Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2013-2014-2015
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
PRIVATE HEALTH INSURANCE (PRUDENTIAL SUPERVISION) BILL 2015
PRIVATE HEALTH INSURANCE (PRUDENTIAL SUPERVISION)
(CONSEQUENTIAL AMENDMENTS AND TRANSITIONAL PROVISIONS)
BILL 2015
PRIVATE HEALTH INSURANCE SUPERVISORY LEVY IMPOSITION
BILL 2015
PRIVATE HEALTH INSURANCE (RISK EQUALISATION LEVY) AMENDMENT
BILL 2015
PRIVATE HEALTH INSURANCE (COLLAPSED INSURER LEVY)
AMENDMENT BILL 2015
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Treasurer, the Hon J. B. Hockey MP)
Table of contents
Glossary .................................................................................................. 5
General outline and financial impact ....................................................... 7
Chapter 1 General Introduction ...................................................... 9
Chapter 2 Introduction .................................................................. 15
Chapter 3 Registration of private health insurers ......................... 19
Chapter 4 Health benefits funds ................................................... 29
Chapter 5 Prudential standards and directions ............................ 65
Chapter 6 Other obligations of private health insurers ................. 79
Chapter 7 Monitoring and investigation ........................................ 95
Chapter 8 Enforceable undertakings .......................................... 107
Chapter 9 Remedies in the Federal Court .................................. 109
Chapter 10 Miscellaneous ............................................................ 117
Chapter 11 Consequential Amendments and Transitional
Provisions ................................................................. 125
Chapter 12 Private Health Insurance Supervisory Levy ............... 193
Chapter 13 Private Health Insurance Risk Equalisation Levy ...... 199
Chapter 14 Private Health Insurance Collapsed Insurer Levy ...... 205
Chapter 15 Statement of Compatibility with Human Rights .......... 209
Index .................................................................................................. 211
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
AAT Administrative Appeals Tribunal
ADI Authorised deposit-taking institution within
the meaning of the Banking Act 1959
APRA Australian Prudential Regulation Authority
APRA Act Australian Prudential Regulation Authority
Act 1998
Collapsed Insurer Levy Act Private Health Insurance (Collapsed Insurer
Levy) Act 2003
Collapsed Insurer Levy Private Health Insurance (Collapsed Insurer
Amendment Bill Levy) Amendment Bill 2015
Consequential Amendments Private Health Insurance (Prudential
and Transitional Provisions Supervision) (Consequential Amendments
Bill and Transitional Provisions) Bill 2015
Corporations Act Corporations Act 2001
CRC Convention on the Rights of the Child
Criminal Code Criminal Code Act 1995
Crimes Act Crimes Act 1914
CRPD Convention on the Rights of Persons with
Disabilities
FISLC Act Financial Institutions Supervisory Levies
Collection Act 1998
FS(CoD) Act Financial Sector (Collection of Data)
Act 2001
ICCPR International Covenant on Civil and Political
Rights
Insurer Registered Private Health Insurer
ITAA 1997 Income Tax Assessment Act 1997
Legislative Instruments Act Legislative Instruments Act 2003
Life Insurance Act Life Insurance Act 1995
PHI Act Private Health Insurance Act 2007
5
Private Health Insurance (Prudential Supervision) Bill 2015 and supporting Bills
Abbreviation Definition
Prudential Supervision Bill Private Health Insurance (Prudential
Supervision) Act Bill 2015
Regulatory Powers Act Regulatory Powers (Standard Provisions)
Act 2014
Risk Equalisation Levy Act Private Health Insurance (Risk Equalisation
Levy) Act 2003
Risk Equalisation Levy Private Health Insurance (Risk Equalisation
Amendment Bill Levy) Amendment Bill 2015
SIS Act Superannuation Industry (Supervision)
Act 1993
SISs Standard Information Statements
SRC Act Safety, Rehabilitation and Compensation
Act 1998
Supervisory Levy Imposition Private Health Insurance Supervisory Levy
Bill Imposition Bill 2015
the Committee The United Nations Committee on
Economic, Social and Cultural Rights
the Council Private Health Insurance Administration
Council
6
General outline and financial impact
General outline and financial impact
The Private Health Insurance (Prudential Supervision) Bill 2015
(Prudential Supervision Bill) creates a regime for the prudential regulation
of private health insurers by the Australian Prudential Regulation
Authority (APRA).
The Private Health Insurance (Prudential Supervision) (Consequential
Amendments and Transitional Provisions) Bill 2015 (Consequential
Amendments and Transitional Provisions Bill) makes consequential
amendments to relevant legislation including the repeal of the provisions
relating to the formation of the Private Health Insurance Administration
Council (the Council) in the Private Health Insurance Act 2007
(PHI Act). It also provides for necessary transitional arrangements to
facilitate the transfer of the Private Health Insurance Administration
Council's (the Council) prudential functions to APRA from 1 July 2015.
The Private Health Insurance Supervisory Levy Imposition Bill 2015
(Supervisory Levy Imposition Bill), the Private Health Insurance (Risk
Equalisation Levy) Amendment Bill 2015 (Risk Equalisation Levy Bill)
and the Private Health Insurance (Collapsed Insurer Levy) Amendment
Bill 2015 (Collapsed Insurer Levy Amendment Bill) provide for the
continued imposition of levies upon the private health insurance industry
to fund APRA's supervision of the industry, the Risk Equalisation Trust
fund and a levy to fund should there be a collapsed insurer.
Date of effect: The Prudential Supervision Bill comes into effect on
1 July 2015 or, if the Bill does not receive Royal Assent before
1 July 2015, on a date fixed by proclamation. The Consequential
Amendments and Transitional Provisions Bill has multiple
commencement dates, some provisions commence on Royal Assent or the
day after, others commence at the same time or immediately after the
commencement of the Prudential Supervision Bill.
Proposal announced: The proposal was announced as part of the
2014-15 Budget.
Financial impact: Nil
7
Private Health Insurance (Prudential Supervision) Bill 2015 and supporting Bills
Human rights implications: These Bills are compatible with human
rights. To the extent that they may limit human rights, those limitations
are reasonable, necessary and proportionate. See Statement of
Compatibility with Human Rights -- Chapter 15.
Compliance cost impact: Nil, no compliance cost assessment.
Summary of regulation impact statement
As the policy involves a machinery of government change, the Office of
Best Practice Regulation considered that a Regulation Impact Statement
was not required.
The measure will not change the regulatory costs on business, community
organisations or individuals and the compliance costs under the package
are substantively the same as the costs under the PHI Act.
8
Chapter 1
General introduction
Context of amendments
1.1 The Council is the prudential regulator of the private health
insurance industry in Australia. It was first established in 1989, under the
National Health Act 1953 and continues its operations under the PHI Act.
1.2 The Council is responsible for monitoring the prudential
performance of registered private health insurers. The Council's role
includes:
• registration of private health insurers;
• developing solvency, capital adequacy and other prudential
standards for the industry;
• publishing circulars, statistics and reports on insurer activities
and performance; and
• administering the Risk Equalisation Trust Fund.
1.3 As part of the Smaller Government - additional reductions in
the number of Australian Government bodies initiative announced as part
of the 2014-15 Budget, the Council will cease as a separate body, and its
prudential supervisory functions will be transferred to APRA.
1.4 The Smaller Government Reform Agenda will streamline
government bodies and reduce duplication of Government agencies as
statutory bodies will be abolished and rationalised where activities are no
longer needed or can be managed within existing departmental resources.
The abolition and merger of statutory bodies, including the Council, is
expected to improve coordination and accountability and reduce the costs
associated with separate governance arrangements.
Summary of new law
1.5 The transfer of the Council's prudential supervisory functions
will be given effect by this package of Bills, which transfers the regime
for the prudential regulation of private health insurers to be administered
by APRA.
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Private Health Insurance (Prudential Supervision) Bill 2015
1.6 The package of Bills replicates elements of the regime currently
set out in the PHI Act with some modifications to harmonise certain
provisions with other legislation administered by APRA, reduce
duplication, update investigation powers to bring them more into line with
the Regulatory Powers (Standard Provisions) Act 2014 (Regulatory
Powers Act) and allow the regime to operate more efficiently.
1.7 Opportunities to harmonise legislation and eliminate duplication
within the private health insurance regulatory framework is consistent
with the Government's deregulation agenda.
1.8 The amendments will have effect from 1 July 2015 (if the
Prudential Supervision Bill receives Royal Assent before 1 July 2015) or a
single day to be fixed by proclamation (if the Prudential Supervision Bill
receives Royal Assent on or after 1 July 2015).
1.9 The Consequential Amendments and Transitional Provisions
Bill includes amendments to:
• the Australian Prudential Regulation Authority Act 1998
(APRA Act) to provide for matters relating to secrecy of
information concerning private health insurers, and to
provide for the administration of industry levies;
• the Financial Institutions Supervisory Levies Collection Act
1998 (FISLC Act) to cater for the collection of private health
insurance supervisory levy and the collection of collapsed
insurance levy;
• the Financial Sector (Collection of Data) Act 2001
(FS(CoD) Act) to facilitate the collection of data relating to
private health insurers by APRA;
• the Income Tax Assessment Act 1997 (ITAA 1997) to update
or replace references to the PHI Act;
• the Life Insurance Act 1995 (Life Insurance Act) to replace a
reference to the PHI Act;
• the Medibank Private Sale Act 2006 (Medibank Private Sale
Act) to include references to the Prudential Supervision Bill
in certain provisions that currently refer to the PHI Act;
• the Ombudsman Act 1976 to enable the sharing of
information with APRA; and
10
General introduction
• the PHI Act to remove the prudential supervision powers,
remove references to the Council and to repeal the provisions
creating the Council.
1.10 A number of transitional provisions have been provided for
relating to the repeal of the provisions establishing the Council and the
transfer of functions to APRA. Such transitional provisions will ensure
that legal actions taken prior to the transfer day, such as the registration of
private health insurers, and other processes, such as legal proceedings,
will continue under the Prudential Supervision Bill. Finally, there are
machinery transitional provisions for the transfer of the Council staff,
assets, liabilities and records from the Council to APRA.
1.11 The Risk Equalisation Levy Amendment Bill amends the
Private Health Insurance (Risk Equalisation Levy) Act 2003 (Risk
Equalisation Levy Act), and the Collapsed Insurer Levy Amendment Bill
amends the Private Health Insurance (Collapsed Insurer Levy) Act 2003
(Collapsed Insurer Levy Act), to replace references to the Council with
references to APRA. Both of these Bills also repeal redundant provisions.
The Private Health Insurance (Council Administration Levy) Act 2003 is
being repealed as it is redundant and the Supervisory Levy Imposition Bill
is being introduced.
1.12 The PHI Act will retain provisions relating to private health
insurance policies such as the establishment and administration of the
premiums reduction scheme (the Private Health Insurance Rebate) and
lifetime health cover and the rules for complying health insurance
products (including the community rating principle). Enforcement
provisions relevant for these provisions and certain reporting provisions
required to support these obligations will also be retained in the PHI Act.
Comparison of key features of new law and current law
New law Current law
Establish APRA as the prudential The Council is the prudential
regulator of the private health regulator for the private health
insurance industry. insurance industry.
The main provisions of the Prudential The main provisions in the PHI Act
Supervision Bill: that relate to the Council and its
• provide for registration of private supervisory role include the:
health insurers and prohibit • registration of private health
entities, that are not registered, insurers and the prevention of
from carrying on a health related entities not registered from
business (Part 2); carrying on a health insurance
11
Private Health Insurance (Prudential Supervision) Bill 2015
New law Current law
• require private health insurers to business (Parts 4-2 and 4-3);
have health benefits funds, and • prevention of private health
outline obligations relating to the insurers from offering or
operation of such funds (Part 3, advertising health insurance
Divisions 2 and 3); business other than as a
• provide for APRA to approve complying health insurance
restructures, mergers, acquisition product (Part 3-3);
and termination of health benefits • requirement for private health
funds (Part 3, Divisions 4 and 5); insurers to have health benefits
• give APRA power to appoint an funds and obligations relating to
external manager of a health the operation of such funds
benefit fund and outline the (Part 4-4);
powers and duties of external • establishment of solvency and
managers and terminating capital adequacy standards and
managers (Part 3, Divisions 6, 7 directions by the Council and the
and 8); requirement for health benefits
• outline duties and liabilities of funds to comply with such
directors (Part 3, Division 9); standards and directions
(Part 4-5);
• allow APRA to establish
prudential standards and exercise • establishment of prudential
powers under the standards, and standards and directions for
give directions and require health private health insurers and the
benefits funds to comply with requirement for insurers to
such standards and directions comply with such standards and
(Part 4); directions (Part 4-4);
• outline obligations of private • restructure, merger, acquisition
health insurers such as the and termination of health benefit
appointment of actuaries and funds (Part 4-4 and 6-5);
reporting and notification • outline of duties and liabilities of
requirements (Part 5, Divisions 2, directors (Part 4-4);
3 and 4);
• obligations of private health
• provide for the monitoring and insurers such as the appointment
investigation of private health of actuaries and reporting and
insurers (Part 6); notification requirements
• provide that APRA can obtain an (Part 4-5);
enforceable undertaking from a • the Council's ability to supervise
person in connection with a matter compliance by private health
in relation to which APRA has a insurers with their obligations
power or function under the Act with respect to matters regulated
or the risk equalisation legislation by the Council
(Part 7); ('Council-supervised obligations')
• provide that APRA may seek (Parts 5-2 and 5-3);
remedies for a contravention of an • the Council's general enforcement
enforceable obligation (Part 8); powers including the ability to
• provide for a review of APRA's seek remedies for a contravention
decisions by the Administrative of a Council-supervised obligation
12
General introduction
New law Current law
Appeals Tribunal (AAT) (Part 9); (Part 5-2);
and • appointment of an external
• set out matters in relation to manager of a health benefits fund
approvals, determinations and and the powers and duties of
rules (Part 9). external managers (Parts 5-3 and
6-5);
• continuation, purpose, functions
and administration of the Council
(Part 6-3);
• review of the Council's decisions
by the AAT (Part 6-9); and
• ability of the Council to make
certain Private Health Insurance
Rules, via legislative instrument
(Part 6-10).
