Senate

Revised Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Scott Morrison MP)

Chapter 6 Indexation of private health insurance thresholds

Background

As part of the 2014-15 Budget, the Government announced that it would pause income thresholds for the MLS and Rebate at the 2014-15 rates for three years from 2015-16.

As part of the 2016-17 Budget, the Government announced that it would continue to pause income thresholds for the MLS and Rebate at the 2014-15 rates for an additional three years from 2018-19.

The income thresholds for the MLS are set out in the Medicare Levy Act 1986 and the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999 . These Acts rely on the thresholds set out in the PHI Act. Subsequently no amendments to these Acts are required in order to pause the MLS income thresholds.

Continuation of the pause in income thresholds at 2014-15 levels could result in individuals with incomes below each threshold moving into a higher income tier as their incomes increase. As a result:

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individuals who do not have private health insurance and do not currently pay the MLS may become liable to pay the MLS, thus encouraging them to purchase private health insurance; and

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an individual's level of MLS may increase, thus encouraging the person to purchase private health insurance.

Amendments

Private Health Insurance Act 2007

Item 1 - Subsection 22-45(3A)

Section 22-45 of the Act provides for the annual indexation of the singles tier 1, tier 2 and tier 3 thresholds. Indexation of the singles thresholds flows through to the corresponding private health insurance family thresholds (see section 22-40 of the Act).

The level of indexation is currently determined in accordance with a statutory indexation factor set out in section 22-45.

Item 1 of the Schedule amends subsection 22-45(3A) to provide that the amounts mentioned in section 22-35 (the private health insurance singles thresholds) are not to be indexed for the 2018-19, 2019-20 or 2020-21 financial years.

Existing subsection 22-45(3B) of the Act provides that where an amount of threshold is not indexed for a financial year because of subsection 22-45(3A), the amount of the threshold for the year is the amount for the most recent financial year for which the amount was indexed, in this case the amounts for the 2014-15 year.

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Indexation of private health insurance thresholds

This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview of the Schedule

As part of the 2016-17 Budget, the Government announced that the income thresholds used in the calculation of the MLS and the Rebate would be paused at the 2014-15 levels for a further three years from 2018-19.

Pausing the income tiers at the 2014-15 rates for a further three years will result in individuals with incomes marginally below each threshold moving into a higher threshold due to wages growth. As a result, some individuals who do not currently have private health insurance may be liable to pay the MLS if they do not purchase private health insurance.

Human rights implications

The right to health

The right to health - the right to the enjoyment of the highest attainable standard of physical and mental health - is contained in article 12(1) of the International Covenant on Economic, Social and Cultural Rights. The United Nations Committee on Economic, Social and Cultural Rights (the Committee) has stated that health is a 'fundamental human right indispensable for the exercise of other human rights', and

that the right to health is not to be understood as a right to be healthy, but rather entails a right to a system of health protection which provides equality of opportunity for people to enjoy the highest attainable level of health.

Private health insurance regulation assists with the advancement of these human rights by improving the governing framework for private health insurance in the interests of consumers. Private health insurance regulation aims to encourage insurers and providers of private health goods and services to provide better value for money to consumers, to improve information provided to consumers of private health services to allow consumers to make more informed choices when purchasing services and requires insurers not to differentiate the premiums they charge according to individual health characteristics such as poor health.

Discussion of the Bill

The Committee states that the notion of 'the highest attainable standard of health' takes into account both the condition of the individual and the country's available resources. The right may be understood as a right of access to a variety of public health and health care facilities, goods, services, programmes and conditions necessary for the realisation of the highest attainable standard of health.

There is no incompatibility with the right to health.

Conclusion

This Schedule is compatible with human rights because it advances the protection of human rights.