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2002-2003-2004
THE
PARLIAMENT OF THE COMMONWEALTH OF
AUSTRALIA
HOUSE OF
REPRESENTATIVES
MEDICAL
INDEMNITY LEGISLATION AMENDMENT (RUN-OFF COVER INDEMNITY AND OTHER MEASURES)
BILL 2004
MEDICAL INDEMNITY (RUN-OFF COVER
SUPPORT PAYMENT) BILL 2004
EXPLANATORY
MEMORANDUM
(Circulated
by authority of the Minister for Health and Ageing,
the Honourable
Tony Abbott MP)
MEDICAL INDEMNITY LEGISLATION AMENDMENT (RUN-OFF COVER
INDEMNITY AND OTHER MEASURES) BILL 2004
AND
MEDICAL
INDEMNITY (RUN-OFF COVER SUPPORT PAYMENT) BILL 2004
OUTLINE
These Bills give effect to the balance of
the Government’s medical indemnity package, announced on 17 December 2003
by the Minister for Health and Ageing and the Minister for Revenue and Assistant
Treasurer.
These Bills follow the Medical Indemnity Amendment Act 2004
and Medical Indemnity (IBNR Indemnity) Contribution Amendment Act 2004, assented
to on 23 March 2004. This earlier legislative package replaced the
Incurred But Not Reported (IBNR) Claims Contribution with the United Medical
Protection (UMP) support payment and put in place a framework for the Premium
Support Scheme (PSS).
In summary, the present package of Bills introduce
a run-off cover indemnity scheme (run-off cover scheme) to address the concerns
of medical practitioners (practitioners) that they have access to affordable
medical indemnity insurance cover for claims that are made against them after
they retire or are otherwise not participating in the private medical workforce.
The cost of the scheme will be funded by a levy on medical indemnity insurers
(insurers).
These Bills also repeal the Medical Indemnity (Enhanced
UMP Indemnity) Contribution Act 2002.
The Medical Indemnity
Legislation Amendment (Run-off Cover Indemnity and Other Measures) Bill (the
Indemnity and Other Measures Bill) creates the run-off cover indemnity scheme,
under which the Commonwealth will reimburse medical defence organisations (MDOs)
and insurers for eligible run-off cover claims for eligible practitioners. It
also provides for a run-off cover claims and administration protocol, under
which the Commonwealth may pay claims handling fees and administration fees to
MDOs and insurers.
It also provides that, in the event that a termination
date is set for the run-off cover scheme, and if the responsible Minister does
not table a determination that alternative run-off cover arrangements are in
place for retiring doctors, then the Government will pay affected doctors the
amount of their total run-off credit including interest.
It provides for
the Commonwealth to recover the costs of the run-off cover scheme.
The
Indemnity and Other Measures Bill adds the run-off cover support payment as a
type of medical indemnity payment. (The UMP support payment is the other type
of medical indemnity payment.)
It outlines who pays the run-off cover
support payment, which is imposed by the Medical Indemnity (Run-off cover
Support Payment) Bill 2004.
The Medical Indemnity (Prudential
Supervision and Product Standards) Act 2003 will be amended to require
medical indemnity insurers to provide free indemnity cover to practitioners who
are eligible for the run-off cover scheme.
The Indemnity and Other
Measures Bill also enables regulations to be made which require insurers to
provide run-off cover to all doctors (who are not eligible under the run-off
cover scheme) who require run-off cover at cost for at least three
years.
The Medical Indemnity Act 2002 will be amended to allow a
claims protocol to be determined to cover the payment of MDO and insurer
expenses arising from INBR indemnity scheme claims.
The Medical
Indemnity (Enhanced UMP Indemnity) Contribution Act 2002 will be repealed.
The Act was intended to recover from UMP members amounts which may have been
paid by the Commonwealth under a Deed with United Medical Protection (UMP) and
UMP’s provisional liquidator. As no payments were made and UMP has
resumed normal trading, the Act is redundant.
The Indemnity and Other
Measures Bill makes minor amendments to the scope of the PSS and to payment days
for insurers to remit to the Health Insurance Commission (HIC) any UMP support
payments paid by persons to the insurers.
It also brings a Lloyds
underwriters under the operation of the Medical Indemnity (Prudential
Supervision and Product Standards) Act 2003 and makes minor amendments to
the Federal Court injunction process.
MEDICAL INDEMNITY (RUN-OFF COVER
SUPPORT PAYMENT) BILL 2004
This is a new Bill, which imposes the
run-off cover support payment as a tax on insurers by reference to their gross
medical indemnity premium income.
FINANCIAL IMPACT
Under
the run-off cover scheme eligible medical indemnity claims will be paid out by
the Australian Government and the cost of this scheme will be funded by a levy
on medical indemnity insurers. Preliminary actuarial analysis suggests that the
total cost of claims for the cohort of doctors entering the scheme each year
will be of the order of $15 million to $20 million.
A comprehensive Regulation Impact Statement (RIS) on the
Government’s recent decisions on medical indemnity was included in the
Explanatory Memorandum for the Medical Indemnity Amendment Bill 2004 and the
Medical Indemnity (IBNR Indemnity) Contribution Amendment Bill 2004. This RIS
reflected the Government's response to the recommendations of the Medical
Indemnity Policy Review Panel which reported to the Prime Minister on
10 December 2003. The RIS detailed, amongst other aspects of the
Government's medical indemnity package, the Government's proposal to introduce a
Run-off Reinsurance Vehicle (RRV).
The RRV will now be known as the
Run-off Cover Scheme, as this title reflects more accurately the structure of
the scheme.
The objective of the Run-off Cover Scheme is to ensure that
selected groups of doctors have effectively free medical indemnity cover when
they leave the medical workforce. The scheme will commence on 1 July 2004.