13
Chapter 2
Introduction
Outline of chapter
2.1 Part 1 deals with the preliminary provisions. This includes:
• the short title and commencement;
• an outline of the Prudential Supervision Bill;
• the definition of terms used; and
• the constitutional basis and application.
2.2 Unless otherwise stated, all references in this Chapter relate to
the Prudential Supervision Bill.
Detailed explanation of new law
Part 1 - Introduction
Division 1 - Preliminary
Short title
2.3 This Bill may be cited as the Private Health Insurance
(Prudential Supervision) Bill 2015. [Part 1, Division 1, section 1]
Commencement
2.4 The Prudential Supervision Bill commences from 1 July 2015 (if
the Bill receives Royal Assent before 1 July 2015) or a single day to be
fixed by proclamation (if the Bill receives Royal Assent on or after
1 July 2015). [Part 1, Division 1, section 2]
2.5 If the Prudential Supervision Bill does not commence by
1 July 2015 and if the Bill does not commence within the period of six
months of Royal Assent, the Bill commences on the day after the end of
that period.
15
Private Health Insurance (Prudential Supervision) Bill 2015
Simplified outline of this Bill
2.6 Only a private health insurer may carry on health insurance
business. A private health insurer is a company that is registered under
Part 2. [Part 1, Division 1, section 3]
2.7 A private health insurer must have at least one health benefits
fund. There are regimes governing:
• how health benefits funds are operated;
• changing the health benefits fund to which a policy of
insurance is referable;
• terminating health benefits funds; and
• external management of health benefits funds. [Part 1,
Division 1, section 3]
2.8 Private health insurers must comply with prudential standards
made by APRA, and (in an enforcement context, usually where a
significant prudential concern exists) with directions given by APRA.
Private health insurers and their appointed actuaries also have various
other obligations. APRA has monitoring and investigative powers in
relation to private health insurers. APRA may accept enforceable
undertakings, and may seek remedies in the Federal Court in relation to
contraventions of enforceable obligations. [Part 1, Division 1, section 3]
2.9 The PHI Act defines the key concepts of health insurance
business and health benefits funds as well as other concepts that relate to
health benefits funds. That Act also sets out rules governing private health
insurance products and provides incentives to encourage people to have
private health insurance. [Part 1, Division 1, section 3]
Interpretation
2.10 The dictionary provides definitions of terms used in the
Prudential Supervision Bill. In some cases, the definitions are signposts to
other provisions within the Bill or refer to definitions of terms in other
Acts in which the meaning of the term is given. [Part 1, Division 1, section 4]
General administration of the Bill
2.11 APRA will have responsibility for the general administration of
the Bill. [Part 1, Division 1, section 5]
16
Introduction
Division 2 - Constitutional matters
2.12 Division 2 relates to the constitutional basis of the Bill and the
Bill's application. The division is based on Division 5 of Part 1-1 of the
PHI Act.
Bill binds the Crown
2.13 The Bill binds the Crown in each of its capacities. This section is
subject to section 7. [Part 1, Division 2, section 6]
Bill not to apply to State insurance within that State
2.14 The Prudential Supervision Bill does not apply to State
insurance that does not extend beyond that State. [Part 1, Division 2, section 7]
Compensation for acquisition of property
2.15 If the operation of the Prudential Supervision Bill would result
in an unjust acquisition of property for a person otherwise than on just
terms (within the meaning of paragraph 51(xxxi) of the Constitution) the
Commonwealth is liable to pay a reasonable amount of compensation to
the person. If agreement cannot be reached on the amount of
compensation, the person may take action in the Federal Court. [Part 1,
Division 2, section 8]
Legal professional privilege
2.16 There is no specific reference to legal professional privilege
applying to this Bill, and therefore the common law principle of legal
professional privilege will apply.
17
Chapter 3
Registration of private health insurers
Outline of chapter
3.1 Part 2 provides a registration regime for private health insurers
administered by APRA. It includes:
• a prohibition on carrying on health insurance business
without being registered and the availability of injunctions to
enforce breaches of this prohibition;
• arrangements for applying for registration, changes in
registration status and cancellation of registration; and
• APRA's powers to grant or refuse applications and cancel a
private health insurer's registration.
3.2 Unless otherwise stated, all references in this Chapter relate to
the Prudential Supervision Bill.
Summary of new law
3.3 Part 2 is largely based on the existing registration provisions
currently provided in Parts 4-2 and 4-3 of the PHI Act, with some
modifications to simplify the provisions relating to APRA's decision
whether or not to register an applicant and bring about consistency with
other legislation administered by APRA.
Comparison of key features of new law and current law
New law Current law
The new law mirrors the current law. There is a prohibition against
carrying on health insurance business
without registration and injunctions to
enforce this prohibition.
19
Private Health Insurance (Prudential Supervision) Bill 2015
New law Current law
Certain bodies may apply to APRA Certain bodies may apply to the
for registration as a private health Council for registration as a private
insurer (section 12). health insurer (section 126-10 of the
PHI Act).
The new law mirrors the current law. Arrangements for applying for
registration and changes in
registration status and the Council's
powers to grant or refuse an
application and cancel a private
health insurer's registration
Detailed explanation of new law
Part 2 - Registration of private health insurers
Division 1 - Introduction
Simplified outline of this Part
3.4 Only a private health insurer may carry on health insurance
business. A private health insurer is a company that is registered under
this Part. Part 4-2 of the PHI Act defines the concept of health insurance
business. [Part 2, Division 1, section 9]
3.5 There are two kinds of special status that some private health
insurers may have. They are:
• a for profit insurer; and
• a restricted access insurer. [Part 2, Division 1, section 9]
Division 2 - Prohibition of carrying on health insurance business
without registration
Carrying on health insurance business without registration
3.6 It is an offence for a person to carry on a health insurance
business without being registered. The penalty for this offence is two
years imprisonment or 120 penalty units, or both. [Part 2, Division 2,
subsection 10(1)]
20
Registration of private health insurers
3.7 The penalty for such an offence has been increased from
40 penalty units under subsection 118-1(1) of the PHI Act, to two years
imprisonment or 120 penalty units, or both. The increase in penalty is to
deter people from operating private health insurance businesses without
registration and to allow APRA to regulate private health insurance
businesses (unregistered private health insurers would not be regulated by
APRA).
3.8 A note is inserted beneath subsection 10(1) to clarify that if a
body corporate is convicted of an offence under subsection 10(1), it may
be subject to a penalty of up to five times the penalty stated in
subsection 10(1). This is imposed by subsection 4B(3) of the
Crimes Act 1914 (Crimes Act), as the offence can apply to a natural
person or a body corporate. This note has been inserted for every offence
provision to assist the reader. Whilst it may appear that some offences
only apply to body corporates or natural persons, the operation of Part 2.4
of the Criminal Code Act 1995 (Criminal Code) applies where a person
aids, abets, counsels or procures the commission of an offence, the
offence provision can apply to that person whether they are a natural
person or a body corporate. [Part 2, Division 2, subsection 10(1)]
3.9 If a person commits such an offence, the offence period is from
the first day the offence and each day thereafter (including the day of
conviction or later day). [Part 2, Division 2, subsection 10(2)]
3.10 All offences in the (Prudential Supervision Bill) will be fault
liability offences. Therefore a relevant fault element (such as intention,
knowledge or recklessness, depending on the operation of the Criminal
Code), is required to commit the offence and this is also a requirement for
prosecution.
Injunctions
3.11 If the Federal Court is satisfied that a person has, or will, carry
on health insurance business without registration under section 10 of the
Prudential Supervision Bill, it may, on the application of APRA, grant an
injunction. [Part 2, Division 2, subsection 11(1)]
3.12 Pending the determination of APRA's application, the Federal
Court may grant an interim injunction to stop or prevent the possible
offence in section 10, but must not require the applicant to give an
undertaking as to damages as a condition of granting the interim
injunction. [Part 2, Division 2, subsections 11(2) and (3)]
3.13 The Federal Court may discharge or vary an injunction granted
under subsection 11(1) or (2). [Part 2, Division 2, subsection 11(4)]
21
Private Health Insurance (Prudential Supervision) Bill 2015
3.14 The Federal Court's power to grant an injunction to restrain a
person from engaging in conduct may be exercised whether or not it
appears that the person intends to engage in, continue to engage in or has
previously engaged in such conduct. [Part 2, Division 2, subsection 11(5)]
3.15 The Federal Court is able to grant an injunction requiring a
person to do an act or thing whether or not it appears to the Court that the
person intends to refuse, fail again or continue to fail or refuse to do the
act or thing. This includes whether the person has previously refused to
fail to do the act or thing. [Part 2, Division 2, subsection 11(6)]
Division 3 - Registration
Applying for registration
3.16 A company within the meaning of the Corporations Act 2001
(Corporations Act), which is also a constitutional corporation, may apply
to APRA for registration as a registered private health insurer. [Part 2,
Division 3, subsection 12(1)]
3.17 The application must be in the approved form and accompanied
by a copy of the applicant's proposed business rules. Additionally, the
application must state that the applicant is seeking to be registered as a for
profit or restricted access insurer, if that is what the applicant is seeking.
[Part 2, Division 3, subsection 12(2)]
3.18 Section 12 is based on section 126-10 of the PHI Act. However
insurers will no longer be obligated to provide their proposed fund rules to
the Secretary of the Department of Health. Fund rules will be provided by
APRA to the Department of Health through an inter-departmental
administrative arrangement.
Requiring further information
3.19 APRA may give an applicant written notice requiring them to
provide further information relating to their application within 90 days of
the making of the application. [Part 2, Division 3, section 13]
Criteria for registration
3.20 APRA may make rules setting out criteria for registration as a
private health insurer. [Part 2, Division 3, section 14]
3.21 Section 14 is based on subsection 12(1B) of the
Insurance Act 1973 and is similar to a number of provisions in current
Acts administered by APRA (for example, subsection 9(2A) of the
Banking Act 1959). As is the case under other APRA administered Acts,
the criteria will be matters to which APRA have regard, rather than a
22
Registration of private health insurers
check list of preconditions that automatically determine whether an
application will be granted or refused.
Deciding the application
3.22 APRA may grant the application to be registered as a private
health insurer, subject to any terms and conditions it deems appropriate.
[Part 2, Division 3, subsection 15(1)]
3.23 A decision to refuse or to apply terms and conditions is
reviewable under section 168.
3.24 If APRA grants the application then:
• the applicant is taken to have been registered as a private
health insurer from the date specified in the instrument
granting the application; and
• if the registration is subject to terms and conditions, those are
taken to have applied from the date on which the applicant is
notified of the granting of the application; and
• if the applicant sought registration as a for profit insurer it is
taken to be registered as such; and
• if the applicant sought registration as a restricted access
insurer and its constitution or rules satisfy subsection 15(3), it
is taken to be registered as such. [Part 2, Division 3,
subsection 15(2)]
3.25 The Consequential Amendments and Transitional Provisions
Bill provides that after the transition time, private health insurers may
request APRA to amend or revoke one or more terms and conditions
imposed upon existing registrations. The purpose of this is to allow APRA
to 'clean up' obviously redundant or out-of-date conditions. Requests
must be made in writing. [Schedule 2, Part 2, subitem 3(3) of the Consequential
Amendments and Transitional Provisions Bill]
3.26 Subsection 15(3) applies to restricted access insurers only. An
applicant's constitution or business rules satisfy subsection 15(3) if they:
• describe the restricted access group the insurer's complying
health insurance products are, or will be, available to;
• prohibit the insurer issuing such a product to anyone outside
of the group; and
23
Private Health Insurance (Prudential Supervision) Bill 2015
• prohibit the insurer ceasing to insure a person because they
no longer belong to the group. [Part 2, Division 3,
subsection 15(3)]
3.27 An insurer's registration status as being, or not being, a for profit
insurer or a restricted access insurer may change after the insurer's initial
registration, but only as provided for in section 19.
3.28 Subsection 15(3) is intended to act as a precondition that the
initial constitution or rules must satisfy in order for the insurer to be
registered as a restricted access insurer. It is not intended to have the
effect that, if the insurer ceases to have such provisions in its constitution
or rules, it will automatically cease to be registered as a restricted access
insurer. The insurer's actual registration status will only change if and
when its status is changed under section 19.
3.29 If a restricted access insurer ceases to adequately comply with
subsection 15(3), a direction will be able to be given under section 200-1
of the PHI Act to modify its constitution or rules in order to comply with
subsection 15(3).
3.30 The requirements for what an insurer has to do if it changes, or
proposes to change, its rules will continue to be dealt with under
sections 169-10, 93-20 and 93-25 of the PHI Act.
