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2010-2011
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
MIDWIFE PROFESSIONAL INDEMNITY LEGISLATION AMENDMENT BILL
2011
EXPLANATORY MEMORANDUM
(Circulated by the authority of the Minister for Health and Ageing,
the Hon. Nicola Roxon MP)
MIDWIFE PROFESSIONAL INDEMNITY LEGISLATION AMENDMENT
BILL 2011
INTRODUCTION
This Bill amends the Midwife Professional Indemnity (Commonwealth Contribution)
Scheme Act 2010 (the Act) to ensure that self-employed midwives can access the
Scheme and amends the Midwife Professional Indemnity (Run-Off Cover Support
Payment) Act 2010 to ensure that the tax on insurers of eligible midwives is correctly
calculated.
The Act, which commenced on 1 July 2010, enables a Commonwealth Contribution to
be paid to insurers for the cost of eligible claims against eligible midwives.
The Midwives Professional Indemnity (Commonwealth Contribution) Act 2010 provides
that Commonwealth Contribution and Run-off Cover Commonwealth Contribution are
not payable for a claim that should, in the ordinary course of business, be covered by
the midwife's employer. Paragraphs 11(3)(g) (for Commonwealth Contribution) and
31(5)(c)(for Run-off Cover Commonwealth Contribution) of the Act are intended to
ensure that Commonwealth contributions are only provided for claims that would not
ordinarily have been paid via an employer (ie. to ensure that there is no intentional cost
shifting from an employer to the Commonwealth).
Following passage of legislation, it was brought to the Government's attention that the
operation of this provision effectively excludes self-employed midwives - this is
explained below under the heading `Background - Self-employed midwives'. This
exclusion was not the Government's policy intent.
The policy intent of ensuring that self employed midwives are able to access the
Commonwealth contributions is currently achieved through the Midwife Professional
Indemnity (Commonwealth Contribution) Scheme Rules 2010 (No.2), which provides
that midwives employed by companies they own (or own jointly with other midwives)
are eligible for a Commonwealth contribution. Rule No. 2 ensures that these midwives
can make valid claims under the scheme notwithstanding that they are employees of a
company and would, `in the ordinary course of business', be covered by the (`self-
employed') midwife's employer in the event of a legal claim.
Rule No.2 was made under Section 90(1)(b) of the Act, which is the 'necessary and
convenient' rule making power. The making of Rule No. 2 under this power, whilst
valid, is a less desirable arrangement than if the Rule were able to be made under
Paragraphs 11(3)(g) (for Commonwealth Contribution) and 31(5)(c)(for Run-off Cover
Commonwealth Contribution) of the Act. Therefore, this Bill is created to ensure that
the Parliament has the opportunity to explicitly approve the Rule-making power.
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BACKGROUND - SELF EMPLOYED MIDWIVES
Before the enactment of the Midwife Professional Indemnity (Commonwealth
Contribution) Scheme Act 2010, midwives were generally unable to obtain insurance to
cover their practice. In order to protect their personal assets in case of a negligence suit,
many midwives chose to set up a company (either alone or with other midwives)
through which they operated. This meant that any legal actions taken were taken
against the company, not the midwife personally.
Some of these companies will have a sole shareholder and sole director - being the
midwife. That midwife will also be an employee of the company. When the midwife
provides services, s/he would do so in the name of the company. In the case of a legal
suit, the company would (ordinarily) be vicariously liable for the acts of the employee
midwife.
Some midwives formed companies with other midwives and/or their partners/spouses.
Again, the midwife (who is also a shareholder/director of that company) will also be an
employee of the company. When the midwife provides services, s/he would do so in
the name of the company.
In these cases, it appears that the existing provisions - intended to deal with private
hospitals and large private obstetric practices as employers - would mean that midwives
who provide services in the name of a company of which they are shareholders would
not be able to be eligible for a Commonwealth contribution. This is because, as they
operate through a company, any claim would, in the ordinary course of business, be
covered by the midwife's employer (based on the vicarious liability principle picked up
by the provisions).