The Medical Indemnity Legislation Amendment (Run-off Cover Indemnity and
Other Measures) Bill 2004 amends the Medical Indemnity Act 2002 to set
out the eligibility criteria for the Run-off Cover Scheme and the payment
arrangements for associated claims.
The Medical Indemnity (Run-off
Cover Support Payment) Bill 2004 imposes the Run-off Cover Support Payment to
enable the Government to recoup over time its outlays under the Run-off Cover
Scheme. On 17 December 2003, the Government announced that the RRV
(now the Run-off Cover Scheme) would be funded through a charge on medical
indemnity insurers (MIIs) and passed on to doctors through premiums.
MEDICAL INDEMNITY LEGISLATION AMENDMENT (RUN-OFF COVER INDEMNITY AND
OTHER MEASURES) BILL 2004
NOTES ON CLAUSES
Clause 1
This item sets out the short title for the
Bill.
Clause 2 This clause provides
the commencement of each schedule and item in this Act.
Clause 3 This clause provides that
each Act that is specified in a Schedule to this Act is amended or repealed as
set out in the applicable items in the Schedule concerned, and any other item in
a Schedule to this Act has effect according to its terms.
This Schedule creates the run-off cover indemnity scheme, under which the
Commonwealth will reimburse medical defence organisations (MDOs) and insurers
for eligible run-off cover claims for eligible practitioners. It also provides
for a run-off cover claims and administration protocol, under which the
Commonwealth may pay claims handling fees and administration fees to MDOs and
insurers.
This Schedule also provides that, in the event that a
termination date is set for the run-off cover scheme, and if the responsible
Minister does not table a determination that alternative run-off cover
arrangements are in place for retiring doctors, then the Government will pay
affected doctors the amount of their total run-off credit including
interest.
Amendments to the Medical Indemnity Act
2002
Item 1 This item adds to the objects of the Act in
section 3 a new object to meet the amounts payable in relation to run-off claims
notified on or after 1 July 2004 against medical practitioners who are no longer
in private medical practice.
Item 2 This item inserts in section 4
a definition of affected medical practitioner by reference to section
34ZQ.
Item 3 This item inserts in section 4 a cross-reference to
the definition of
eligible run-off claim in new section 34ZB.
Item
4 This item defines a run-off cover indemnity as a new type of indemnity
scheme payment in section 4. This means all provisions referring to an
indemnity scheme payment will now include the run-off cover indemnity scheme.
Item 5 This item expands the definition of late payment penalty
in section 4 to include penalties incurred under new section 34ZM for amounts
due to the Commonwealth under new section 34ZJ.
The amount overpaid
becomes a debt due to the Commonwealth that the insurer or MDO has to pay back
to the Health Insurance Commission if they receive too much run-off cover
indemnity (because they received an amount from a third party that would have
reduced the amount of indemnity).
Item 6 This item adds a note to
the definition of medical practitioner in subsection 4(1) that new subsection
4(6) extends the definition for the purpose of the run-off cover scheme in
Division 2B or 4 of Part 2 to include persons who used to be medical
practitioners.
Item 7 This item inserts in section 4 a
definition of run-off cover claims and administration protocol by reference to
new section 34ZN.
Item 8 This item inserts in section 4 a
definition of run-off cover credit by reference to subsection
34ZS(2).
Item 9 This item inserts in section 4 a definition of
run-off cover indemnity by reference to new Division 2B of Part 2.
Item 10 This item inserts in section 4 a definition of total run-off cover credit by reference to new section 34ZS.
Item 11 This item inserts a new subsection 4(6) extending the
definition of medical practitioner for the run-off cover indemnity scheme in
Division 2B and a medical indemnity premium subsidy scheme formulated under
Division 4 of Part 2 to include a person who has been a medical practitioner.
Item 12 This item inserts into section 7 a new subsection (2A)
to provide the circumstances in which a person has incident-occurring based
cover with an MDO for the purposes of the run-off cover indemnity
scheme.
Item 13 This item amends section 19 so that an IBNR
indemnity is not payable for a claim if a run-off cover indemnity is also
payable for that claim.
Item 14 This item amends section 34D by
providing that, when working out whether the amounts paid by the insurer reach
the practitioner’s contract limit so that an exceptional claims indemnity
is payable to the insurer, the amount paid by the insurer is not to be reduced
by the amount of a run-off indemnity.
Item 15 This item adds a new subsection 1A to section 34E to include
claims relating to incidents arising from public patient treatment in the
Exceptional Claims Scheme for practitioners eligible for the run-off cover
scheme who had claims made cover with an MDO. The incident must have occurred
before 1 July 2003 (the date at which discretionary claims-made cover ceased).
The MDO must make an arrangement with an insurer to provide run-off cover under
the proposed subsection 26A(4) of the Medical Indemnity (Prudential
Supervision and Product Standards) Act 2003.
Item 16 This
item amends subsection 34S(2) by providing that a payment of run-off cover
indemnity is not counted as an amount that would have reduced the amount of an
exceptional claims indemnity payable (had it been taken into
account).
Item 17 This item amends subsection 34T(5) and has the
same effect as Item 11, but while the above item applies for amounts paid
before an exceptional claims indemnity is paid, this item applies for amounts
paid after an exceptional claims indemnity is paid.
Item 18 This
item inserts new Division 2B into Part 2 of the Act to create the new run-off
cover indemnity scheme. The sections in the new Division are as follows:
This guide outlines that this Division provides for a run-off cover indemnity
to be paid for an eligible run-off claim, and a Run-off cover Claims and
Administration Protocol to be determined for other matters relating to eligible
run-off claims.
It notes that the Medical Indemnity (Prudential
Supervision and Product Standards) Act 2003 requires medical indemnity
insurers to provide run-off cover for medical practitioners eligible for the
run-off cover scheme.