3.31 A restricted access group is defined as a group of people
belonging to a particular group due to being:
• employed in a particular profession, trade, industry or
calling; or
• employed by a particular employer or employer belonging to
a particular class of employers; or
• a past or present member of:
- a particular profession, professional association or union;
or
- the Defence Force (or part of the Defence Force); or
• currently or previously part of any group described in APRA
rules made for the purpose of paragraph 4(e). These rules
may describe a group as having one or more classes of
people (whether or not they are described by reference to
matters referred to in paragraphs 4(a) to (d)). [Part 2, Division 3,
subsections 15(4) and (5)]
24
Registration of private health insurers
3.32 A partner or dependent children of a person who belongs to such
a group is also considered as belonging to the group. [Part 2, Division 3,
subsection 15(4)]
3.33 Section 15 is based on an amalgamation of section 126-20 of the
PHI Act and sections 12 and 13 of the Insurance Act 1973. There has been
no change to the definition of a restricted access group.
Notifying the decision
3.34 If APRA grants the application for registration as a private
health insurer, it must:
• notify the applicant in writing of the grant, including any
terms and conditions to which it is subject; and
• publish details of the grant in the Gazette within one month
of granting the registration. [Part 2, Division 3, subsection 16(1)]
3.35 If APRA refuses the application, it must notify the applicant of
this in writing. [Part 2, Division 3, subsection 16(2)]
APRA can be taken to refuse application
3.36 APRA is taken to have refused the application for registration as
a private health insurer (allowing merits review under section 168, if
requested) if it does not notify the applicant of its decision by the later of:
• 90 days after the application was made; or
• 90 days after further information was provided to APRA
under section 13. [Part 2, Division 3, section 17]
APRA to ensure that up-to-date record of information about private health
insurers is publicly available.
3.37 APRA must publish on its website an up-to-date record of
private health insurers. The records must contain the insurer's name,
registration status, which States and Territories it operates in and contact
details such as address, telephone number and website. [Part 2, Division 3,
section 18]
25
Private Health Insurance (Prudential Supervision) Bill 2015
Changing registration status
For profit insurer
3.38 Private health insurers may, by notifying APRA in the approved
form, change their status from for profit insurer to not for profit insurer or,
with the approval of APRA under section 20, from not for profit to for
profit. [Part 2, Division 3, subsections 19(1) and (2)]
Restricted access insurer
3.39 Private health insurers may, by notifying APRA in the approved
form, change their status from restricted access insurer to other insurer or
change their status to restricted access insurer (subject to compliance with
subsection 15(3)). [Part 2, Division 3, subsections 19(4) and (5)]
3.40 APRA must notify changes of for profit or not for profit status to
the Health Secretary, the Private Health Insurance Ombudsman and the
Commissioner of Taxation. Changes of restricted access registration
should also be notified to the Health Secretary and the Private Health
Insurance Ombudsman. [Part 2, Division 3, subsections 19(3) and (6)]
Conversion to for profit status
3.41 A private health insurer may apply to APRA for approval to
convert to for profit status. The application must be made in the approved
form and be given to APRA least 90 days before the proposed date of
effect. [Part 2, Division 3, subsections 20(1) and (2)]
3.42 APRA must approve the application within 30 days after the
application was made if it is satisfied that the application has been made
in the approved form and the conversion scheme does not in substance
involve the demutualisation of the insurer. [Part 2, Division 3, subsection 20(3)]
3.43 If the scheme does in substance involve the demutualisation of
the insurer then the processes in subsections 20(4) and (5) will apply.
3.44 APRA rules may set out criteria for deciding if an application to
convert to for profit status does not involve demutualisation of the insurer.
[Part 2, Division 3, subsection 20(6)]
3.45 If an application to convert to for profit status is not approved
through the operation of subsection 20(3), the application must be
advertised publicly at least 45 days before the proposed date of effect.
[Part 2, Division 3, paragraph 20(4)(a)]
3.46 APRA may seek further information on the application within
90 days of it being made. [Part 2, Division 3, paragraph 20(4)(b)]
26
Registration of private health insurers
3.47 Providing that the insurer has complied with subsection (2) and
paragraph (4)(b), APRA must approve the application if satisfied that the
conversion scheme:
• would not result in a financial benefit to a person (including a
natural person and a corporate person) who is not a policy
holder or not insured through a health benefits fund
conducted by the insurer; and
• would not result in an inequitable distribution of financial
benefits between policy holders and persons insured through
a health benefits fund conducted by the insurer. [Part 2,
Division 3, subsection 20(5)]
3.48 APRA must provide written notice to the insurer on the outcome
of the application, however, this approval is not a legislative instrument.
The statement that the approval is not a legislative instrument is included
to assist readers, as the instrument is not a legislative instrument under
general principles, therefore does not constitute a substantive exemption
from the definition of a legislative instrument in the Legislative
Instruments Act 2003 (Legislative Instruments Act), but is a statement of
the 'status quo'. [Part 2, Division 3, subsection 20(7)]
3.49 APRA is required to notify the insurer of its decision in writing
as currently required under subsection 126-42(7) of the PHI Act. [Part 2,
Division 3, subsection 20(8)]
3.50 Refusals of applications are reviewable under section 168.
Example 3.1
CALM Health Insurance applies to APRA to change its status to for
profit from 7 October. To do so, CALM Health Insurance provides
APRA with the approved form on 3 July - more than 90 days in
advance of when the conversion is to take effect. In considering the
application, APRA sought further information from CALM Health
Insurance as to whether the conversion scheme involved a
demutualisation. After considering the information, APRA is satisfied
that it is not a demutualisation, approves the conversion and notifies
CALM Health Insurance in writing within 30 days of lodgement.
Cancellation of registration
3.51 APRA must cancel the registration of a private health insurer if:
• it has not conducted health insurance business for 12 months;
• its health benefits funds have been terminated under
Division 5 of Part 3; or
27
Private Health Insurance (Prudential Supervision) Bill 2015
• the insurer is no longer a company within the meaning of the
Corporations Act. [Part 2, Division 3, subsection 21(1)]
3.52 APRA must notify the insurer in writing of the cancellation and
publish in the Gazette a notification of the cancellation within one month.
[Part 2, Division 3, subsection 21(2)]
3.53 APRA will advise the Department of Health of any cancellation
of registration through an inter-departmental administrative arrangement.
28
Chapter 4
Health benefits funds
Outline of chapter
4.1 Part 3 relates to health benefits funds. It provides for the:
• establishment and operation of health benefits funds;
• restructure, merger and acquisition of health benefits funds;
• termination and external management of health benefits
funds; and
• APRA's ability to give notices to directors and remedies for
non-compliance.
4.2 Unless otherwise stated, all references in this Chapter relate to
the Prudential Supervision Bill.
Summary of new law
4.3 Divisions 2 (requirement to have at least one health benefits
fund), 3 (operating of health benefits funds), 4 (restructure, merger and
acquisition of health benefits funds), 5 (termination of health benefits
funds) and 9 (duties and liabilities of directors) of Part 3 are based on
Part 4-4 of the PHI Act. However, the Prudential Supervision Bill does
not include the special provisions for solvency standards and directions
(currently in Division 140 of the PHI Act) and capital standards and
directions (currently in Division 143 of the PHI Act) as these will be
absorbed in APRA's general prudential standard-making and directions
powers in Divisions 2 and 3 of Part 4.
4.4 Divisions 6 (external management of health benefits funds),
7 (court-ordered terminating management of health benefits funds), and
8 (general provisions relating to external and terminating management)
are based on provisions in Parts 4-4 and 5-3 of the PHI Act. The
Prudential Supervision Bill will simplify the legislative regime by
co-locating into Part 3 all the provisions relating to the operation, merger
29
Private Health Insurance (Prudential Supervision) Bill 2015
and acquisition, external management and termination of health benefits
funds that are currently located in different parts of the PHI Act.
Comparison of key features of new law and current law
New law Current law
Establishment and operation of health benefits funds
The new law substantively mirrors Insurers are required to set up health
the current law. Insurers are required benefits funds. The assets of the fund
to set up health benefits funds. The are kept separate from those of the
assets of the fund are kept separate insurer. The operation of health
from those of the insurer. APRA rules benefits funds are governed by the
govern the operation of health Private Health Insurance (Health
benefits funds. Benefits Fund Administration) Rules.
Restructure, merger and acquisition of health benefits funds
The new law substantively mirrors Insurers must apply to the Council for
the current law. Insurers must apply approval restructure of a fund, merger
to APRA for approval restructure, of a fund with another health benefits
merger or acquisition of a fund. A fund or acquisition of a fund. Private
restructure, merger or acquisition Health Insurance (Health Benefits
must be in the interests of policy Fund Administration) Rules may
holders. APRA rules may govern a govern a restructure, merger or
restructure, merger or acquisition acquisition.
Termination and external management of health benefits funds
The new law substantively mirrors Insurers may apply to the Council for
the current law. Insurers may apply to termination of a health benefits fund.
APRA for termination of a health The Council can appoint an external
benefits fund (additionally the manager in certain circumstances.
Federal Court can order the The external management must be
appointment of a terminating conducted in accordance with the
manager). APRA can appoint an PHI Act, rather than any other state or
external manager in certain federal law. Officers are liable for
circumstances. The losses caused by contraventions of
termination/external management the Act.
must be conducted in accordance
with the Act, rather than any other
state or federal law. Officers are
liable for losses caused by
contraventions of the Act.
Notices and Remedies for non-compliance
The new law substantively mirrors The Council can issue the insurer a
the current law. APRA can issue the notice to remedy a contravention of
insurer a notice to remedy a the Act. Directors are liable for losses
contravention of the Act. Directors caused by a failure to remedy a
are liable for losses caused by a contravention.
failure to remedy a contravention.
30
Health benefits funds
Detailed explanation of new law
Division 1 - Introduction
Simplified outline of this Part
4.5 A private health insurer must have at least one health benefits
fund. Part 4-4 of the PHI Act defines the concept of a health benefits fund
as well as other key concepts related to health benefits funds. [Part 3,
Division 2, section 22]
4.6 There are regimes governing:
• how health benefits funds are operated; and
• changing the health benefits fund to which a policy of
insurance is referable; and
• terminating health benefits funds; and
• external management of health benefits funds. [Part 3,
Division 2, section 22]
4.7 APRA may require private health insurers to remedy
contraventions of this Part. [Part 3, Division 2, section 22]
Division 2 - The requirement to have health benefits funds
Private health insurers must have health benefits funds
4.8 A private health insurer is required to have at least one health
benefits fund at all times, in respect of:
• its health insurance business; or
• its health insurance business and some or all of its
health-related businesses. [Part 3, Division 2, subsection 23(1)]
4.9 Section 4 defines health benefit fund, health insurance business
and health-related business as having the same meaning as in the PHI Act.
4.10 A private health insurer may have multiple health benefits funds,
but no more than one in respect of a risk equalisation jurisdiction, subject
to certain exceptions. [Part 3, Division 2, subsection 23(2)]
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Private Health Insurance (Prudential Supervision) Bill 2015
4.11 Section 4 provides that 'risk equalisation jurisdiction' has the
meaning in the PHI Act. Section 131-20 of the PHI Act, as inserted by
item 45 of Part 1 of Schedule 1 to the Consequential Amendments and
Transitional Provisions Bill, provides that an area is a risk equalisation
jurisdiction if the Private Health Insurance (Health Benefits Fund Policy)
Rules so provide. Those rules will continue to be made by the Health
Minister under the PHI Act.
4.12 An exception to subsection 23(2) is provided if each fund in a
risk equalisation jurisdiction (or each fund other than a single fund
established through a restructure under Division 4) is a fund that existed
on 1 April 2007 and was conducted by a registered organisation under the
National Health Act 1953. This exception grandfathers certain
pre-PHI Act arrangements, including where there has been a subsequent
restructure under Division 4. [Part 3, Division 2, subsection 23(3)]
4.13 Additional exceptions to subsection 23(2) may be specified in
the Private Health Insurance (Health Benefits Fund Policy) Rules. [Part 3,
Division 2, subsection 23(4)]
Notifying APRA when health benefits funds are established
4.14 A private health insurer establishing a health benefits fund must
notify APRA, in the approved form, of the date of the establishment of the
fund and anything else specified in the APRA rules, unless the fund is
established under Division 4. [Part 3, Division 2, section 24]
Inclusion of health-related businesses in health benefits funds
4.15 If a private health insurer has a health benefits fund for its health
insurance business and health-related business, the dominant purpose of
the fund must relate to the health insurance business. [Part 3, Division 2,
subsection 25(1)]
4.16 If APRA is satisfied that an insurer is contravening
subsection 25(1), APRA may direct the insurer to divest the fund of
health-related business to the extent that APRA considers necessary to
ensure compliance with the subsection. [Part 3, Division 2, subsection 25(2)]
4.17 APRA may also vary or revoke such a direction. A revoked
direction will cease to have any effect. [Part 3, Division 2,
subsections 25(3) and (4)]
32
Health benefits funds
4.18 Sections 98 (power to comply with a direction), 101 (direction
not a ground for denying an obligation), 102 (supply of information about
directions) and 103 (secrecy requirements) apply to directions given under
subsection 25(2). [Part 3, Division 2, subsection 25(5)]
Division 3 - The operation of health benefits funds
Assets of health benefit funds to be kept separate from other assets
4.19 A private health insurer must keep the assets of a health benefits
fund distinct and separate from the assets of other health benefits funds
and other assets of the insurer, and maintain a separate authorised
deposit-taking institution (ADI) account for each health benefits fund.
[Part 3, Division 3, subsections 26(1) and (2)]
What are the assets of a health benefits fund
4.20 The assets of a health benefits fund are:
• the balance of money credited to the fund under section 27
(payments to health benefits funds);
• assets of the insurer obtained as a result of the expenditure or
application of money credited to the fund;
• investments held by the insurer as a result of the expenditure
or application of money credited to the fund; and
• other money, assets or investments of the insurer transferred
to the fund. [Part 3, Division 3, subsection 26(3)]
4.21 Assets or investments obtained by the application of assets of a
fund are themselves assets of the fund. [Part 3, Division 3, subsection 26(4)]
4.22 The definition of assets of a health benefits fund includes assets
that are transferred into, and excludes assets transferred out of, the fund as
the result of a restructure or arrangement approved under Division 4.
