House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Health and Ageing, the Honourable Tony Abbott MP)

PRIVATE HEALTH INSURANCE (COLLAPSED ORGANIZATION LEVY) AMENDMENT BILL 2006

NOTES ON CLAUSES

Clause 1 Short title

This clause sets out the short title of the Bill.

Clause 2 Commencement

This clause sets out the commencement day for the various provisions in the Bill.

Clause 3 Schedule(s )

This clause provides that each Act specified in a Schedule to the Bill is amended or repealed as set out in the Schedule, and any other item in a Schedule has effect according to its terms. Schedule 1 - Amendments

Private Health Insurance ( Collapsed Organization Levy ) Act 2003

Item 1 amends the title to replace "collapsed organization levy on registered health benefits organizations" with "collapsed insurer levy on private health insurers" following changes to terminology arising from the replacement of the National Health Act 1953 by the proposed Private Health Insurance Act.

Item 2 amends section 1 to reflect the replacement of registered health benefits organizations under the National Health Act 1953 with private health insurers in the proposed Private Health Insurance Act.

Items 3 and 4 repeal the definitions of capital adequacy requirements and capital adequacy standard in section 5.

Item 5 inserts a definition in section 5 of collapsed insurer as a private health insurer if:

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the Council has approved the termination of all of the insurer's health benefits funds under section 149-10 of the proposed Private Health Insurance Act; or

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the Council has appointed an external manager to one or more of a private health insurer's health benefits funds under section 217-10.

•

the Federal Court has ordered the appointment of a terminating manager for all of the insurer's health benefits funds under section 220-5 of the proposed Private Health Insurance Act; or

Item 6 inserts into section 5 a definition of collapsed insurer levy as the levy imposed under section 7.

Item 7 inserts into section 5 a definition of collapsed insurer levy day as the day specified in a determination under section 7 of the Act.

Items 8 to 10 repeal the definitions of collapsed organization, collapsed organization levy and collapsed organization levy day in section 5.

Item 11 inserts into section 5 a definition of complying health insurance policy as defined in the proposed Private Health Insurance Act.

Item 12 replaces the reference to the National Health Act 1953 in the definition of Council in section 5 with a reference to the proposed Private Health Insurance Act.

Item 13 repeals the definition of the National Health Act in section 5, as this is now redundant.

Item 14 inserts a definition of private health insurer in section 5 to have the same meaning as in the proposed Private Health Insurance Act.

Items 15 to 17 repeal the definitions of registered health benefits organization, solvency requirements and solvency standard in section 5.

Item 18 repeals section 6, and replaces it with a new section which describes the purpose of a collapsed insurer levy as being to meet the collapsed insurer's liabilities to the people insured under its complying health insurance policies that it is unable to meet itself.

Item 19 repeals section 7, and replaces it with a new section which imposes collapsed insurer levy. If a private health insurer is a collapsed insurer and the Minister determines that this section applies, a collapsed insurer levy is imposed on each private health insurer (other than an exempt insurer) on each collapsed insurer levy day for the levy determination. The Minister may determine the collapsed insurer levy day or days for the levy determination.

Item 20 repeals section 8, and replaces it with a new section which describes an exempt insurer. Subsection 1 provides that an insurer is exempt if it is the collapsed insurer or another insurer determined by the Minister. Subsection 2 provides that the Minister may make a determination if he or she is satisfied that imposition of the levy would significantly adversely affect the insurer's inability to comply with the solvency standard or capital adequacy standard under the proposed Private Health Insurance Act, or a solvency direction or capital adequacy direction made under Divisions 140 or 143 of that Act.

Item 21 replaces the references to organization throughout subsection 9(1) with references to insurer.

Item 22 repeals paragraph 9(1)(a) and inserts a new paragraph to replace the reference to the rate of levy being determined in writing by the Minister with a reference to it being determined by the Minister by legislative instrument.

Item 23 replaces the reference in subsection 9(2) to the organization's liabilities to its contributors with a reference to the insurer's liabilities to people insured under its complying health insurance policies.

Item 24 repeals subsections 9(3) and 9(4), and inserts a new subsection 3 which determines the rate of levy. It must be based on the number of complying health insurance policies on issue on the day determined by the Minister, may be different for complying health insurance policies under which different numbers of people are insured and may be set at zero.

Item 25 replaces the reference to organization in subsection 10(1), wherever it occurs, with a reference to insurer.

Item 26 replaces the reference to the organization's liabilities to its contributors in paragraph 10(1)(f) with a reference to the insurer's liabilities to people insured under its complying health insurance policies.