34ZB Eligible run-off
claims
Subsection (1) provides criteria that must be met for a claim to
be an eligible run-off claim. These include:
- a claim made against a
person while they are eligible;
- it relates to incident/s that occurred in
the course of, or in connection with, the person’s practice as a medical
practitioner;
- at the time of the incident, a person must have had a
contract of insurance or an arrangement with an MDO; and
- the person has
medical indemnity cover that indemnifies the person in relation to the claim,
being either cover:
- that is required to be provided to them under Division
2A of Part 3 of the Medical Indemnity (Prudential Supervision and Product
Standards) Act 2003; or
- incident-occurring based cover with an
MDO.
In the event that the scheme is terminated, a person already
eligible for the scheme would continue to have their claims covered by the
terminated scheme until they cease to be eligible. A person who would have
become eligible after the termination date (if the scheme had not been
terminated) would not become eligible.
Subsection (2) provides for who
will be covered by the scheme. Some practitioners will be eligible for the
scheme permanently (until their estate is wound up) and others will be eligible
temporarily – they are taken to have left the scheme when they no longer
meet the eligibility criteria (for example they return to private medical
practice).
In general terms, the following practitioners will be covered
by the scheme:
- retirees over 65;
- practitioners who have not engaged in
private medical practice for 3 years;
- practitioners on maternity
leave;
- practitioners who no longer practice because of permanent
disability;
- administrators of a deceased practitioner’s estate;
and
- practitioners included by the regulations.
Classes of persons
may be excluded by regulation.
As persons generally must have ceased
private medical practice to become eligible, this means that the incident must
have occurred before the person becomes eligible for the scheme. The
regulations have the capacity to include practitioners who continue in some form
of private medical practice, and the Government intends to make regulations
covering gratuitous practice. Claims arising from this practice would not be
covered by the run-off cover scheme, so a practitioner would need to take out a
contract of insurance to cover claims notified while the practitioner is still
practising. If the practitioner does so and then ceases gratuitous practice,
the run-off cover indemnity scheme would then cover subsequent claims notified
arising from that gratuitous practice.
Subsections (3) and (4) provide
that the regulations may set a termination date for the run-off cover indemnity
scheme by regulation. Such regulations do not come into effect until 12 months
after they are gazetted.
Subsection (5) provides a definition of private
medical practice. Regulations may specify types of practice included in the
definition.
This section provides that a run-off cover indemnity is payable to an MDO or
insurer for an eligible claim if:
(a) the claim relates to an incident that
occurred in the course of or in connection with a person’s practice as a
medical practitioner; and
(b) for MDOs – the MDO would pay under an
arrangement in the ordinary course of business while the person is eligible; and
(c) for insurers – the insurer would pay under contract while the
person is eligible; and
(d) the MDO or insurer was first notified of the
claim, or of facts that might give rise to the claim on or after 1 July
2004; and
(e) the MDO or insurer applies to the HIC for the run-off cover
indemnity in accordance with section 36.
The reference in paragraph
34ZC(c) to a contract of insurance would include medical indemnity cover that is
issued in accordance with new section 26A of the Medical Indemnity
(Prudential Supervision and Product Standards) Act 2003 to be added by
Schedule 3 of this Bill.
This section is intended to allow payments under the run-off cover scheme to
be made to MDOs or insurers in external administration, consistent with the
approach taken for other indemnity schemes.
It also provides that run-off
cover indemnity payments made to MDOs or insurers in external administration are
paid on trust for the benefit of the person that the MDO or insurer is liable to
pay.
A run-off cover indemnity may be payable under an
indemnity arrangement with an MDO or an insurance contract with an insurer. In
some cases, an MDO and a related insurer may both be liable to pay some amounts
in relation to one claim.
This section will effectively allow the
insurer to elect that the amounts payable to it in relation to such a claim are
instead payable to the MDO.
34ZF Clarification of circumstances in
which run-off cover indemnities are payable
This section provides for
run-off cover indemnity to be payable even if the claim is covered by
reinsurance or the incident occurred outside Australia.
This is intended
to cover Australian medical practitioners who have provided medical services
outside Australia for which they were indemnified by an Australian MDO or
insurer.
34ZG Exceptions
This item provides that a run-off
cover indemnity is not payable to an MDO or insurer if the payment is an
insurer-to-insurer payment or the payment is a payment prescribed by the
regulations for the purposes of this section.
Unlike other indemnity
schemes in this Act, treatment of public hospital patients in public hospitals
is not excluded, as this treatment was indemnified by MDOs in some cases and the
liability has not been assumed by State or Territory Governments.
The effect of this section is that where a high cost claim indemnity and a run-off cover indemnity are both payable, the high cost claim indemnity is payable first (such amounts are fully funded by the Australian Government), then any residual amount is paid as a run-off cover indemnity.
Sections 34ZI and 34ZJ provide for amounts which reduce the amount
that an insurer or MDO would pay for a claim to be taken into account
to:
• reduce the amount of run-off cover indemnity paid to the MDO or
insurer if the amount is made before the run-off indemnity is paid,
or
• make the amount an overpayment that the MDO or insurer must pay
back to the Commonwealth if the amount is paid after the run-off cover indemnity
has already been paid to the MDO or insurer.
Section 34ZK
provides for a new obligation to notify the HIC that an amount specified in the
above two sections has been paid. Failure to notify is an
offence.
Section 34ZL provides for the HIC to notify the MDO or
insurer of the amount of debt due and the due date.
Section 34ZM
provides for a late payment penalty if this amount is paid back late. The HIC
may remit the whole or a part of an amount of late payment penalty if the HIC
considers that there are good reasons for doing so. Such a decision is
reviewable by the Administrative Appeals Tribunal.