[Part 3, Division 3, subsection 26(5)]
4.23 Assets or investments obtained by the expenditure or application
of assets of the fund are not assets of the fund if the insurer conducting the
fund is registered as a for profit insurer and the expenditure or application
was not done for the purposes of the fund. This allows for profit insurers
to draw money from the fund for other purposes, such as investment
elsewhere or return to shareholders (subject to other relevant provisions,
including prudential standards). [Part 3, Division 3, subsection 26(6)]
33
Private Health Insurance (Prudential Supervision) Bill 2015
The Bill does not have effect of making insurer etc. a trustee of assets of
a health benefits fund
4.24 For the avoidance of doubt, it is clarified that nothing in the
Prudential Supervision Bill is intended to make an insurer or its directors a
trustee or trustees of the assets of a health benefits fund of the insurer.
[Part 3, Division 3, subsection 26(7)]
Payments to health benefits funds
4.25 A private health insurer is required to credit to a health benefits
fund particular amounts, including premiums payable under policies
referable to the fund and income from investments of the assets of the
fund. [Part 3, Division 3, subsection 27(1)]
4.26 A private health insurer may make a capital payment to a health
benefits fund, being an amount that is not required, under
subsection 27(1), to be paid to the fund. Assets of another health benefits
fund cannot be credited to a fund without APRA's written approval.
Approvals under section 27 are only ever given on a case by case basis
and standing approvals are not given. Therefore, an approval would not be
a legislative instrument on general principles. The statement that an
approval is not a legislative instrument in subsection 27(4) therefore does
not constitute a substantive exemption from the definition of a legislative
instrument in the Legislative Instruments Act, but is a statement of the
'status quo'. A refusal to approve the crediting of an amount to a fund is a
reviewable decision under section 168. [Part 3, Division 3, subsections 27(2), (3)
and (4)]
Expenditure and application of health benefits funds
4.27 A private health insurer must not apply or deal with the assets of
a health benefits fund except in accordance with Division 3.
Subsection 28(2) provides that the assets of a fund must not be applied for
a purpose other than:
• meeting liabilities or expenses incurred for the purpose of the
business of the fund; or
• making investments under section 30 (which relates to the
investment of health benefits funds); or
• a distribution when a fund is terminated under Division 5; or
• a purpose specified in the APRA rules. [Part 3, Division 3,
subsections 28(1) and 2)]
34
Health benefits funds
4.28 An insurer is prohibited from mortgaging or charging the assets
of a fund except to secure an overdraft from an ADI or for purposes
specified in the APRA rules. [Part 3, Division 3, subsection 28(3)]
4.29 An insurer is prohibited from borrowing money for the business
of a fund except in accordance with the APRA rules. [Part 3, Division 3,
subsection 28(4)]
4.30 Subsection 28(2), which imposes limits on the application of
assets of a health benefits fund, does not apply to an insurer registered as a
for profit insurer, which may apply the assets of a fund for any purpose
not inconsistent with prudential standards or a direction under section 96.
[Part 3, Division 3, subsection 28(5)]
4.31 Section 28 does not apply to the transfer of assets from one
health benefits fund to another under Division 4 or a divestiture of assets
directed by APRA under subsection 25(2). [Part 3, Division 3, subsection 28(6)]
Effect of non-compliance with section 28
General principle
4.32 There is a general principle that a transaction entered into in
contravention of section 28 is of no effect unless either:
• the Federal Court has made an order under subsection 29(2);
or
• it is included in a class of transactions specified in the APRA
rules (subject to any court orders under subsection 29(6) -
see below). [Part 3, Division 3, subsection 29(1)]
Order declaring the transaction to be effective
4.33 The Federal Court, on application by a party to the transaction,
may make an order declaring the transaction to be effective, provided the
Federal Court is satisfied that the applicant entered into the transaction in
good faith and without knowledge of the contravention. [Part 3, Division 3,
subsections 29(2) and (3)]
4.34 The Federal Court in deciding on an application may have
regard to any hardship that would be caused to the applicant if the order
was not made, and may have regard to other matters. [Part 3, Division 3,
subsections 29(4) and (5)]
Order declaring the transaction to be of no effect
4.35 The Federal Court, on application by APRA, may declare that a
transaction that contravened section 28 but was included in APRA rules
35
Private Health Insurance (Prudential Supervision) Bill 2015
made under paragraph 29(1)(b) is of no effect. [Part 3, Division 3,
subsection 29(6)]
4.36 The Federal Court may not make an order under
subsection 29(6) if it is satisfied that the effect of the order would be to
cause hardship to a person who entered into the transaction in good faith
and without knowledge of the contravention. [Part 3, Division 3,
subsection 29(7)]
Investment of health benefits funds
4.37 A private health insurer is allowed to invest assets of a health
benefits fund in any way likely to further the business of the fund.
However, nothing in the Prudential Supervision Bill authorises a private
health insurer to make an investment it would otherwise be prohibited
from making or would not have the power to make. An insurer must not
make or retain an investment prohibited by APRA rules. [Part 3, Division 3,
subsections 30(1) and (2)]
4.38 A transaction is not ineffective merely because it contravenes
paragraph 30(2)(c) (relating to investments prohibited by the APRA
rules). [Part 3, Division 3, subsection 30(3)]
Division 4 - Restructure, merger and acquisition of health benefits funds
Restriction on restructure, merger, acquisition or termination of health
benefits funds
4.39 A private health insurer must not change the health benefits fund
to which a policy is referable except under Division 4. Division 4 governs
the restructure of funds (transferring policies between health benefits
funds of the one insurer) and merger or acquisition of funds (transferring
groups of policies between two or more insurers). [Part 3, Division 3,
subsection 31(1)]
When an insurer may restructure its health benefits funds
4.40 A private health insurer is allowed to restructure its health
benefits funds so that insurance policies that are referable to a health
benefits fund (a transferring fund) become referable to one or more other
health benefits funds (receiving funds) of the insurer (whether existing or
proposed) if:
• the effect of a restructure is that all insurance policies relating
to one or more policy groups (groups comprising policy
holders from the same risk equalisation jurisdiction) of the
transferring health benefits fund become referable to the
receiving fund(s);
36
Health benefits funds
• the insurer applies in writing, in the approved form, to APRA
for approval;
• APRA approves the restructure in writing; and
• the insurer complies with any requirements imposed in the
APRA rules in relation to the restructure. [Part 3, Division 4,
subsection 32(1)]
How APRA decides whether to approve the restructure
4.41 APRA must approve the restructure if it is satisfied:
• that the proposed division of assets and liabilities between
the transferring and receiving funds is a reasonable estimate
of the net asset position of the transferring fund ('net asset
position' is defined in section 4, subject to a modification
described below that applies where not all policy groups are
transferred); and
• the assets and liabilities would be fairly distributed amongst
those funds if there is more than one receiving fund; and
• the restructure will not result in a breach of prudential
standards. [Part 3, Division 4, subsection 32(2)]
4.42 In working out the net asset position of the transferring fund, it
will be necessary to disregard the net asset position of the transferring
fund to the extent that it relates to insurance policies that do not belong to
a policy group(s) being transferred. [Part 3, Division 4, subsection 32(3)]
4.43 However, APRA cannot approve the restructure if it considers
that it would result in unfairness to either the policy holders of a fund
existing before the restructure or a fund as it would exist after the
restructure, or if the insurer is being wound up when the application is
made. An approval is not a legislative instrument as it would only be
given on a case by case basis, therefore the statement in subsection 32(6)
does not constitute a substantive exemption, but is a statement of the
'status quo'. A refusal to approve a restructure is reviewable under
section 168. [Part 3, Division 4, subsections 32(4) and (6)]
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Private Health Insurance (Prudential Supervision) Bill 2015
APRA rules may provide for various matters
4.44 APRA rules may provide for:
• criteria for approving or refusing to approve applications
under subsection 32(1);
• calculating reasonable estimates of the net asset position
referred to in paragraph 32(2)(a);
• criteria for deciding whether assets and liabilities would be
fairly distributed for the purposes of paragraph 32(2)(b);
• requirements to notify people of the outcomes of
applications;
• a number of administrative matters connected with how the
restructure is to proceed; and
• requirements for insurers to provide information to APRA
following restructures. [Part 3, Division 4, subsection 32(5)]
Definitions
4.45 A policy group is defined as all the insurance policies that are
referable to the fund and whose policy holders have addresses located in
the same risk equalisation jurisdiction. APRA rules may provide for a
definition where policy holders' addresses are not in the same risk
equalisation jurisdiction. [Part 3, Division 4, subsection 32(7)]
Merger and acquisition of health benefits funds
When an arrangement may be entered into
4.46 A private health insurer (the transferee insurer) may enter into
an agreement with one or more other private health insurers (transferor
insurers) under which all the insurance policies referable to a health
benefits fund, or referable to one or more policy groups of a fund, of the
transferor insurer, are transferred to one or more transferee insurers.
[Part 3, Division 4, subsection 33(1)]
4.47 A transfer under subsection 33(1) cannot take place without:
• the insurers jointly applying, in the approved form, to APRA
for approval;
• APRA's written approval; and
38
Health benefits funds
• the insurers complying with any relevant requirements in
APRA rules. [Part 3, Division 4, subsection 33(2)]
How APRA decides whether to approve the arrangement
4.48 APRA must approve the transfer if it is satisfied that:
• the allocation of assets and liabilities to any new health
benefits fund is a reasonable estimate of the net asset position
of the fund (or funds) (again, the concept of the net asset
position is modified when not all policy groups are being
transferred - see below);
• if there would be multiple receiving funds, that the
distribution of assets and liabilities would be fairly
distributed between those funds;
• if all the insurance policies that are referable to the
transferring fund are transferred, the net asset position of the
transferring fund after the arrangement takes effect will not
be greater than zero; and
• the transfer will not result in a breach of a prudential
standard. [Part 3, Division 4, subsection 33(3)]
4.49 A refusal to approve a transfer is reviewable under section 168.
It is not a legislative instrument, as decisions are made on a case by case
basis. Therefore the statement in section 33(8) is not a substantive
exemption from the Legislative Instruments Act, but a statement of the
'status quo'.
4.50 In working out the net assets position of the transferring fund, it
will be necessary to disregard the net asset position of the transferring
fund to the extent that it relates to insurance policies that do not belong to
a policy group transferred to the receiving fund(s). [Part 3, Division 4,
subsection 33(4)]
APRA rules may provide for various matters
4.51 APRA rules may provide for:
• criteria for approving or refusing to approve applications
under subsection 33(2);
• calculating reasonable estimates referred to in
paragraph 33(3)(a);
39
Private Health Insurance (Prudential Supervision) Bill 2015
• criteria for deciding whether assets and liabilities would be
fairly distributed for the purposes of paragraph 33(3)(b);
• requirements to notify people of the outcomes of
applications;
• a number of administrative matters connected with the
arrangement;
• requirements for insurers to provide information to APRA
following transfers. [Part 3, Division 4, subsection 33(5)]
Notice to be given if arrangement takes effect
4.52 The transferee insurer must notify APRA within 28 days after
the transfer takes place, in a notice complying with any relevant
requirements in the APRA rules. [Part 3, Division 4, subsection 33(6)]
Effect of arrangement
4.53 If an insurance policy becomes referable to a fund conducted by
an insurer other than the insurer that issued the policy as a result of a
merger or acquisition, it is treated, after the arrangement takes effect, as if
the policy were issued by the transferee insurer, for both the purposes of
the Prudential Supervision Bill and the PHI Act. [Part 3, Division 4,
subsection 33(7)]
Consent of policy holders not required
4.54 The consent of policy holders to a restructure under section 32
or an arrangement under section 33 is not required unless the insurer's
constitution requires it. [Part 3, Division 4, section 34]
Division 5 - Termination of health benefits funds
Subdivision A - Approving the termination of health benefits funds
Applying for termination
4.55 A private health insurer may to apply to APRA in the approved
form for approval of the termination of each of its health benefits funds.
Terminations may also occur under Federal Court orders as set out in
Division 7. [Part 3, Division 5, Subdivision A, section 35]
40
Health benefits funds
Requiring further information
4.56 APRA may seek further information from the applicant within
28 days of receiving the application under section 35. [Part 3, Division 5,
Subdivision A, section 36]
Deciding the application
4.57 APRA must approve the termination if it is satisfied that the
insurer is not being wound up, each of its health benefits funds complies
with all applicable prudential standards relating to capital adequacy or
solvency that apply in relation to the fund, the termination will not result
in unfairness to the policy holders of the fund or funds, and APRA is
satisfied as to any matters specified in the APRA rules. [Part 3, Division 5,
Subdivision A, subsection 37(1)]
4.58 If APRA grants the application it must do so in writing. It may
also appoint a person other than the insurer as the terminating manager of
the funds, and if it does must also notify the insurer of the person
appointed. Approvals are only ever given on a case by case basis and
standing approvals are not given. An approval would therefore not be a
legislative instrument on general principles. Therefore the statement in
subsection 37(4) is not an exemption from the Legislative Instruments
Act, but is a statement of the 'status quo'. [Part 3, Division 5, Subdivision A,
subsections 37(2) and (4)]
4.59 APRA must notify the applicant in writing if it refuses the
application. [Part 3, Division 5, Subdivision A, subsection 37(3)]
4.60 A refusal to approve a termination is reviewable under
section 168.
