1)).

Subsection (1) does not apply if the premium to which the payment relates has been reduced under the premium reduction scheme (subsection 4-6(2)).

Item 3

This item repeals subsection 6-20(1) and inserts a new subsection. The new subsection

6-20(1) provides that the HIC has 14 days in which it must grant or refuse a claim made by a person for the incentive payment.

Item 4

This item inserts new sections 6-25, 6-30 and 6-35.

6-25 - Application for reconsideration of decision refusing claim

The new section 6-25 provides for a person who has been refused a claim for the incentive payment to apply to the HIC to have the decision reconsidered (subsection (1)).

The application for reconsideration must be in writing and made within 28 days of notification of the decision to refuse, unless the HIC has extended the period for making an application (subsections (2) and (3)).

6-30 - Reconsideration by HIC

The new section 6-30 provides that the HIC has to reconsider the decision and either affirm or revoke the decision.

6-35 - Deadline for reconsideration

The new section 6-35 provides that the HIC must reconsider its decision within 28 days after receiving the application for reconsideration (subsection (1)).

If the HIC does not advise the applicant of its decision on reconsideration before the end of the 28 day period, it is taken to have made a decision confirming the original decision (subsection (2)).

Item 5

This item amends subsection 8-5(1) by removing the word written.

Item 6

This item repeals section 8-10 of the PHIIA. Section 8-10 has been incorporated into new section 18-2 at item 50.

Introduction - Items 7 to 28

These amendments allow a person to register for premiums reduction once only, rather than each financial year. If a person, already registered for the premiums reduction scheme, obtains a further policy from the same fund that issued the first policy, there is no need to register again. Under the amendments a person who pays for a policy but is not covered by the policy is also entitled to register for the premium reduction scheme. Notification requirements have also been amended to make it clear when and to whom notification of registration and revocation of registration in the premiums reduction scheme is be given.

Item 7

This item amends section 10-5 by removing the words for a financial year.

Item 8

This item amends paragraph 10-5(b) by removing the words , for that year.

Item 9

This item amends paragraph 10-5(c) by removing the words for that year.

Item 10

This item amends subsection 11-5(1) by removing the words for a financial year.

Item 11

This items amends subsection 11-5(1) by removing the words for that year.

Item 12

This item repeals subsection 11-5(3) and inserts two new subsections.

The new subsection 11-5(3) enables a person to register once only for the premiums reduction scheme.

The new subsection 11-5(3A) provides that if a person who is registered with a fund in respect of an appropriate private health insurance policy becomes eligible to be registered in relation to another appropriate private health insurance policy issued by the same fund, they are deemed to be registered. If a person becomes eligible for registration in relation to an appropriate private health insurance policy that is issued by a different fund, they must submit another application to register for premiums reduction.

Item 13

This item amends subsection 11-5(4) by removing the words for a financial year.

Item 14

This item repeals section 11-10 and inserts a new section.

11-10 - Eligibility to apply for registration

The new section 11-10 sets out who is eligible to apply for registration under the premiums reduction scheme, including:

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a person or employer who has paid a premium;

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a person who is covered by the policy; or

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a parent, if everyone the policy covers is a dependent child.

Item 15

This item repeals redundant subsection 11-15(4).

Item 16

This item repeals subsection 11-20(1) and inserts a new subsection with two paragraphs. The new paragraph 11-20(1)(a) provides that a health fund must notify the HIC when it receives an application for registration. New paragraph 11-20(1)(b) requires a health fund to notify the HIC of a person who is already registered for the premiums reduction scheme and subsequently becomes eligible to be registered in respect of another appropriate private health insurance policy.

Item 17

This item repeals subsection 11-25(1) and inserts a new subsection. The new subsection 11-25(1) requires the HIC to notify a person that it is refusing to register them for premiums reduction and also the health fund that issued the policy to the person. The HIC must do so within 28 days of the refusal occurring.

Item 18

This item amends subsection 11-25(2) by removing the words for a financial year.

Item 19

This item amends paragraph 11-30(1)(a) by removing the words for a financial year.

Item 20

This item amends paragraph 11-30(1)(b) by removing the words for the year and substituting the words for a financial year.

Item 21

This item amends subsection 11-30(1) by removing the word written.

Item 22

This item repeals subsection 11-30(4) and inserts a new subsection. The new subsection 11-30(4) requires a person who no longer wishes to be registered in the premiums reduction scheme to notify their health fund.

Item 23

This item amends subsection 11-40(1) by removing the words for a financial year.

Item 24

This item amends subsection 11-40(1) be removing the words for that year.