The intention is that any midwife who provides services by utilising a company
structure should have access to the schemes. Allowing a rule making power within
paragraphs 11(3)(g) (for Commonwealth Contribution) and 31(5)(c)(for Run-off Cover
Commonwealth Contribution) of the Act would provide exactitude for the making of
Rule No. 2. It would also allow the Minister to make rules in the future under 11(3)(g)
and 31(5)(c) to appropriately respond to new and innovative self employment
arrangements for midwives. The making of such rules in the future would be subject to
the scrutiny of the Parliament.
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CONSULTATION
The Government has consulted with Medicare Australia, the Chief Nurse and
Midwifery Officer of the Department of Health and Ageing, the Medical Insurance
Group Australia (MIGA) and representatives of midwives' organisations.
FINANCIAL IMPACT STATEMENT
There is no financial impact from this Bill.
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MIDWIFE PROFESSIONAL INDEMNITY LEGISLATION AMENDMENT
BILL 2011
NOTES ON CLAUSES
General note on the use of Rules
This Bill provides for certain things to be specified in Rules made by the Minister. This
is so that aspects of the Midwife Professional Indemnity (Commonwealth Contribution)
Scheme can be readily and conveniently modified if required. Each Rule will be a
legislative instrument, subject to the requirements of the Legislative Instruments Act
2003 and in particular may be subject to disallowance.
Chapter 1--Introduction
Part 1--Preliminary
Division 1--Preliminary
Clause 1 Short title
This clause sets out the short title of the Bill, once enacted.
Clause 2 Commencement
This clause sets out that the Bill, once enacted, will commence on Royal Assent.
Clause 3 Schedule(s)
This clause provides for amendments and repeals of the Acts as set out in items in the
Schedule
Schedule 1 - Amendments
Midwife Professional Indemnity (Commonwealth Contribution) Scheme Act 2010
Item 1
This item inserts a Rule-making power (section (3A)) that can be used to ensure that
claims made for incidents that occur by certain categories of employed midwives are
eligible for a Commonwealth contribution.
The provisions in the Act would continue to exclude an incident that would, in the
ordinary course of business, be indemnified by an employer.
This item inserts a note (section (3B)) to avoid doubt that Rules may take effect
retrospectively. Rules will be made so that no person would be disadvantaged, apart
from the Commonwealth.
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Item 2
This item inserts a Rule-making power (section 6) that can be used in the definition of
privately practising midwife for to ensure that claims made for incidents that occur by
certain categories of employed midwives are eligible for a Commonwealth contribution.
The provisions in the Act would continue to exclude an incident that would, in the
ordinary course of business, be indemnified by an employer.
This item inserts a note (section 7) to avoid doubt that Rules may take effect
retrospectively. Rules will be made so that no person would be disadvantaged, apart
from the Commonwealth.
Any Rules will be legislative instruments, subject to the requirements of the Legislative
Instruments Act 2003, and in particular may be subject to disallowance.
Midwife Professional Indemnity (Run-off Cover Payment) Act 2010
Item 3
This item fixes a typographical error by replacing the formula in subsection 7(3) so that
instead of:
Net premium + Applicable rate
1 + Applicable rate
It will read:
Net premium × Applicable rate
1 + Applicable rate
The effect of the typographical error is to inadvertently impose a much higher tax on
premium income of insurers of eligible midwives than intended.
The Midwife Professional Indemnity (Run-Off Cover Support Payment) Act 2010
imposes a tax on the premium income of insurers of eligible midwives and is intended
to be consistent with ss7(2A) of the Medical Indemnity (Run-off Cover Support
Payment) Act 2004, which imposes a similar tax on the premium income of insurers of
eligible medical practitioners. This amendment will make these Acts consistent. Failure
to amend this formula would have the effect of causing an insurer to pay more than the
entirety of the net premium to the Commonwealth as a tax.
Item 4
This item states that the amendment made by item 3 applies to all contribution years
commencing on or after 1 July 2010.
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