APRA can be taken to refuse application
4.61 APRA is taken to have refused the application for the purposes
of section 168 if it does not notify the applicant of its decision within
90 days of the application, or within 90 days after receiving additional
information sought under section 36 (whichever is the later). [Part 3,
Division 5, Subdivision A, section 38]
Subdivision B - Conducting the termination of health benefits funds
The basis of the law relating to termination
4.62 Despite the provisions of any other law of the Commonwealth or
a State or Territory a health benefits fund can only be wound up or
terminated in accordance with Part 3. [Part 3, Division 5, Subdivision B,
section 39]
41
Private Health Insurance (Prudential Supervision) Bill 2015
Conduct of funds during termination process
4.63 After being notified that termination of its health benefits funds
has been approved, an insurer is prohibited from:
• entering into an insurance policy with a person who it is not
already insuring; or
• in the case of a for profit insurer, applying assets of the fund
other than under subsection 28(2), unless this prohibition
does not apply because of section 45 (distribution of assets
remaining after termination is completed); or
• changing its registration status from not for profit to for
profit. [Part 3, Division 5, Subdivision B, subsection 40(1)]
4.64 This prevents insurers from accepting new business or drawing
money from the health benefits fund other than for meeting liabilities or
expenses incurred for the purpose of the business of the health benefits
fund or making investments under section 30.
4.65 Within 60 days of being notified that termination has been
approved, an insurer must provide written notice of the termination day
(after which it will not renew policies) to each policy holder of its funds
and to APRA and notify the termination day in a national newspaper or
newspaper circulating where the insurer carries on business. The
termination day must be at least 90 days after any notice required in this
subsection. [Part 3, Division 5, Subdivision B, subsection 40(2)]
4.66 The insurer is prohibited from renewing any insurance policies
after the termination day. [Part 3, Division 5, Subdivision B, subsection 40(3)]
4.67 The insurer must accept any valid claim for benefits made up to
12 months after the expiry of the last policy referable to any of the funds
being terminated. [Part 3, Division 5, Subdivision B, subsection 40(4)]
Insurers etc. to give reports to APRA
4.68 The terminating manager or the insurer (if there is no
terminating manager) must report to APRA within 28 days after the
termination day setting out details of the assets and liabilities of the funds
on that day. [Part 3, Division 5, Subdivision B, section 41]
42
Health benefits funds
Terminating managers displace management of funds
4.69 If a terminating manager has been appointed to a health benefits
fund, management of the fund vests in the terminating manager for so
long as the appointment is in force or until the termination is completed,
and any officer of the insurer responsible for the management of the fund
before the terminating manager was appointed is divested of that
management. [Part 3, Division 5, Subdivision B, section 42]
Subdivision C - Ending the termination of health benefits funds
Power to end termination
4.70 During the termination of the health benefits funds of a private
health insurer, APRA or the terminating manager may apply to the
Federal Court for an order ending the termination. [Part 3, Division 5,
Subdivision C, subsections 43(1) and (2)]
4.71 The Federal Court, before making an order, may direct the
terminating manager or private health insurer (if there is no terminating
manager) to provide a report on a relevant fact or matter. [Part 3, Division 5,
Subdivision C, subsection 43(3)]
4.72 The Federal Court in making an order ending the termination
may give directions for the resumption of the management and control of
the health benefits funds by the insurer. [Part 3, Division 5, Subdivision C,
subsection 43(4)]
Subdivision D - Completing the termination of health benefits funds
Completion of the termination process
4.73 The termination of the health benefits funds of a private health
insurer is complete if 12 months have passed since the expiry of the last
policy referable to any of the funds being terminated and so far as possible
having regard to the assets of the funds:
• liabilities to policy holders have been discharged;
• any amounts of collapsed insurer assistance payments that
APRA has paid to the insurer or the terminating manager
have been repaid; and
• any other liabilities of the funds have been discharged. [Part 3,
Division 5, Subdivision D, section 44]
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Private Health Insurance (Prudential Supervision) Bill 2015
Distribution of remaining assets after completion of the termination
process
4.74 If there are any residual assets of the funds after the termination
process is completed, then:
• a for profit insurer may apply the assets other than for the
purposes of the fund (paragraph 40(1)(b) ceases to apply);
and
• a not for profit insurer is liable to pay APRA an amount
equal to the assets. This amount would then be credited to the
Risk Equalisation Special Account under section 318-5 of the
PHI Act, as amended, and returned to private health
insurance industry members through adjustments to risk
equalisation payments. [Part 3, Division 5, Subdivision D,
section 45]
Liability of officers of insurers for loss to terminated funds
4.75 If an insurer contravenes the Prudential Supervision Bill in
relation to a health benefits fund that it conducts in a way that results in a
loss to the fund and the termination of the fund is completed, then the
persons who were officers of the insurer when the contravention occurred
are jointly and severally liable to pay to APRA (for payment to the Risk
Equalisation Trust Fund) an amount equal to the loss. [Part 3, Division 5,
Subdivision D, subsection 46(1)]
4.76 A person is not liable under subsection 46(1) if he or she can
prove that he or she exercised due diligence to prevent the contravention.
A separate exoneration provision, in section 166 will also apply. [Part 3,
Division 5, Subdivision D, subsection 46(2)]
4.77 The Federal Court may, on application by APRA, order any
person liable under subsection 46(1) to pay to APRA (for payment to the
Risk Equalisation Trust Fund) the whole or any part of the loss. [Part 3,
Division 5, Subdivision D, subsection 46(3)]
Report of terminating manager
4.78 A terminating manager may make a written report to APRA at
any time and must make such a report as soon as practicable after the
termination of the funds. [Part 3, Division 5, Subdivision D, subsection 47(1)]
4.79 The manager may recommend, in their final report that an
application be made under section 48 for the winding up of the insurer.
[Part 3, Division 5, Subdivision D, subsection 47(2)]
44
Health benefits funds
Applying for winding up
4.80 If a terminating manager's report recommends the winding up of
an insurer, APRA or the terminating manager (if directed by APRA) may
apply to the Federal Court for an order that a private health insurer be
wound up. [Part 3, Division 5, Subdivision D, subsections 48(1) and (2)]
4.81 The Federal Court may make such an order if it is satisfied that
this would be in the financial interests of the policy holders of the health
benefits funds. [Part 3, Division 5, Subdivision D, subsection 48(3)]
4.82 The winding up is to be conducted in accordance with the
Corporations Act. [Part 3, Division 5, Subdivision D, subsection 48(4)]
Division 6 - External management of health benefits funds
Subdivision A - Preliminary
Purpose of Division
4.83 The purpose of the Division is to permit a health benefits fund
under external management to be managed so as to maximise the chances
that the policy holders of the fund continue to be covered by that fund or
another fund to which the business is transferred, and if that is not
possible, safeguard the financial interests of the policy holders of the fund
if the fund is terminated. [Part 3, Division 6, Subdivision A, section 49]
4.84 This Division, and the other provisions in the Prudential
Supervision Bill relating to external management and terminating
management (flowing from external management) of health benefits
funds, are based on provisions currently in Divisions 217, 220 and Part
6.5 of the PHI Act.
4.85 The Prudential Supervision Bill does not alter the essential
structure of these provisions, which provide for an external management
and terminating management of health benefits funds (rather than of the
entire private health insurer) and apply certain provisions of Part 5.3A of
the Corporations Act by reference, with modifications to external
management of health benefits funds.
4.86 However the Prudential Supervision Bill arranges the provisions
to set them out in consecutive divisions (Divisions 6, 7 and 8 of Part 3).
There have been some changes to clarify the relationship between an
external manager or terminating manager of a health benefits fund and
other external administrators of a private health insurer, for example, a
liquidator. The guiding principle is that external management and
terminating management of a health benefits fund should proceed
45
Private Health Insurance (Prudential Supervision) Bill 2015
independently of any other external administration that may be occurring
in relation to the business of a private health insurer outside its health
benefits funds. There have also been amendments to clarify the way in
which the provisions governing terminating management in Division 5
(previously Division 149 of the PHI Act) may apply in relation to a
court-ordered termination under Division 7 (previously Division 220 of
the PHI Act).
The basis of the law relating to external management
4.87 The external management of a health benefits fund is regulated
by Division 6 and by various provisions in the Corporations Act applying
subject to modifications set out in the Prudential Supervision Bill or
APRA rules. [Part 3, Division 6, Subdivision A, subsections 50(1), (4) and (5)]
4.88 The ability of APRA rules, under subparagraph 50(1)(b)(ii) of
the Prudential Supervision Bill, to modify the provisions of the
Corporations Act listed in paragraph 50(1)(b) is consistent with the ability
of the Minister to modify these provisions under
subparagraph 217-5(1)(b)(ii) of the PHI Act. This ability provides
flexibility to the external management regime by allowing APRA to
modify the Corporations Act provisions listed in paragraph 50(1)(b) as
these provisions change or as external management practices change. It is
proposed that APRA's initial rules will replicate the existing PHI Act
subparagraph 217-5(1)(b)(ii) rules, with some updating to cater for where
the Corporations Act provisions were amended after the making of the
current rules under subparagraph 217-5(1)(b)(ii).
4.89 A health benefits fund cannot be placed under external
administration (which will be defined broadly in section 4 to include a
range of different forms of external administration, including control by a
liquidator or voluntary administrator under the Corporations Act) except
in accordance with Part 3 of the Prudential Supervision Bill. [Part 3, Division
6, Subdivision A, subsections 50(2) and (3)]
4.90 A provision of the Corporations Act listed in subsection 50(1)
applies to the external management of a fund as if:
• a reference to the company were a reference to the fund;
• a reference to the administrator was a reference to the
external manager appointed under the Prudential Supervision
Bill; and
• a reference to the Court were a reference to the Federal
Court. [Part 3, Division 6, Subdivision A, subsection 50(4)]
46
Health benefits funds
Subdivision B - Appointment of external managers
APRA may appoint external managers
4.91 APRA may appoint in writing an external manager to a health
benefits fund if the grounds specified in subsections 52(1) and (2) are
satisfied. [Part 3, Division 6, Subdivision B, subsection 51(1)]
4.92 The person appointed must be an official liquidator under the
Corporations Act and must not be a person related to the fund (for
example, they cannot be a policy holder, auditor or actuary in relation to
the fund). The appointment takes effect from the date specified in the
appointment. [Part 3, Division 6, Subdivision B, subsections 51(2) and (3)]
Preconditions for appointment of external managers
4.93 APRA must not appoint an external manager to a health benefits
fund unless APRA believes it is in the interests of the policy holders of the
fund. [Part 3, Division 6, Subdivision B, subsection 52(1)]
4.94 In addition, APRA must not appoint an external manager to a
health benefits fund unless:
• APRA is satisfied that the private health insurer has
contravened, in relation to the relevant health benefits fund:
- a prudential standard relating to capital adequacy or
solvency; or
- a direction under section 96; or
• a request for external management of the fund is made to
APRA by a resolution of the directors of the insurer; or
• a ground specified in APRA rules applies in respect of the
fund. [Part 3, Division 6, Subdivision B, subsection 52(2)]
External managers to displace management of funds
4.95 If an external manager has been appointed to a fund,
management of the fund vests in the external manager for so long as the
appointment is in force, and any officer of the insurer responsible for the
management of the fund before the external manager was appointed, is
divested of that management. [Part 3, Division 6, Subdivision B, section 53]
47
Private Health Insurance (Prudential Supervision) Bill 2015
Subdivision C - Duties and powers of external managers
Duties of external managers
4.96 The main duties of an external manager of a health benefits fund
are:
• to examine the business, affairs and property of the fund and
ascertain its assets and liabilities;
• to apportion the assets and liabilities between the fund and
the other business (if the business of the fund has been mixed
with other business);
• to form an opinion as to which course of action maximises
the chance that the policy holders of the fund continue to be
covered by that fund or another fund to which the business is
transferred; and
• make a final report to APRA recommending that course of
action. [Part 3, Division 6, Subdivision C, subsection 54(1)]
4.97 The external manager is required to manage the day-to-day
administration of the fund as efficiently and economically as possible.
[Part 3, Division 6, Subdivision C, subsection 54(2)]
Additional powers of external managers
4.98 The additional powers of an external manager under the
provisions of Division 8 of Part 5.3A of Chapter 5 of the Corporations Act
(conferred under section 50), do not include the power to remove or
appoint directors of the private health insurer and execute a document,
bring or defend proceedings, or do anything else, in an insurer's name.
This is in part to avoid the application of inapplicable powers or
provisions and in part to avoid duplication as section 70 in Division 8 of
Part 3 of the Prudential Supervision Bill separately confers certain
powers. Subsection 442D(1) of the Corporations Act also does not apply
to the external manager's powers, meaning that that the external
manager's power prevails over the power of secured parties and receivers.
[Part 3, Division 6, Subdivision C, subsection 55(1)]
4.99 For the purpose of the protection of people dealing with an
external manager under section 442F of the Corporations Act (as it applies
through the operation of section 50 of the Prudential Supervision Bill), the
assumptions contained in sections 128 and 129 of the Corporations Act
are taken to apply, subject to any modifications in the APRA rules. What
this means in practice is that a person dealing with an external manager is
entitled to believe that the external manager has been duly appointed and
48
Health benefits funds
is acting within his or her powers and functions and complying with the
Prudential Supervision Bill, unless the person dealing with the external
manager knows or suspects that this is not in fact the case. The ability to
modify the application of sections 128 and 129 allows APRA to
appropriately tailor the operation of these provisions to the private health
insurance context. [Part 3, Division 6, Subdivision C, subsection 55(2)]
Protection of property during external management
4.100 The provisions of Division 6 of Part 5.3A of Chapter 5 of the
Corporations Act (conferred under section 50) relating to the protection of
property during external management, are not taken to include
section 440A. Section 440A provides that a company under Part 5.3A
administration (which translates for present purposes as a fund under
external management) cannot be wound up voluntarily and any
proceedings for the winding up of the company or the appointment of a
provisional liquidator are to be adjourned, although the court has
discretion to allow those proceedings to continue. [Part 3, Division 6,
Subdivision C, subsection 56(1)]
4.101 The fact that section 440A is not applied does not mean that it is
intended that a health benefits fund can be wound up by a liquidator when
under external management. To the contrary, the intention is that an
external management of a health benefits fund be isolated and protected
from any winding up of the company and occur independently of the
winding up. This intention is effected by other provisions in the
Prudential Supervision Bill, including subsections 50(2) and (3).