This section provides for the Minister to determine a Run-off cover Claims
and Administration Protocol which sets out the terms and conditions for paying
claims handling and legal, administrative or other costs incurred by MDOs and
insurers in respect of eligible run-off claims and paying costs incurred by
insurers in respect of complying with (principally this means offering or
providing contracts of insurance) Division 2A of Part 3 of the Medical
Indemnity (Prudential Supervision and Product Standards) Act 2003. Such a
determination would be a disallowable instrument.
The protocol is
intended to apply primarily to costs that insurers will be required to incur by
granting medical indemnity cover under new section 26A of the Medical
Indemnity (Prudential Supervision and Product Standards) Act 2003. It is
generally not expected that MDOs will be eligible for such payments, as MDOs
voluntarily assumed those costs when they entered into discretionary
arrangements. However, section 34ZN will allow the protocol to provide for
payments to be made to MDOs where appropriate.
This section provides for the HIC to request information relevant to
determining the entitlement and amount of a payment under the Run-off cover
Claims Protocol to an MDO or insurer. It identifies those from whom the HIC may
request information and provides how the HIC must make a request and the time
period for complying.
Subdivision E –
Miscellaneous
34ZP Commonwealth’s obligations on termination
of the run-off cover indemnity scheme
This section provides for the
Commonwealth to pay an amount in respect of each affected practitioner if a
termination date is set for the run-off cover indemnity scheme and if the
Minister does not make a determination setting out alternative arrangements.
34ZQ Affected medical practitioners
This section provides
that an affected practitioner is one for whom premiums for medical indemnity
cover have been paid for at least 12 months before the termination date and who
is not eligible for the Run-off cover indemnity scheme under subsection 34ZB(2)
before termination.
34ZR Payments in relation to affected medical
practitioners
This section provides that a payment by the Commonwealth in
relation to an affected practitioner must be paid to a person nominated by the
practitioner (and that person must be providing medical indemnity cover for the
practitioner), that the payment must be for all or part of a premium for that
cover, and must be paid within 12 months of termination. The payment must not
exceed the practitioner’s total run-off cover credit.
34ZS
Total run-off cover contribution
This section provides for working out an
affected practitioner’s total run-off cover credit from the first
financial year in which the insurer provided cover under a contract after 30
June 2004 by multiplying the practitioner’s run-off cover credit by the
interest rate adjustment for each financial year.
For example if a
practitioner’s contribution for the financial year is $1,000 and the
interest rate adjustment is 5%, the calculation is $1,000 x 1.05 =
$1,050.
This calculation is done each year (so the interest compounds)
and added up in the year of termination.
The interest rate is a rate
specified by regulation or the Commonwealth Government short-term bond rate for
each June quarter immediately preceding the end of each financial
year.
34ZT Medical indemnity insurers must provide information
attributing run-off cover payments
This section provides that an insurer
must, in relation to each run-off cover payment they make, notify the HIC of
each medical practitioner to whom the payment is attributable for each financial
year.
This section requires the MDO or insurer to notify the HIC if a person ceases
to be eligible for the run-off cover indemnity scheme and immediately before
they ceased the MDO or insurer was providing medical indemnity insurance (within
the meaning of the Medical Indemnity (Prudential Supervision and Product
Standards) Act to the person. For example, an insurer would become aware
that the person has returned to private practice when the person takes out a new
medical indemnity insurance contract for that practice.
34ZV
Invoices for medical indemnity cover
This section provides that if an
insurer gives a person an invoice for medical indemnity cover for which the
insurer is liable to pay run-off cover support payment, the insurer must ensure
the invoice states the total premium payable and the proportion and amount of
the premium that represents a run-off cover support payment.
This section requires the Minister to:
- cause a report to be prepared of
the operation of this Division within 6 months after the end of the financial
year; and
- cause a copy of the report to be tabled in each House of the
Parliament within 15 sitting days of that House after its receipt by the
Minister.
This report includes:
- the number of persons who were
eligible for run-off cover indemnity at the end of the financial year,
- the
amounts paid for run-off cover indemnity and under the Run-off Cover Claims
Protocol by the Commonwealth during the financial year;
- the total of all
the amounts of run-off cover support payments remitted to the Commonwealth
during the financial year; and
- estimates by the Actuary of the
Commonwealth’s future liabilities.
This section provides for regulations to modify the application of the
Division in respect of claims, indemnity arrangements, contracts of insurance,
liabilities covered by more than one contract of insurance, or specified classes
of liabilities or payments. It also allows regulations to prescribe
modifications regarding liabilities under an order of a court requiring an
amount to be paid pending the outcome of an appeal.
It does not allow the
regulations to modify a provision that creates an offence, or that imposes an
obligation which, if contravened, constitutes an offence.
The power for
these regulations to be made is required to allow the scheme to reflect the
rapidly changing market for medical indemnity insurance.
The regulations will
allow the scheme to respond to the industry's provision of new types of
insurance products to cover new types of claims, and to respond to contracts and
claims that are affected in an unintentional manner by the
legislation.
Item 19 This item protects the rights of
insurers with a transitional provision that if item 18 commences before the Act
receives Royal Assent:
• the requirement that an insurer offers medical indemnity cover under the Medical Indemnity (Prudential Supervision and Product Standards) Act 2002 and the requirement that a practitioner must have this cover to have an eligible run-off claim in subparagraph 34ZB(1)(e)(i) are taken to have commenced at the same time; and
• the HIC must not make a request under s34ZO of the Medical Indemnity Act 2002 before this Act receives Royal Assent; and
• paragraph 34ZU(2)(c) of that Act applies as if a person is not
required to give notice under s34ZU earlier than 28 days after this Act receives
Royal Assent.
Items 20 - 24 These items add references to the
run-off cover indemnity scheme to provisions in Division 3 of Part 2 of the Act.
The Division outlines how people can apply for indemnities, when they will be
paid, what information has to be provided to the HIC about indemnity matters,
what records must be kept.
Items 25 - 27 These items extend
record keeping obligations under section 39 to the run-off cover claims and
administration protocol and the run-off cover indemnity scheme.