Item 25

This item amends section 11-40 by inserting a new subsection. The new subsection 11-40(3) requires the HIC to notify the person if it revokes their registration in the premiums reduction scheme and to also notify the fund that issued the policy. The HIC must issue the notification within 28 days of the revocation occurring.

Item 26

This item amends subsection 12-5(1) by removing the word scheme and substituting the words for that year.

Item 27

This item amends subsection 12-5(3) by inserting a new subsection. The new subsection 12-5(3A) provides a formula for the amount of reduction a participant in the premiums reduction scheme will receive if their policy is less than 1 year.

Item 28

This item repeals section 12-10 and substitutes a new section.

12-10 - Participant in premium reduction scheme

The new section 12-10 provides that a person is a participant in the premiums reduction scheme in respect of an appropriate private health insurance policy if:

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where the financial year is the financial year that began on 1 July 1998 - the individual was registered under the Private Health Insurance Incentives Act 1997 immediately before 1 January 1999 in respect of the policy; or

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where the financial year is the financial year that began on 1 July 1998 or a later financial year - the individual was registered under the premiums reduction scheme in respect of the policy and the registration has not been refused.

Introduction - Items 29 to 38

These amendments require a health fund to only register once to become a participating fund in the premiums reduction scheme. A fund will have its status revoked if it does not issue a recept to a person for the purposes of the incentive payment, does not comply with the regulations or on or after 1 July 2000, the fund does not offer no gap or known gap policies.

Item 29

This item amends subsection 14-5(1) by removing the words for that financial year.

Item 30

This item amends subsection 14-5(2) by removing the words for the financial year beginning on 1 July 1998 or later financial year and substituting the words for the purposes of this Act.

Item 31

This item repeals subsection 14-5(3) and inserts a new subsection. Under the new subsection 14-5(3) a health fund, if approved by the Minister, will become a participating fund.

Item 32

This item amends paragraph 14-10(1)(d) by removing the words until the end of the financial year concerned.

Item 33

This item inserts is a new subsection 14-10(1A) providing that any undertaking given by a health fund prior to the date on which Schedule 3 to the Health Legislation Amendment Act (No. 3) 1999 receives Royal Assent is taken to comply with paragraph 14(1)(d) of the PHIIA.

Item 34

This item repeals redundant subsection 14-10(2).

Item 35

This item amends subsection 14-15(1) by removing the words subsections (2) and (3) and substituting the words subsection (2).

Item 36

This item repeals subsections 14-15(2) and (3) and inserts a new subsection. The new subsection 14-15(2) provides that the Minister must not approve an application by a health fund to participate in the premiums reduction scheme on or after 1 July 2000 unless the health fund offers its members no gap and known gap policies.

Item 37

This item amends subsection 14-20 by removing the words in writing.

Item 38

This item inserts new Division 14A.

Division 14A - Revocation of status of health fund as a participating fund

14A-1 - Revocation of status of participating fund

Subsection 14A-1(1) provides for the Minister to give notice to a health fund revoking its status as a participating fund if any one of the following occurs:

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if the fund fails to issue a receipt to a person who has paid a premium;

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if the fund fails to comply with a condition of participating in the premium reductions scheme as contained in the regulations; or

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if the fund does not offer its members the choice of no gap and known gap policies on or after 1 July 2000.

Subsection 14A-1(2) declares that, upon the giving of the notice, the fund ceases to be a participating fund.

Introduction - Items 39 to 46

The HIC is processing claims by health funds using summary data. Consequently, these amendments are required to facilitate summary data claiming and payment by the HIC and to ensure there is a suitable mechanism for the HIC to pay part of a claim by a health fund and to reconsider that decision.

Item 39

This item amends subsection 15-5(1) by removing the words a financial year for.

Item 40

This item amends subsection 15-5(2) by removing the words The HIC must pay a health fund and substituting the words If a health fund makes a claim that the HIC decides is correct, the HIC must pay to the fund.

Item 41

This item repeals subsection 15-10(1) and inserts two new subsections.

The new subsection 15-10(1) enables the HIC to refuse to pay a claim, or part of a claim, by a health fund if it considers that the claim is not correct.

Under the subsection 15-10(1A) the HIC must notify the health fund of its decision.

Item 42

This item amends subsection 15-20(2) by removing the number (1) and substituting it with the number (1A).

Item 43

This item repeals subsection 15-25(1) and inserts a new subsection.

The new subsection 15-20(3) provides that the HIC will be taken to have made a decision that a claim from a health fund is correct if it does not give the health fund notice on or before the day on which the claim would be payable.

Item 44

This item amends subsection 15-25(1) by removing the number (1) and substituting it with the number (1A).

Item 45

This item repeals redundant paragraph 15-25(2)(a).