Accordingly, it is unnecessary for the relationship between external
management and winding up to be regulated by applied section 440A of
the Corporations Act. [Part 3, Division 6, Subdivision C, subsection 56(1)]
4.102 Applied section 440D of the Corporations Act provides for a
stay of any court proceedings against a company (which translates as the
'fund') in relation to any of its property without the administrator's
(external manager's) written consent or the leave of the Federal Court.
Where an external manager or the Federal Court is considering (under
applied section 440D of the Corporations Act) whether or not to allow a
legal proceeding to continue while the fund is under external
management, the external manager or the Federal Court must consider
whether the action in question does, or does not, relate to the property of
the fund and whether such proceedings would be materially detrimental to
the interests of policy holders of the fund. [Part 3, Division 6, Subdivision C,
subsection 56(2)]
49
Private Health Insurance (Prudential Supervision) Bill 2015
Rights of chargee, owner or lessor of property of fund under external
management
4.103 The provisions of Division 7 of Part 5.3A of Chapter 5 of the
Corporations Act (conferred under section 50) relating to the rights of
chargees, owners or lessors of the property of a fund during external
management, do not include section 441A and selected words in
subsection 441D(1) in the applied Division. Section 441A relates to
situations where there is a charge over all, or substantially all, of the
property of a company or there are two or more charges. [Part 3, Division 6,
Subdivision C, subsection 57(1)]
4.104 It allows a secured creditor or receiver or controller acting for a
secured creditor to enforce a security interest in certain circumstances,
despite other provisions of Part 5.3A of the Corporations Act. The effect
of not applying section 441A in relation to an external administration of a
health benefits fund will be to protect the assets of a health benefits fund
from potential action by secured creditors, while the external management
is in force. The modification to section 441D is consequential upon the
'disapplication' of section 441A. It should be noted that, under
subsection 28(3) of the Prudential Supervision Bill, it will continue to
only be possible to give charges over fund assets in very limited
circumstances. [Part 3, Division 6, Subdivision C, subsection 57(1)]
4.105 Nothing in the applied Division 7 prevents the external manager
or the Federal Court from agreeing to the enforcement of a charge if
satisfied that the charge does not relate to the property of the fund and
enforcement of the charge would not be materially detrimental to the
interests of the policy holders of the fund. [Part 3, Division 6, Subdivision C,
subsection 57(2)]
Subdivision D - Procedure relating to voluntary deeds of arrangement
Matters that may be included in the APRA rules
4.106 The APRA rules may provide for:
• the external managers of health benefits funds to convene
meetings of creditors and policy holders of funds to consider
the possibility of the responsible insurers for those funds
executing voluntary deeds of arrangement;
• the details of how the meetings are to be convened or
conducted, and the matters that may be decided;
• the kind of recommendations that made be made to APRA by
the external manager; and
50
Health benefits funds
• the actions APRA may take in response to such
recommendations. [Part 3, Division 6, Subdivision D,
subsection 58(1)]
4.107 It is expected that, initially, the APRA rules for the purpose of
this Division will be in substantially the same form as those currently in
force for the purposes of the external management provisions in the
PHI Act.
4.108 This section does not limit the scope of the APRA rules for the
purposes of other provisions in this Part. [Part 3, Division 6, Subdivision D,
subsection 58(2)]
Subdivision E - External managers' reports to APRA
External managers to give reports to APRA
4.109 An external manager must, as soon as practicable but in any
event within three months or such longer time as APRA determines in
writing, conclude the examination of the health benefits fund and make a
final written report to APRA. [Part 3, Division 6, Subdivision E, subsections 59(1)
and (2)]
4.110 The external manager in the report to APRA is required to
recommend a course of action that maximises the chance that the policy
holders of the fund continue to be covered by that fund or another fund to
which the business is transferred, and set out the reasons for that
recommendation. [Part 3, Division 6, Subdivision E, subsection 59(3)]
4.111 Without limiting the courses of action he or she may
recommend, an external manager may recommend that:
• subject to a Federal Court order, that the responsible insurer
for the fund implement a scheme of arrangement concerning
the business of the fund; or
• subject to a Federal Court order, that a terminating manager
be appointed to the funds of the insurer; or
• that the external management cease and the business of the
fund be resumed by responsible insurer. [Part 3, Division 6,
Subdivision E, subsection 59(4)]
4.112 The external manager must recommend that APRA approve the
execution of a voluntary deed of arrangement if APRA rules so provide.
[Part 3, Division 6, Subdivision E, subsection 59(5)]
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Private Health Insurance (Prudential Supervision) Bill 2015
4.113 Without limiting what a scheme or arrangement ordered by the
Federal Court may provide for, the scheme may provide for:
• the continuation of the business of the fund on terms set out
in the scheme; or
• the transfer of the business of the fund on terms set out in the
scheme to another private health insurer; or
• execution of a deed in the same form as a voluntary deed of
arrangement rejected at any meeting of creditors and policy
holders under section 58. [Part 3, Division 6, Subdivision E,
subsection 59(6)]
Dealing with reports given to APRA
Deciding what to do in relation to a recommendation
4.114 In deciding whether or not to approve a course of action
recommended in a report under subsection 59(3), APRA may seek further
information from the external manager and engage any person to assist it
in evaluating the assessments and projections relied upon in the report. In
reaching a decision APRA must have regard to the external manager's
report and any additional information provided by the external manager or
by any person engaged to assist APRA. [Part 3, Division 6, Subdivision E,
subsection 60(1)]
APRA to inform manager if satisfied with a recommended course of
action
4.115 If APRA is satisfied that a course of action recommended by the
external manager will be in the interests of the policy holders of the health
benefits fund, APRA must by written notice inform the external manager
to that effect. If the recommended course of action is the external
management cease, the external management ends when notice is given
under subsection 60(2) (see paragraph 62(2)(c)). [Part 3, Division 6,
Subdivision E, subsection 60(2)]
Additional steps to be taken by APRA if satisfied with certain kinds of
recommended course of action
4.116 If APRA is satisfied that a scheme of arrangement (as specified
in paragraph 59(4)(a)) is the appropriate course of action (approach the
court for an order implementing a scheme of arrangement), APRA must
direct the external manager to apply under subsection 61(1) to the Federal
Court to give effect to that. If the course of action is termination of the
funds of the private health insurer, APRA must direct the external
manager to apply under subsection 66(1) for a terminating manager's
appointment. [Part 3, Division 6, Subdivision E, subsections 60(3) and (4)]
52
Health benefits funds
4.117 APRA rules may provide for what needs to be done in relation
to the action, if it is not an action specified in subsections 59(4) or (5).
[Part 3, Division 6, Subdivision E, subsection 60(5)]
If APRA is not satisfied with a recommended course of action
4.118 If APRA is not satisfied that a course of action recommended by
the external manager will be in the interests of the policy holders of the
fund, it may take a different course of action that it is satisfied will be in
the interests of the policy holders of the fund. These courses of action
include (but are not limited to) APRA applying to the Federal Court for
orders giving effect to a scheme of arrangement for the business of the
fund or appointing a terminating manager to the health benefits funds of
the responsible insurer. [Part 3, Division 6, Subdivision E, subsections 60(6)
and (7)]
Federal Court orders in respect of schemes of arrangement
4.119 An external manager is required to apply to the Federal Court
for an order giving effect to a scheme of arrangement recommended under
paragraph 59(4)(a) if directed to do so by APRA. [Part 3, Division 6,
Subdivision E, subsection 61(1)]
4.120 On an application by the external manager under
subsection 61(1), or an application by APRA under paragraph 60(7)(a),
for an order giving effect to a scheme of arrangement, APRA and any
other interested person are entitled to be heard, and the Federal Court may
make such orders as it considers will be in the interests of the policy
holders of the health benefits fund concerned. [Part 3, Division 6,
Subdivision E, subsection 61(2)]
Subdivision F - Miscellaneous
When an external management begins and ends
4.121 This clause provides that an external management of a health
benefits fund begins when an external manager is appointed under
section 51 to administer the fund, and ends when either:
• APRA terminates the appointment of the external manager
and does not appoint a replacement; or
• a voluntary deed of arrangement relating to the fund is
executed; or
• APRA notifies the external manager, under subsection 60(2),
that it has accepted the external manager's recommendation,
made under subsection 59(3), that the external management
cease; or
53
Private Health Insurance (Prudential Supervision) Bill 2015
• the Federal Court makes an order under section 61 giving
effect to a scheme of arrangement for the business of the
fund; or
• a terminating manager of the fund is appointed. [Part 3,
Division 6, Subdivision F, section 62]
Effect of things done during external management of health benefits funds
4.122 Anything done in good faith by or with the consent of the
external manager of a health benefits fund is valid and effectual and not
liable to be set aside in a termination of a fund. This applies in addition to
section 80, which relates inter alia to irregularities and defects in the
appointment process. [Part 3, Division 6, Subdivision E, section 63]
Disclaimer of onerous property
4.123 For the purpose of determining the power of an external
manager to disclaim onerous property (certain encumbered or problematic
property that a liquidator can set aside or ignore when assessing assets)
under the provisions of Division 7A of Part 5.6 of Chapter 5 of the
Corporations Act (as applied by section 50), those provisions apply as if
the external manager were the liquidator of the company and references to
the company's creditors were references to the policy holders of a health
benefits fund. [Part 3, Division 6, Subdivision F, subsection 64(1)]
4.124 A disclaimer by an external manager has the same effect and the
external manager is under the same obligations, for the purposes of the
Prudential Supervision Bill, as if the disclaimer had been made under
Division 7A of Part 5.6 of Chapter 5 of the Corporations Act. This means
an external manager is able to set aside certain property whose value is
difficult to realise when managing the insurer's assets and liabilities.
[Part 3, Division 6, Subdivision F, subsection 64(2)]
Application of provisions of Corporations Act
4.125 The application under the Prudential Supervision Bill of sections
in the Corporations Act includes application of relevant regulations and
other instruments made under those sections (unless the contrary intention
appears). [Part 3, Division 6, Subdivision F, subsections 65(1), (2) and (3)]
4.126 APRA rules made under the Prudential Supervision Bill may,
for the purposes of the application of a provision of the Corporations Act,
also modify regulations and other instruments made under the modified
provision of the Corporations Act. [Part 3, Division 6, Subdivision F,
subsection 65(4)]
54
Health benefits funds
4.127 The fact that the Prudential Supervision Bill provides for a
specific modification of a provision in the Corporations Act does not
imply that further modifications to that provision cannot be made by
APRA rules, provided the modifications made by the APRA rules are
consistent with those made by the Prudential Supervision Bill. [Part 3,
Division 6, Subdivision F, subsection 65(5)]
4.128 The definitions and interpretations principles under the
Corporations Act have effect on applied sections (unless the contrary
intention appears). [Part 3, Division 6, Subdivision F, subsection 65(6)]
4.129 Rules made by APRA under the Act may take the place of
regulations and other instruments that could be made under the applied
sections. [Part 3, Division 6, Subdivision F, subsection 65(7)]
Division 7 - Ordering the termination of health benefits funds
Applications by external managers to the Federal Court
4.130 An external manager is required to apply to the Federal Court
for an order appointing a terminating manager, under subsection 60(4), if
directed to do so by APRA. [Part 3, Division 7, subsection 66(1)]
4.131 APRA and any other person likely to be affected by the
termination are entitled to be heard on the application. [Part 3, Division 7,
subsection 66(2)]
Orders made on applications for appointments of terminating managers
4.132 The Federal Court may, on an application by the external
manager under subsection 66(1), or by APRA under paragraph 60(7)(b),
make an order for the appointment of a terminating manager of the health
benefits funds of a private health insurer, and any related orders. The
Federal Court must not make such an order unless it considers the order
will be in the interests of the policy holders of the funds. [Part 3, Division 7,
section 67]
Notice of appointments
4.133 If the Federal Court orders the appointment of a terminating
manager of the health benefits funds of a private health insurer APRA
must notify the insurer in writing of the person appointed. Section 69 of
the Prudential Supervision Bill provides that, subject to any other orders
made by the Court, the provisions relating to terminating management in
Subdivisions B, C and D of Division 5 apply as if APRA had approved
the termination of the health benefits funds, and as if the notice given
under section 68 were a notification under subsection 37(2). This clarifies
55
Private Health Insurance (Prudential Supervision) Bill 2015
the relationship between Division 5 of the Prudential Supervision Bill
(currently Division 149 of the PHI Act) and Division 7 of the Prudential
Supervision Bill (currently Division 220 of the PHI Act), in relation to
which there has been some uncertainty. [Part 3, Division 7, sections 68 and 69]
Division 8 - External managers and terminating managers
Subdivision A - Powers of managers
Powers of managers
4.134 Division 8 of the Prudential Supervision Bill sets out general
provisions that apply to both external managers and terminating managers
and is based on Part 6-5 of the PHI Act. While a health benefits fund is
under external management or terminating management, the external or
terminating manager has power to:
• control, carry on and manage the business, affairs and
property of the fund;
• terminate or dispose of all or any part of the business or
dispose of any property;
• do anything (including executing documents or bringing or
defending proceedings) in the name of the responsible private
health insurer for the purpose of the business of the fund;
• appoint a lawyer or agent; and
• perform any other function or exercise any power that the
insurer or its officers or employees could perform or exercise
if the fund was not under external management or
terminating management. [Part 3, Division 8, Subdivision A,
subsection 70(1)]
4.135 Unless a manager provides written approval, whilst the fund is
under external or terminating management the rights of the insurer or its
officers to exercise the powers above are suspended. This will also be the
case if there is an external administrator of one or more assets of the fund.