Items
28 - 29 These items extend recovery powers for debts due to the
Commonwealth under section 41 and garnishee powers under section 42 to
overpayments of a run-off cover indemnity.
Item 30 This item adds
a new section 44B which enables the HIC to notify an affected practitioner of
their run-off cover credit or the amount of interest calculation under
subsection 34ZS(1) for a financial year, or the practitioner’s total
run-off cover credit.
Item 31 This item provides for an
offence under section 45 if a person fails to give information requested by the
HIC concerning the run-off cover claims protocol.
Items 32 - 33
These items amend section 46 to provide for an offence if a person fails to
notify the HIC under section 34ZK if a run-off cover indemnity has been paid to
an MDO or insurer and another amount has been paid or under section 34ZU that a
person ceases to be eligible for the run-off cover indemnity scheme. Strict
liability does not apply, as the MDO or insurer must be aware of the other
amount.
Item 34 This item provides that medical indemnity
insurers failing to include required information in invoices is an offence of
strict liability. This is consistent with Commonwealth criminal law policy as
the offence is not punishable by imprisonment and incurs relatively low penalty
units. The Commonwealth’s capacity to punish such an offence is likely to
be an effective deterrent.
Item 35 This item amends section 48
to provide for the Consolidated Revenue Fund to be appropriated for run-off
cover indemnities and amounts payable under the run-off cover claims
protocol.
Amendments to the Medical Indemnity (Prudential
Supervision and Product Standards) Act 2003
Item 36 This item amends section 20 so that rights to a run-off cover
indemnity under the Medical Indemnity Act 2002 are to be disregarded when
working out the maximum amount payable by an insurer under a contract of
insurance, for the purposes of the minimum cover provisions of the Act.
This schedule provides for the Commonwealth to recover the costs of the
run-off cover scheme.
This schedule adds the run-off cover support
payment as a type of medical indemnity payment. (The UMP support payment is
the other type of medical indemnity payment.)
This schedule outlines
who pays the run-off cover support payment, which is imposed by the Medical
Indemnity (Run-off cover Support Payment) Bill 2004.
Amendments to the
Health Insurance Act 1973
Item 1 This item replaces
the reference in subsection 130(25) to the Medical Indemnity (Enhanced UMP
Indemnity) Contribution Act 2002 with a reference to the Medical
Indemnity (Run-off cover Support Payment) Act 2004 in the definition of
medical indemnity legislation for the purposes of the secrecy provisions in the
Act.
Amendments to the Health Insurance Commission Act
1973
Item 2 This item replaces the reference in paragraph
42(2)(b), which relates to the Health Insurance Commission annual report, to the
Medical Indemnity (Enhanced UMP Indemnity) Contribution Act 2002 with a
reference to the Medical Indemnity (Run-off cover Support Payment) Act
2004. This reflects that the former Act is repealed by Schedule 5 of
this Bill
Amendments to the Medical Indemnity Act
2002
Item 3 This item replaces a reference in section 3
(the objects provision) to the enhanced UMP indemnity contribution (as the
relevant Act is being repealed) with a reference to the run-off cover support
payment.
Item 4 This item replaces a reference to the enhanced UMP
indemnity contribution in the definition of contribution year with a reference
to the run-off cover support payment.
Item 5 This item removes
the enhanced UMP indemnity contribution from the definition of imposition day.
Items 6 and 7 These items amend the definition in section 4 of a
medical indemnity payment and medical indemnity payment legislation by replacing
the references to the enhanced UMP indemnity contribution and associated Act
with a reference to a run-off cover support payment and associated
Act.
Item 8 This item repeals Division 2 of Part 3 which relates
to the enhanced UMP indemnity contribution and replaces it with a new Division 2
of Part 3 to provide for the run-off cover support payment.
This section provides a guide to the run-off cover support payment
provisions.
It outlines that the support payment is imposed on medical
indemnity insurers through the Medical Indemnity (Run-off cover Support
Payment) Act 2004.
This section provides that a medical indemnity insurer is liable to pay to
the HIC a proportion (prescribed by regulation) of their medical indemnity
insurance premium income for a financial year, and the person is not exempt
under section 59.
This section provides for the regulations to prescribe exemptions from the
payment, either generally or for a particular contribution year.
Item
9 This item repeals a reference to the enhanced UMP indemnity contribution
in the guide to Division 3 of Part 3 (which covers administration of the medical
indemnity contributions) and replaces it with a reference to run-off cover
support payments.
Item 10 This item repeals a reference to the
enhanced UMP indemnity contribution in section 61 and provides for a payment day
for the run-off cover support payment as:
• 30 June in the contribution
year or
• such other day as is specified in the regulations, either
generally for all people or for the class of people that includes a
person.
The Government intends to make regulations to specify a different
payment day for Australasian Medical Insurance Limited, to reflect that it
operates on a calendar year basis. As payment day is the day by which insurers
must notify the HIC of the practitioners in respect of whom they have paid a
run-off cover support payment, the regulation amends the content of an offence.
This is necessary to enable flexibility for regulations to reflect the rapidly
changing nature of medical indemnity insurance. Such regulations are subject
to Parliamentary scrutiny.
Items 11 - 12 These items amend
section 62 to remove the possibility of a person deferring a run-off cover
support payment. The Act still enables individual practitioners who are liable
for the UMP support payment to defer their payment for one contribution year.
Item 13 This item deletes a reference to the enhanced UMP
contribution in subsection 62(4).
Item 14 This item amends
section 62 to refer only to UMP support payments, so that if a person who has
been granted a deferral of a UMP support payment becomes permanently exempt,
either by way of death or of reaching a prescribed age, the deferred amount is
immediately payable.
Item 15 This is a transitional provision
saving deferrals already granted during 2003-04 before passage of this
Bill.