Item 46

This item repeals subsections 15-25(3), (4) and (5) and inserts two new subsection, being subsections 15-25(3) and (4).

The new subsection 15-25(3) states that the HIC, as soon as practicable after receiving a request from a health fund, must reconsider its decision not to pay a claim or only pay a part of the claim.

The new subsection 15-25(4) states that if the HIC varies its original decision or revokes it and makes a fresh decision, the varied or fresh decision has effect from the time that the original decision was made.

Item 47

This item amends subsection 16-5(3) by removing the words in writing.

Item 48

This item amends section 16-5 by inserting a new subsection. The new subsection 16-5(7) provides that, if the HIC gives a health fund notice, it is required to give the HIC a certificate from a registered company auditor as to the correctness of the funds accounts and records as they relate to the participation of persons in the premiums reduction scheme, the reductions of premiums and the receipt of money from the HIC.

Item 49

This item amends subsection 16-10(1) by removing the words written.

Introduction - Items 50 to 55

These amendments ensure that amounts are recoverable as debts to the Commonwealth and provides for the HIC to set off a Commonwealth debt owed by a person or a health fund with an amount due to be paid to the person or health fund.

Item 50

This item amends paragraph 18-5(1)(b) by inserting a new paragraph. The new paragraph 18-5(1)(ba) provides that the incentive payment is recoverable from a person who withdraws their claim.

Item 51

This item repeals paragraph 18-5(1)(c) and substitutes it with two new paragraphs.

The new paragraph 18-5(1)(c) provides that an amount is a debt due to the Commonwealth if it was a payment to a health fund in relation to a reduced premium and the person to whom the appropriate private health insurance policy relates was a participant in the premiums reduction scheme and not eligible to participate in the scheme.

The new paragraph 18-5(1)(ca) provides that, a payment made to a health fund that relates to a premium for which a reduction was not allowable, is a debt due to the Commonwealth.

Item 52

This item repeals subparagraph 18-5(1)(d)(ii) and inserts a new paragraph.

The new subparagraph 18-5(1)(d)(ii) provides that an amount is a debt due to the Commonwealth, owed by a health fund, where the health fund has not retained a persons application for registration with the premiums reduction scheme.

Item 53

This item amends subparagraph 18-5(1)(d)(iii) by removing the words to a financial year and.

Item 54

This item amends paragraph 18-5(2)(a) by removing the words or (b) and substituting the words , (b) or (ba).

Item 55

This item amends paragraph 18-5(2)(b) by removing the words (c), (d) or (e) and substituting the words (c), (ca), (d) or (e).

Item 56

The item inserts a new section.

18-20 - HIC may set off debts against amounts payable

The new subsection 18-20(1) provides that where an amount would be payable to a person or a health fund and there is an amount that is recoverable under section 18-5, the HIC may set off the HIC may set off the whole or part of the amount that is owing against the amount of the debt.

Under new subsection 18-10(2), if the HIC makes a set off, it must be pay the person or the health fund the amount remaining after the set-off and the amount that is owing to the Commonwealth is reduced by the amount that has been set off.

Item 57

This item amends Division 19 by inserting 3 new sections.

19-1 - Notification requirements-health funds

The new subsection 19-1(1) provides that the HIC may require a health fund to provide certain information in relation to the premiums reduction scheme and the incentive payments scheme relating to person who:

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is covered at any time during a financial year specified in the notice by an appropriate private health insurance policy issued by the fund; or

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paid premiums under such a policy.

Subsection 19-1(2) states that the information that the HIC can require a fund to produce includes:

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the name, residential address and date of birth of each person covered by a policy or the person who paid premiums under the policy;

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the fund membership number of the policy;

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the name, residential address and date of birth of the person covered by the policy whom the health fund treats as the contributor in respect of the policy;

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whether the policy provides hospital cover, ancillary cover or combined cover;

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the date on which the policy was issued;

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whether the policy has terminated or been suspended, and, if it has, the date on which it was terminated or was suspended;

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the amount of the premium under the policy

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the period to which the premiums relates;

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any increase or decrease in the premium;

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whether a payment in respect of a premium that was due within a period specified by the HIC was not paid; and

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any other information relevant to Chapters 2 or 3 that has been determined in writing by the Managing Director.

The new subsection 19-1 (3) provides that the Managing Director must not make a determination that requires a health fund to provide a persons tax file number or information relating to the physical, psychological or emotional health of any person.

The new subsection 19-1(4) provides that determinations referred to in paragraph 19-1(2)(l) are disallowable instruments for the purposes of section 46A of the Acts Interpretation Act 1901.

The new subsection 19-1(5) states that the information that a health fund is required to provide must be in a form approved by the HIC and provided within the period specified in the notice.