[Part 3, Division 8, Subdivision A, subsection 70(2)]
4.136 Nothing in Division 8, or sections 42 and 53, implies that an
officer or employee of the insurer, or an external administrator, is
removed from office. For example an officer or employee may continue to
have functions in relation to business of the insurer that falls outside the
health benefits funds. [Part 3, Division 8, Subdivision A, subsection 70(3)]
56
Health benefits funds
Officers etc. not to perform functions etc. while fund is under management
4.137 If a health benefits fund is under external or terminating
management, an individual (other than the manager) commits an offence
with a penalty of 60 penalty units, or imprisonment for 12 months, or both
if:
• the person performs or exercises, or purports to perform or
exercise, any function or power of an officer of the
responsible insurer for the fund or an external manager of
any assets of the fund; and
• the function or power is a function or power of the manager;
and
• the person does it without the manager's written approval.
[Part 3, Division 8, Subdivision A, section 71]
Managers act as agents of private health insurers
4.138 A manager exercising a power as manager of a health benefits
fund is taken to be acting as the agent of the responsible insurer for the
fund. This section does not allow the insurer to direct the manager in the
exercise of his or her powers. [Part 3, Division 8, Subdivision A, section 72]
Subdivision B - Information concerning, and records and property of,
health benefits funds
Directors etc. to help managers
4.139 Each director of the responsible insurer for a health benefits
fund under external management or terminating management must as
soon as practicable after the management:
• give the manager all records in the director's possession that
relate to the business of the fund; and
• tell the manager of the location of other records known to the
director. [Part 3, Division 8, Subdivision B, subsection 73(1)]
4.140 The above does not apply to the extent that the person is entitled
to retain the records, against the manager and the responsible insurer of
the fund. [Part 3, Division 8, Subdivision B, subsection 73(6)]
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Private Health Insurance (Prudential Supervision) Bill 2015
4.141 The directors and officers of the responsible insurer for a fund
under external management or terminating management must give the
manager a statement about the business, property, affairs and financial
circumstances of the fund. The statement must be made within seven
days (or longer as allowed by the manager) and comply with the
manager's requirements as to form and contents. [Part 3, Division 8,
Subdivision B, subsections 73(2) and (3)]
4.142 A director or officer of the responsible insurer must attend on
the manager and give her or him information about the business, property,
affairs and financial circumstances of the fund as the manager reasonably
requires. [Part 3, Division 8, Subdivision B, subsection 73(4)]
4.143 An individual commits an offence with a penalty of 30 penalty
units if the person does not comply with the requirements of this section.
[Part 3, Division 8, Subdivision B, subsection 73(5)]
Managers' rights to certain records
4.144 A person is not entitled to retain possession of records against
the manager of the fund or enforce a lien on the records (although the lien
otherwise stands). An exception is where a secured creditor is entitled to
retain possession of the records other than by way of a lien. However, the
manager will still be entitled to inspect and make copies of the documents.
The manager is entitled to inspect and copy such records held by a
secured creditor at any reasonable time. [Part 3, Division 8, Subdivision B,
subsections 74(1) and (2)]
4.145 A manager may give a person notice of at least three days to
deliver to the manager specified records that are in the person's
possession. [Part 3, Division 8, Subdivision B, subsections 74(3 ) and (4)]
4.146 An individual commits an offence with a penalty of 30 penalty
units if the person does not comply with a notice under subsection (3),
unless the person is entitled to retain the records against the manager and
the insurer. [Part 3, Division 8, Subdivision B, subsections 74(5) and (6)]
Only manager can deal with property of fund under management
4.147 A transaction or dealing affecting the property of a health
benefits fund under external management or terminating management
entered into by the responsible insurer or a person purportedly on behalf
of the fund or the insurer is void (subject to a Federal Court order) unless:
• it was entered into by the manager; or
• the manager consented to the transaction or dealing
beforehand; or
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Health benefits funds
• it was ordered by the Federal Court or a State or Territory
Supreme Court. [Part 3, Division 8, Subdivision B, subsections 75(1)
and (3)]
4.148 Subsection 75(1) does not apply to a payment by an ADI (such
as a bank, building society or credit union) made in good faith and in the
ordinary course of its banking business, out of the account of the relevant
private health insurer, while the external management or terminating
management is under way but before the first of:
• the ADI being notified by the manager of the external
management or terminating management; or
• the manager advertising the external management or
terminating management in a national newspaper or
newspaper circulating where the insurer carries on business.
[Part 3, Division 8, Subdivision B, subsection 75(2)]
4.149 An individual commits an offence with a penalty of 60 penalty
units or imprisonment for 12 months, or both if:
• the person is an officer of the responsible insurer for a fund
under external management or terminating management, or
the receiver, or receiver and manager of any of the assets of
the fund; and
• the person purported to enter into a transaction or dealing on
behalf of the responsible insurer that is void because of the
operation of this clause, or was in any way concerned in or a
party to the transaction or dealing. [Part 3, Division 8, Subdivision
B, subsection 75(4)]
Order for compensation where officer involved in void transaction
4.150 If a court finds a person guilty of an offence against
subsection 75(4) and is satisfied that the health benefits fund under
external management or terminating management concerned has suffered
a loss because of the transaction involved in the offence, the court may
order the person to pay compensation to the responsible insurer for the
fund. An order under subsection 76(1) may be enforced as a judgement of
the court. The exoneration provision in section 166 of the Prudential
Supervision Bill applies in relation to subsection 76(1). [Part 3, Division 8,
Subdivision B, subsections 76(1) and (2)]
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Private Health Insurance (Prudential Supervision) Bill 2015
Subdivision C - Provisions incidental to appointment of managers
Remuneration of managers
4.151 APRA may, in writing, determine the remuneration and
allowances for a manager, unless the Federal Court has made such an
order under section 67. Unless APRA determines otherwise, the
remuneration and allowances are to be paid out of the assets of the health
benefits fund under external management or terminating management.
[Part 3, Division 8, Subdivision C, section 77]
Directions to managers
4.152 APRA may give a manager, other than a terminating manager
appointed in accordance with an order of the Federal Court under
Division 7, written directions concerning the exercise of their powers.
While the directions may be general, depending on the circumstances they
may take into account the specific circumstances of the health benefits
fund under external management or terminating management, and may
include directions requiring the provision of interim reports. If the
terminating manager was appointed by the court (and not by APRA under
subsection 37(2)), then the Federal Court may give directions concerning
the exercise of the powers vested in the manager or the provision to
APRA of reports. [Part 3, Division 8, Subdivision C, subsections 78(1), (2), (3)
and (4)]
4.153 The manager must comply with written direction. [Part 3,
Division 8, Subdivision C, section 78(5)]
Termination of appointments of managers
4.154 APRA may terminate the appointment of a manager with effect
from the date specified in the instrument. This includes a terminating
manager appointed by the Federal Court under Division 7. APRA would
require this capability in certain circumstances, such as when the external
or terminating management has been completed or it emerges that a
manager, including a terminating manager appointed by the court, has a
conflict of interest, or is not conducting their functions in a competent
manner or in accordance with the law.
4.155 In that event the manager is divested of the functions and powers
set out in subsection 70(1) and all the other functions and powers of the
manager in relation to the health benefits fund(s) cease. [Part 3, Division 8,
Subdivision C, subsection 79(1)]
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Health benefits funds
4.156 If the appointment of an external manager is terminated, APRA
may appoint a replacement manager to carry on the external management.
If it does not, then the power to control, carry on and manage the business,
affairs and property of the health benefits fund vests again in the officers
of the responsible insurer. [Part 3, Division 8, Subdivision C,
subsections 79(2) and (4)]
4.157 If the appointment of a terminating manager is terminated,
APRA must appoint a replacement manager to carry on the terminating
management, subject to two exceptions. The first exception is where the
Federal Court has ordered an end to the termination of the funds under
section 43. In that event the power to control, carry on and manage any
remaining business, affairs and property of the health benefits fund vests
again in the officers of the responsible insurer, subject to any order of the
court under subsection 43(4). The second is where the termination is
complete and the manager has reported to APRA under section 47. In all
other circumstances (for example where the terminating manager has been
removed under the section because they cannot continue to perform the
functions of terminating manager, or it is inappropriate that they continue
to do so) APRA must appoint another terminating manager. [Part 3,
Division 8, Subdivision C, subsections 79(3) and (4)]
Act of managers valid etc.
4.158 The acts of a manager of a health benefits fund are valid despite
any defect or irregularity found later in his or her appointment. [Part 3,
Division 8, Subdivision C, subsection 80(1)]
4.159 Persons dealing with the fund in good faith without any
knowledge of any defect or irregularity in the appointment of the manager
are protected from the invalidity of certain transactions. [Part 3, Division 8,
Subdivision C, subsection 80(2)]
4.160 Persons making or permitting any payment or disposition of
assets of the fund without any knowledge of the defect or irregularity in
the appointment of the manager are protected and indemnified. [Part 3,
Division 8, Subdivision C, subsection 80(3)]
Indemnity
4.161 A manager of a health benefits fund is indemnified against any
action, claim or demand by a person in relation to anything done (or not
done) in good faith in exercising the powers of a manager under the
Prudential Supervision Bill. [Part 3, Division 8, Subdivision C, section 81]
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Private Health Insurance (Prudential Supervision) Bill 2015
Qualified privilege
4.162 A manager of a health benefits fund is conferred qualified
privilege in respect of any statement made by him or her in the course of
performing the duties of a manager. [Part 3, Division 8, Subdivision C,
section 82]
Subdivision D - Miscellaneous
Time for doing act does not run while act prevented by this Division or
other provisions
4.163 If Divisions 5, 6 or 8 prevent an act from being done, the time
for doing any act that must be done by a certain time is extended by the
time that those divisions prevented it from being done. [Part 3, Division 8,
Subdivision D, section 83]
Continued application of other provisions of the Prudential Supervision
Bill
4.164 In relation to the fund or the rights and obligations of persons in
relation to the responsible insurer for the fund, the appointment of an
external manager or terminating manager to a health benefits fund does
not affect the continued application of the Prudential Supervision Bill or
the PHI Act other than:
• in the case of external management, the provisions of
Division 6 (which relate to external managers); or
• in the case of terminating management, the provisions of
Divisions 5 or 7 (which relate to terminating managers).
[Part 3, Division 8, Subdivision D, section 84]
Modifications of the Prudential Supervision Bill in relation to health
benefits funds under management
4.165 APRA rules may set out modifications of the Prudential
Supervision Bill or the PHI Act relating to how Chapter 3 of the PHI Act
(which relates to community rating and complying health policies, among
other things) applies where the health benefits funds are under external
management or terminating management, including different
modifications according to the nature of the funds concerned, as long as
the modifications do not modify a provision that creates an offence or
include a new provision that creates an offence. The Prudential
Supervision Bill and the PHI Act operate subject to such modifications.
[Part 3, Division 8, Subdivision D, subsections 85(1), (2), (3) and (5)]
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Health benefits funds
4.166 This modification power will allow APRA to ensure that the
requirements of Chapter 3 of the PHI Act can, if necessary, be
appropriately adjusted to the context of external or terminating
management and, if necessary, can be appropriately tailored to those
health benefit funds concerned. This power would only be exercised in
limited circumstances, such as where strict compliance with a provision in
the PHI Act, for example community rating requirements, would be
difficult to achieve in the content of terminating a health benefits fund.
4.167 APRA must consult with the Health Secretary prior to making
any rules under this section. [Part 3, Division 8, Subdivision D, subsection 85(4)]
Order of Federal Court to be binding on all persons
4.168 This clause provides that an order of the Federal Court made
under Divisions 5, 6 or 7 is binding on all persons and has effect
notwithstanding anything in the constitution or rules of a private health
insurer or health benefits fund to which the order relates. [Part 3, Division 8,
Subdivision D, section 86]
APRA rules dealing with various matters
4.169 This clause provides that the APRA rules may:
• provide for a range of administrative and procedural matters
in relation to meetings required or permitted to be held under
Division 6 (external management); and
• stipulate the form and contents of any document required or
permitted to be given to APRA or an external manager or
terminating manager of a health benefits fund under a
provision of Division 5 (terminating management) or 6
(external management). [Part 3, Division 8, Subdivision D,
section 87]
Division 9 - Duties and liabilities of directors etc.
Notices to remedy contravention
4.170 APRA may give a private health insurer that has contravened
this Part written notice requiring the insurer to take specific action within
a specific period to remedy the contravention. The insurer is required to
comply with the notice and failure to comply is an offence under
section 148. [Part 3, Division 9, subsection 88(1)]
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Private Health Insurance (Prudential Supervision) Bill 2015
4.171 The specified period in the notice:
• must be a period ending not earlier than one month after the
giving of the notice; and
• may be extended by APRA any time before the notice period
ends, for a period as APRA thinks fit. [Part 3, Division 9,
subsection 88(2)]
4.172 The action specified in the notice is action APRA thinks
appropriate and reasonable to overcome the effects of the contravention.