Amendments to the National Health Act
1953
Item 16 This item replaces the reference to the
Medical Indemnity (Enhanced UMP Indemnity) Contribution Act 2002 with a
reference to the Medical Indemnity (Run-off cover Support Payment) Act
2004 in the secrecy provision of the Act (subsection 135A(24)).
This schedule amends the Medical Indemnity (Prudential Supervision and
Product Standards) Act 2003 to require medical indemnity insurers to provide
free indemnity cover to practitioners who are eligible for the run-off cover
scheme.
It also enables regulations to be made which require insurers
to provide run-off cover to all doctors (who are not eligible under the run-off
cover scheme) who require run-off cover at cost for at least three
years.
Item 1 This item adds a definition to section 4 of MDO and
provides that it has the same meaning as in the Medical Indemnity Act
2002.
Item 2 This item adds a definition to section 4 of
medical indemnity insurer and provides that it has the same meaning as in the
Medical Indemnity Act 2002.
Item 3 This item inserts a new
section 7A which sets out matters that must be considered in determining whether
premiums payable by an insured under a contract of insurance are reasonable.
The section deals with the same general issues that were covered in subsection
24(3) which is repealed by item 6.
The requirement for reasonable
premiums applies to retroactive cover offered under section 22 (see amended
paragraph 24(2)(f)).
The matters to be taken into account in setting a
reasonable premium are amended so that:
- the claims handling and
administrative expenses are no longer restricted to the cover being offered;
and
- the expenses the insurer can reasonably be expected to incur in capital
raising and prudential compliance are no longer restricted to being reasonably
attributable to the cover being offered.
The following matters are
added:
- the amount that represents provisioning for future liabilities for
medical indemnity cover that may be required to be offered under section 23 for
a premium that does not reflect the cost of providing that medical indemnity
cover;
- the receipt, or probable receipt, of Commonwealth assistance in
relation to provision of the medical indemnity cover; and
- enables matters
to be included by regulation (the capacity for APRA to issue guidelines will be
removed).
Item 4 This item amends section 22(1A) to apply strict
liability to the offence of failing to make a complying offer, to the extent
that it relates to whether the premium is reasonable.
Item 5 This
item replaces the present requirement in paragraph 24(2)(f) for retroactive and
run-off cover to have a reasonable premium, with a requirement that:
- for an
offer of retroactive cover under section 22—the premium payable must be
reasonable within the meaning of new section 7A (paragraph 24(2)(f));
and
- for an offer of run-off cover under section 23—the premium
payable must not exceed the amount specified in, or worked out in accordance
with, the regulations (paragraph 24(2)(fa)).
Item 6 This
item replaces subsection 24(3) to provide that regulations made for the purposes
of paragraph 24(2)(fa) may specify different amounts, or different ways of
working out amounts, in relation to different classes of practitioners or
different classes of insurance contracts. Regulations may set a nil
amount.
Item 7 This item repeals section 25 as it is no longer
considered necessary for the Australian Prudential Regulation Authority to issue
guidelines about reasonable premiums.
Item 8 This item amends
section 26 to add the Minister administering the Medical Indemnity Act 2002
as a party who can take action in the Federal Court to seek an injunction
compelling an insurer who has failed to make an offer of retroactive or run-off
cover under sections 22 or 23.
Section 26A requires medical indemnity insurers to offer run-off cover for
the purposes of the run-off cover scheme to medical practitioners in particular
circumstances.
Subsection (1) provides that it is an offence for a
medical indemnity insurer not to provide run-off cover to a practitioner
if:
- that practitioner is eligible for the run-off cover indemnity scheme;
and
- the insurer or another insurer has provided the practitioner with
medical indemnity insurance;
- the insurer is the last medical indemnity
insurer to have provided medical indemnity cover to that practitioner for
incidents occurring during that medical practice period (or the medical
indemnity insurers has taken over that last medical indemnity insurer);
- the insurer does not provide insurance that satisfies the requirements in
subsection (4); and
- the insurer does not provide medical indemnity cover
before any termination of the run-off cover scheme under the Medical
Indemnity Act 2002.
For example, where there are regulations in
effect to include gratuitous practice under paragraph 34ZB(2)(f) of the Medical
Indemnity Legislation Amendment (Run-Off Cover Indemnity And Other Measures)
Bill 2004 and a medical indemnity insurer has provided gratuitous cover to a
medical practitioner, and that practitioner ceases the gratuitous practice, the
medical indemnity insurer must provide run-off cover to that person for that
gratuitous practice.
Subsection (2) provides that the cover may be
provided to the practitioner or someone else, for example in the case of a
deceased estate that is not yet wound up, the cover may be offered to the legal
representative of the estate, and that the cover need not be provided while the
person was eligible for the run-off cover indemnity scheme.
Subsection
(3) outlines the circumstances in which one medical indemnity insurer is said to
have taken over another. Essentially, it covers any situation where one insurer
assumes financial responsibility for claims formerly covered by another
insurer.
Subsections (4)-(6) provide that the run-off cover
must:
- cover incidents that occurred while the practitioner had
either
- medical indemnity cover provided by an insurer; or
- claims made
medical indemnity cover provided by an MDO
while the practitioner was
registered or licensed;
- cover the same nature and range of incidents as
covered by the practitioner’s last contract of medical indemnity cover;
- provide a contract limit at least equal to the relevant threshold for the
Exceptional Claims Scheme in section 34F of the Medical Indemnity Act
2002;
- be provided on the terms and conditions as determined by
disallowable instrument by the Minister administering the Medical Indemnity
Act 2002;
- be provided until the person ceases to be eligible;
and
- be at no cost to the practitioner.
Subsection (7) provides that
the practitioner does not need to apply for the cover.
Subsection (8)
provides that the insurer does not have to provide new medical indemnity cover
in the event that winding up of the insurer has started.