The new subsection 19-1(6) provides that a health fund is guilty of an offence if it fails to provide the information within the time as specified on the notice issued by the HIC. The maximum penalty for the offence is 20 penalty units. The obligation to provide information is a continuing obligation and a health fund is guilty of an offence for each day, after the period specified in the notice, until the information is provided.

19-2 - Form of notices

The new subsection 19-2(1) provides that a notice under the PHIIA by the Minister or the HIC to a health fund, or a notice, request or application by a health fund to the Minister or the HIC may be in writing or in electronic form.

The new subsection 19-2-(2) provides that a notice under the PHIIA by the HIC to a person, other than a health fund, or a notice, request or application by a person other than a health fund to the HIC must be in writing.

19-3 - Use of information to determine whether persons covered by private health insurance policies are eligible for medicare benefits

The new section 19-3 provides that, to determine whether a person covered by appropriate private health insurance policy is an eligible person under either section 3, 6 or 7 of the Health Insurance Act 1973, the HIC can use information it has obtained in determining whether the person was eligible to receive Medicare benefits.

Item 58

This item inserts a new section 19-6.

19-6 - Principles relating to personal information

The new subsection 19-6(1) provides that the Minister may make principles in relation to the acquiring of personal information under the PHIIA and the storage, security, correction and use and disclosure of such personal information.

The new subsection 19-6(2) provides that a health fund must comply with such principles.

The new subsection 19-6(3) provides that the principles are disallowable instruments for the purposes of section 46A of the Acts Interpretation Act 1901.

The new subsection 19-6(4) provides that personal information has the same meaning as in the Privacy Act 1998.

Item 59

This item repeals paragraph 19-10(a) and inserts a new paragraph. The new paragraph 19-10(a) provides that the decision of the HIC confirming a decision to refuse to pay a claim for the incentive payment is reviewable by the Administrative Appeals Tribunal.

Item 60

This item amends paragraph 19-10(b) by removing the words for a financial year.

Item 61

This item repeals paragraph 19-10(e) and inserts two additional paragraphs.

The new paragraph 19-10(e)(da) provides that a decision to revoke a health funds status as a participating fund is reviewable by the Administrative Appeals Tribunal.

The new paragraph 19-10(e) provides that a decision by the HIC that a claim submitted by a health fund is incorrect is reviewable by the Administrative Appeals Tribunal.

Item 62

This item amends subsection 19-15 by inserting five additional paragraphs after paragraph 19-15(b). Section 19-15 requires the HIC to give the Commissioner of Taxation certain information within 90 days after the end of the financial year. The additional information is:

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the fund membership number of the policy;

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the identification code of the fund that issued the policy;

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the type of membership provided by the fund in respect of the policy;

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whether the policy has been terminated or suspended;

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if the policy has been terminated or is suspended, the date of the termination or suspension.

Item 63

This item amends section 19-15 by adding two additional paragraphs of information to be given by the HIC to the Commissioner of Taxation and two new subsections.

The additional paragraphs of information to be provided are:

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the total amounts paid by the HIC under Chapters 2 and 3 for the financial year;

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any other information that the Commissioner determines in writing.

The new subsection 19-15(2) provides that the Commissioner must not make a determination that the HIC provide a persons tax file number or information relating to the physical, psychological or emotional health of any person.

The new subsection 19-15(3) provides that determinations by the Commissioner are disallowable instruments for the purposes of section 46A of the Acts Interpretation Act 1901.

Item 64

This item amends section 19-15 by inserting a new section.

19-16 - Delegation

The new subsection 19-16(1) provides that the Minister may delegate, in writing, all or any of his or her powers under the Act to:

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the Secretary of the Department of Health and Aged Care;

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the Managing Director;

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an officer or an employee of the Department of Health and Aged Care; or

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a staff member of the HIC.

The new subsection 19-16(2) provides that the HIC may delegate, in writing, all or any of its powers under the PHIIA to the Managing Director or to a staff member.

The new subsection 19-16(3) provides that the Managing Director may, in writing, delegate, all or any of his or her powers under the PHIIA to a staff member of the HIC.

Introduction - Items 65 to 66

These amendments include changes and additions to the definitions contained in the Private Health Insurance Incentives Act 1998.

Item 65

This item amends paragraph (b) of the definition of appropriate private health insurance policy by inserting or 7 after 6. This is a reference to section 7 of the Health Insurance Act 1973.

Item 66

This item repeals the definition of participating fund and substitutes a new definition. Participating fund means a health fund referred to in subsection 14-5(1) or (3), other than a fund whose status as a participating fund has been revoked under subsection 14A-1(1).