Subsection (9)
defines various terms including eligible practitioner and private medical
practice by reference to subsection 34ZB of the Medical Indemnity Act
2002 and medical practice period as:
- a period in which practitioner was
not eligible for the run-off cover scheme; and
- the period during which a
practitioner was an eligible practitioner engaged in private practice, was
providing medical services free of charge.
The Government intends to
make regulations under subsection 34ZB(2) of the Medical Indemnity Act
2002 providing that practitioners who continue to practice on a gratuitous
basis will be eligible for the run-off cover scheme in relation to their
previous private medical practice. Combined with the provisions in this
section, this will allow doctors purchasing indemnity for post-retirement
gratuitous service provision to cease that practice and be provided access to
the run-off cover scheme for their period of gratuitous service
provision.
This new section covers the situation where a MDO offered a practitioner
claims-made cover on a discretionary basis.
If the MDO was the last MDO
or insurer to have provided cover to a practitioner (or has taken over that last
MDO) the MDO commits an offence if it does not have an arrangement with an
insurer obliging the insurer to provide medical indemnity cover that satisfies
the requirements of subsection 26A(4).
Paragraph 26B(1)(g) provides that
an offence has not been committed under subsection (1) if a termination date has
been set for the run-off cover indemnity scheme under subsection 34ZB(3) of the
Medical Indemnity Act 2002.
This section provides that an insurer obliged to provide cover under an
arrangement with a MDO under section 26B commits an offence if they do not do
so. The section imposes the same requirements on insurers as section
26A.
26D Notification and record-keeping
Subsections (1) - (3)
provide that the insurer commits an offence if it does not give notice to the
person of the nature and range of incidents it covers under 26A(1) and 26C(1)
and the terms and conditions on which it is provided and notice to the HIC of
details of the cover that has been provided.
Subsection (2) provides
specifically that the insurer must give written notice to the HIC of the name of
the practitioner who is covered, the date from which the cover took effect and
other matters as determined by the Minister administering the Medical
Indemnity Act 2002.
Subsection (4) creates an offence if the insurer
does not keep relevant records.
This section provides that the run-off cover provided under sections 26A or
26C is taken, for all purposes (other than the purposes specified in the
regulations), to be a contract of insurance between the insurer and the person
to whom the medical indemnity cover is provided.
This is so even though
the insurer does not receive any premium for providing the medical indemnity
cover; and regardless of whether the person accepts the offer of
cover.
This provision will mean that the cover issued under section 26A
should be treated in the same way as other contracts of insurance. For instance,
legislation and general law principles about insurance will apply to the
cover.
This section provides for the Federal Court to grant an injunction requiring an insurer to provide insurance if they fail to provide it under sections 26A or 26C or requiring an MDO to enter into an arrangement with an insurer if it fails to do so under section 26B. A practitioner, ASIC or the Minister responsible for the Medical Indemnity Act 2002 may apply to the Federal Court.
26G Pecuniary penalties for offences against this Division
Subsection (1) provides that subsection 48B(3) of the Crimes Act 1914 applies to any offence against a provision of this Division committed by a body corporate, as though an offence against that provision could be committed by a natural person.
Subsection (2) provides that this section does not affect the meaning of any other offence against this Act.
This Schedule amends the Medical Indemnity Act 2002 to allow a
claims protocol to be determined to cover the payment of MDO and insurer
expenses arising from INBR indemnity scheme claims.
Amendments to the
Medical Indemnity Act 2002
Items 1 and 2 These items
amend section 4 to make it clear than amounts payable under the IBNR Claims
Protocol are not covered by the definition of IBNR indemnity, and to insert a
definition of IBNR Claims Protocol as a protocol determined by the Minister
under new section 27A.
Items 3 and 4 These items amend section 10
(the guide to Division 1 of Part 2 of the Act) to insert appropriate reference
to the IBNR Claims Protocol.
Item 5 This item adds new
Subdivision F at the end of Division 1 of Part 2 of the
Act.
Subdivision F—The IBNR Claims
Protocol
27A Minister may determine a protocol dealing with
various matters
This section provides for the determination by the
Minister (by disallowable instrument) of an IBNR Claims Protocol that can deal
with making payments to MDOs and insurers of claim handling fees, and making
payments on account of legal, administrative or other costs incurred by MDOs and
insurers (whether on their own behalf or otherwise), in respect of claims
relating to incidents covered by the IBNR indemnity scheme.
Section 27B provides that the HIC may request a person to provide information
relevant to determining whether an MDO or insurer is entitled to a payment under
the IBNR Claims Protocol or the amount that is payable to an MDO or insurer
under the IBNR Claims Protocol.
Items 6 and 7 These items add
the IBNR Claims Protocol to the record keeping requirements in section
39.
Item 8 This amends the offence provision (section 45)
concerning a failure to provide information to the HIC relevant to the IBNR
Claims Protocol under section 27B.
Item 9 This item amends
section 48 to provide for payment under the IBNR Claims Protocol to be paid out
of the Special Appropriation.
This schedule repeals the Medical Indemnity (Enhanced UMP Indemnity)
Contribution Act 2002. The Act was intended to recover from UMP members
amounts which may have been paid by the Commonwealth under a Deed with United
Medical Protection (UMP) and UMP’s provisional liquidator. As no payments
were made and UMP has resumed normal trading, the Act is
redundant.
Item 1 This item repeals the Medical Indemnity
(Enhanced UMP Indemnity) Contribution Act 2002. The Act was intended to recover
the cost to the Commonwealth of any amounts it may have paid out under a Deed
with United Medical Protection and the provisional liquidator. As no payments
were made under the Deed and UMP is no longer in provisional liquidation, there
is no longer any need for the Act.
This schedule makes minor amendments to the scope of the PSS and to
payment days for insurers to remit to the Health Insurance Commission (HIC) any
UMP support payments paid by persons to the insurers.
It also brings
Lloyds underwriters under the operation of the Medical Indemnity (Prudential
Supervision and Product Standards) Act 2003 and makes minor amendments to
the Federal Court injunction process.
Item 1 This item amends the
definition of medical indemnity insurer in section 4 to include a Lloyd’s
underwriter. It takes effect from the commencement of the Medical Indemnity
Amendment Act 2004 when this definition was first implemented. This is not
deterimental to any person.
Item 2 This item provides for
regulations to prescribe incidents that do not occur in Australia to be eligible
for the Exceptional Claims Scheme. The Government intends to make regulations
to include incidents incurred by Australian doctors providing treatment overseas
while accompanying Australian sporting or cultural groups overseas or
undertaking aid work overseas. This item takes effect from the commencement of
the Exceptional Claims Scheme in Schedule 2 to the Medical Indemnity Act 2003
as it provides a benefit to practitioners to be covered for such incidents.
This is not deterimental to any person.
Items 3 and 4 These items
amend section 43 to provide that the Minister may formulate subsidy schemes
which involving making payments to help medical practitioners meet the cost of
making medical indemnity payments.
Item 5 This item amends the
provisions in subsection 66A(5) so that the insurer or MDO must remit UMP
support payments received to the HIC:
(a) on that payment day; or
(b) 7
days after the day on which the amount is paid
whichever is
later.
This means that amounts paid to insurers or MDOs in the 7 days
leading up to payment day will no longer be required to be paid on payment day
– they will now be required 7 days after payment day.
Item 6
This item amends the provisions in paragraph 66A(7)(a) so that the insurer
collecting UMP support payments can deposit the amount in an interest bearing
account.
Medical Indemnity (Prudential Supervision and Product
Standards) Act 2003
Items 7-9 These items amend subsections
4(1), 10(2) and 11(1) to define ‘Lloyds’ underwriters’ and
allow them to offer and provide medical indemnity cover, with effect from the
date of commencement of the Act on 1 July 2003. No person will be detrimentally
affected by the retrospective commencement of this provision.
A person
commits an offence in offering or providing medical indemnity cover to a health
care professional without being a general insurer. ‘General
insurer’ has the same meaning as in the Insurance Act 1973, which
defines the term as a body corporate authorised by APRA under section 12 of that
Act to carry on insurance business.
Lloyd’s underwriters are
authorised under section 93 of the Insurance Act 1973 to undertake
insurance business in Australia, but are not a general insurer as defined.
Because they are not authorised under section 12, they cannot currently offer
medical indemnity cover under the Act.
Items 10-13 These items
clarify the operation of section 26. The Federal court is able to grant an
injunction requiring an insurer to offer medical indemnity cover where the
insurer has failed to make an offer as required by the Act.
Medical
Indemnity (Prudential Supervision and Product Standards) Regulations 2003.
Item 14 This item provides for the repeal of the provision in
the Regulations which exempts Lloyds’ underwriters from the Act. This
Regulation will no longer be required as other items in this Schedule bring
Lloyd’s underwriters into the general provisions of the Act.
MEDICAL INDEMNITY (RUN-OFF COVER SUPPORT PAYMENT) BILL
2004
This Bill imposes a tax to recover the cost of the run-off cover
indemnity scheme. The tax is called the run-off cover support payment.
In
effect, the run-off cover indemnity scheme under the Medical Indemnity Act
2002 provides 100% reimbursement to medical indemnity insurers for the
run-off cover they are required to grant under new section 26A of the Medical
Indemnity (Prudential Supervision and Product Standards) Act 2003. It will
also provide 100% reimbursement for certain incidents already covered by MDOs.
Under the run-off cover support payment the insurers will contribute to the
costs of the scheme.
1 Short title
This clause provides a short
title for the Bill.
This clause provides for commencement of the Bill on 1 July 2004.
This clause defines a number of terms used in the Bill.
This clause imposes a tax on each medical indemnity insurer.
5 Contribution years
This clause provides for each financial year
or other period of 12 months specified in the regulations that starts on or
after 1 July 2004 to be a contribution year.
Regulations may specify
different periods for a particular medical indemnity insurer or class of
insurer.
The Government intends to make regulations to specify a
different contribution year for Australasian Medical Insurance Limited to
reflect that it operates on a calendar year basis.
6 Amount of run-off cover support payment
This clause provides
for the amount of the run-off cover support payment imposed on an insurer for a
contribution year as a percentage of the insurer’s premium income for the
period of 12 months ending on 31 May in each contribution year or such other
period as specified in regulations for a particular medical indemnity insurer or
class of insurer.
The Government intends to make regulations to specify a
different contribution year for Australasian Medical Insurance Limited to
reflect that it operates on a calendar year basis.
The percentage is 15%
or such lower percentage as is specified in the regulations (which may specify
different percentages for a particular medical indemnity insurer or class or
insurer.
The Government intends to make regulations specifying a lower
percentage of 8.5% for the first four contribution years commencing on or after
1 July 2004 and 9.5625% for the first four contribution years for AMIL because
this insurer’s support payment will commence later to reflect their
calendar year operation. However, the operation of the scheme will be reviewed
regularly and the rate may be changed earlier if required.
This clause provides that premium income for a period is the sum of all
premiums paid during the period to the insurer for medical indemnity cover
provided for medical practitioners by contracts of insurance with the insurer;
and includes any amounts paid by the Premium Support Scheme (PSS) under section
43(1) of the Medical Indemnity Act 2002. It does not include any PSS
payment in relation to payment of UMP support payment or Run off cover support
payment.
It includes amounts prescribed by regulation but excludes
relevant amounts of GST, stamp duty and amounts specified in regulations where
they relate to the make up of the premium.
This item uses definitions
for the relevant terms that are the same as those used in relevant legislation.
8 Regulations
This clause provides for the Governor-General
to make regulations.