[Part 3, Division 9, subsection 88(3)]
Liability of directors in relation to non-compliance with notices
4.173 If a private health insurer has been notified by APRA under
section 88 in respect of a contravention that has resulted in a loss to a
health benefits fund and has not complied with the notice, the persons
who are directors of the insurer when the contravention occurred are
jointly and severally liable to pay to the insurer an amount equal to the
loss. [Part 3, Division 9, subsection 89(1)]
4.174 A person is not liable under subsection 89(1) if they can prove
they exercised due diligence to ensure that the insurer complied with the
notice. [Part 3, Division 9, subsection 89(2)]
4.175 An action to recover an amount under subsection 89(1) may be
brought by the insurer or, with APRA's approval, a policy holder of the
health benefits fund involved. APRA's approval may be subject to
conditions as to the persons or number of persons who may join the action
as plaintiffs. This approval is not a legislative instrument, as it is done on
a case by case basis, and is therefore an administrative decision. Therefore
the statement in subsection 89(5) is not a substantive exemption from the
Legislative Instruments Act but a statement of the 'status quo'. A separate
exoneration provision, in section 166, will also apply. [Part 3, Division 9,
subsections 89(3), (4) and (5)]
APRA may sue in the name of private health insurers
4.176 APRA may bring an action in the name of a private health
insurer to recover an amount the insurer is entitled to recover under
Division 9. [Part 3, Division 9, section 90]
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Chapter 5
Prudential standards and directions
Outline of chapter
5.1 Part 4 establishes the prudential supervision of the private health
insurance industry, in particular, prudential standards and directions.
Part 4 sets out:
• the ability of APRA to make prudential standards and give
directions;
• the requirement for private health insurers to comply with
prudential standards and directions and to notify APRA of
any breach of prudential standards that is not minor or
technical in nature, and of certain financial matters;
• how APRA may vary or revoke prudential standards and
directions; and
• certain other matters and arrangements relating to directions.
5.2 Unless otherwise stated, all references in this Chapter relate to
the Prudential Supervision Bill.
Summary of new law
5.3 Part 4 will simplify the existing legislative scheme by replacing
the three standard-making powers currently in the PHI Act (solvency
standards in Division 140, capital adequacy standards in Division 143 and
prudential standards in Division 163) with a single prudential
standard-making power. Bringing these three standard-making powers
into one will also harmonise the legislation with APRA's existing
prudential standard-making powers in relation to the ADIs, life insurers,
general insurers and superannuation trustees.
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Private Health Insurance (Prudential Supervision) Bill 2015
5.4 The directions power will replace a number of powers currently
in the PHI Act, to the extent that they have been exercisable by the
Council:
• solvency directions under section 140-20;
• capital directions under section 143-20;
• directions under section 163-15 to comply with all or part of
a prudential standard, or take specified action within a
specified time, where the Council is satisfied that an insurer
has breached a prudential standard or is likely to do so in a
way that is likely to give rise to prudential risk; and
• general directions the Council can give under section 200-1
to require a private health insurer to modify its day to day
operations (among other things).
5.5 The directions power in the (Prudential Supervision Bill) is
based on directions powers APRA has in the Life Insurance Act;
accordingly, it will promote harmonisation with other legislation
administered by APRA in relation to financial sector entities.
Comparison of key features of new law and current law
New law Current law
APRA has the power to make The Council had the power to make
prudential standards regarding prudential standards (Division 163 of
prudential matters, which private the PHI Act), as well as solvency
health insurers must comply with. standards (Division 140 of the PHI
Act) and capital adequacy standards
(Division 143 of the PHI Act).
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Prudential standards and directions
New law Current law
APRA may (on certain grounds) give The Council was able to issue:
a private health insurer a direction. • solvency directions (under
section 140-20 of the PHI Act);
• capital directions (under section
143-20 of the PHI Act);
• directions (under section 163-15
of the PHI Act) to comply with all
or part of a prudential standard, or
take specified action within a
specified time, where the Council
is satisfied that an insurer has
breached a prudential standard or
is likely to do so in a way that is
likely to give rise to prudential
risk; and
• general directions the Council can
give (under section 200-1 of the
PHI Act) to require a private
health insurer to modify its day to
day operations (among other
things).
Detailed explanation of new law
Division 1 - Introduction
Simplified outline of this Part
5.6 Private health insurers must comply with prudential standards
made by APRA. A private health insurer must notify APRA if it becomes
aware of a contravention by it of a prudential standard (other than a
contravention that is merely of a minor or technical nature) or any other
matter or occurrence that materially affects its financial position. APRA
may, on certain grounds, give a private health insurer a direction that the
insurer must comply with. [Part 4, Division 1, section 90]
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Private Health Insurance (Prudential Supervision) Bill 2015
Division 2 - Prudential standards
Prudential standards
APRA may make prudential standards
5.7 APRA may make prudential standards in writing relating to
prudential matters. The standards must be complied with by private health
insurers, or in relation to insurers. [Part 4, Division 2, subsection 92(1)]
5.8 The reference to the standards being complied with 'in relation
to private health insurers' recognises that actuaries are required, under
subsections 107(2) and 109(1), to perform 'statutory functions and duties'
which include functions and duties under prudential standards.
5.9 Prudential matters is defined as matters relating to the conduct
of the affairs of a private health insurer so as to keep the insurer in a sound
financial position and not cause or promote instability in the Australian
private health insurance system, and the conduct of the affairs of the
insurer with integrity, prudence and professional skill. [Part 4, Division 2,
subsection 92(2)]
The private health insurers to which a prudential standard applies
5.10 A prudential standard may impose requirements for all private
health insurers, a specified class of insurers or one or more specified
insurers. [Part 4, Division 2, subsection 92(3)]
Prudential standards may provide for APRA to exercise powers and
discretions
5.11 APRA may exercise discretions under a standard, including in
relation to approving, imposing, adjusting or excluding specific prudential
requirements for particular insurers. As is the position under other
legislation administered by APRA, the exercise of such discretion under a
prudential standard will not be merits reviewable, although it will be
reviewable in the Federal Court for an error of law. It will often be the
case that, in exercising the power, APRA will adjust or exclude a
provision of the standard to ensure that it applies in a way that is
appropriate to the particular circumstances of that entity, and this will
often facilitate the entity's business processes. In other cases an
adjustment or exclusion may be necessary to give APRA certainty that the
prudential requirements apply appropriately to protect policy holders, for
example where there are prudential concerns, and such action may need to
be taken urgently and with certainty that the insurer will comply with the
adjusted requirements. [Part 4, Division 2, subsection 92(4)]
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Prudential standards and directions
Variation and revocation of prudential standards
5.12 A standard can be varied or revoked by APRA in writing.
[Part 4, Division 2, subsection 92(5)]
Prudential standards are legislative instruments (other than standards
that apply to one or more specified insurers)
5.13 A prudential standard referred to in paragraph 92(3)(a) or (b)
(that is, one applying to all, or a class of, private health insurers) or an
instrument varying or revoking such a standard, is a legislative instrument.
A standard or an instrument varying or revoking such a standard under
paragraph 92(3)(c), is not a legislative instrument because it only applies
to a specified insurer, or specified insurers. Therefore the statement that
the standard is not a legislative instrument is not a substantive exemption
from the Legislative Instruments Act but a statement of the 'status quo'. A
decision to make, vary or revoke such a standard will be merits
reviewable under section 168 of the Prudential Supervision Bill. [Part 4,
Division 2, subsection 92(6)]
Prudential standards may provide for a matter by adopting etc. material
from another instrument
5.14 A prudential standard may deal with a matter by referring to
(with or without modification) another instrument or writing as in force or
existing from time to time, whether or not the other instrument comprises
a legislative instrument or provision of another Act. This is despite
section 46AA of the Acts Interpretation Act 1901 and section 14 of the
Legislative Instruments Act. [Part 4, Division 2, subsection 92(7)]
5.15 This will enable APRA's prudential standards to refer to and
incorporate guidance and standards published by professional bodies as
updated from time to time where appropriate, such as professional
standards issued by the Actuaries Institute, even though these are not
themselves legislative instruments. For example, the Council's current
Appointed Actuaries Standard provides that an appointed actuary must
prepare a financial condition report in accordance with Professional
Standard 600: Financial Condition reports for Private Health Insurers,
made by the Institute of Actuaries of Australia in June 2011, as in effect
immediately before the commencement of this paragraph'. APRA's power
to incorporate material will mean that APRA will not need to remake a
prudential standard each time the Actuaries Institute updates its standard
on financial condition reports for private health insurers.
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Private Health Insurance (Prudential Supervision) Bill 2015
Prudential standards may not do certain things
5.16 Prudential standards may not:
• create an offence or civil penalty;
• provide for powers of arrest, detention, entry, search or
seizure;
• impose a tax;
• set an amount to be appropriated from the Consolidated
Revenue Fund under an appropriation under the Prudential
Supervision Bill; or
• amend the text of the Prudential Supervision Bill. [Part 4,
Division 2, subsection 92(8)]
Delegation of power to make etc. prudential standards
5.17 Section 15 of the APRA Act allows APRA to delegate its
powers to an APRA member or APRA staff member. However, in relation
to the power to make, vary or revoke prudential standards, a delegation
can only be to an:
• APRA member (within the meaning of the (APRA Act); or
• APRA staff member (within the meaning of the APRA Act)
who is an executive general manager (or equivalent),
executive general manager being the highest level of
management within APRA other than the APRA members.
[Part 4, Division 2, subsection 92(9)]
5.18 The delegation of powers is to an APRA Member or an APRA
staff member who is an Executive General Manager level, which is the
highest level within APRA below an APRA member. In practice, all
prudential standards will ordinarily be considered in detail at meetings of
APRA's executive group, which includes all APRA members and
Executive General Managers, prior to being finalised. The ability to
delegate to an Executive General Manager gives APRA some
administrative flexibility, as there are only three APRA members, and the
members are often required to travel overseas, and therefore delegation to
an Executive General Manager may be required.
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Prudential standards and directions
Additional matters in relation to standards that are not legislative
instruments
5.19 A prudential standard under paragraph 92(3)(c) relating to one
or more specified private health insurers, or a determination varying or
revoking such a standard, applies from the day it is made or from a day it
specifies. [Part 4, Division 2, subsection 93(1)]
5.20 If APRA makes, varies or revokes a prudential standard relating
to one or more specified private health insurers, it must, as soon as
practicable give a copy of the standard or variation, or notice of the
revocation to each insurer to which it applies or will apply. [Part 4,
Division 2, subsection 93(2)]
Compliance with prudential standards
5.21 Private health insurers must comply with prudential standards to
the extent they apply to the insurer. [Part 4, Division 2, section 94]
Notice of breach of prudential standards or of other matters that
materially affect financial position
5.22 A private health insurer commits an offence if it fails to notify
APRA, in writing and as soon as practicable, if it becomes aware of a
breach (other than a contravention that is merely of a minor or technical
nature) of a prudential standard or anything that materially affects its
financial position. The relevant penalty is 30 penalty units. [Part 4,
Division 2, subsection 95(1)]
5.23 An insurer's notification to APRA must not include personal
information about a person insured under a complying health insurance
product referable to a health benefits fund conducted by the insurer, unless
it relates to prudential matters about the insurer. [Part 4, Division 2,
subsection 95(2)]
Division 3 - Directions
APRA's power to give directions
5.24 APRA may give a private health insurer a direction of a kind
specified under section 97 if APRA reasonably believes that:
• the insurer has contravened an enforceable obligation within
the meaning of the Prudential Supervision Bill, or a provision
of the FS(CoD) Act (or direction or condition given under
that Act - see subsection 4(2) of the Prudential Supervision
Bill); or
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Private Health Insurance (Prudential Supervision) Bill 2015
• the insurer is likely to contravene an enforceable obligation
or the FS(CoD) Act, in a way likely to create a prudential
risk; or
• the direction is necessary in the interests of policy holders or
prospective policy holders of the private health insurer. [Part
4, Division 3, paragraphs 96(1)(a), (b) and (c)]
5.25 APRA's decision to give a direction under section 96 is
reviewable under section 168 if it is given on the basis of ground (a), (b)
or (c) in subsection 96(1), which relate to contraventions or likely
contraventions of relevant legislation or the direction being necessary in
the interests of policy holders or prospective policy holders of the insurer.
5.26 APRA may also give a private health insurer a direction for a
range of specific reasons related to preserving the interests of policy
holders and the insurer's financial position, including:
• the insurer is, or is about to become, unable to meet its
liabilities; or
• there is, or there might be, a material risk to the security of
the insurer's assets; or
• there has been, or there might be, a material deterioration in
the insurer's financial condition; or
• the insurer is conducting its affairs in an improper or
financially unsound way; or
• the failure to issue a direction would materially prejudice the
interests of policy holders or prospective policy holders of
the insurer; or
• the insurer is conducting its affairs in a way that may cause
or promote instability in the Australian private health
insurance system. [Part 4, Division 3, paragraphs 96(1)(d) to (i)]
5.27 A direction would generally only be given to address a
significant concern of a prudential nature affecting a private health insurer
as a whole and not, for example, to address a concern of a consumer
nature that has no prudential impact.
5.28 APRA's direction to a private health insurer must be in writing
and specify the ground for which it is given. It may also specify the time
or period during which it must be complied with. [Part 4, Division 3,
subsections 96(2) and (3)]
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Prudential standards and directions
The kinds of directions that may be given
5.29 The kinds of directions APRA may give a private health insurer
are directions to do one or more of a range of specified activities. [Part 4,
Division 3, subsection 97(1)]
5.30 These actions are specified in paragraphs 97(1)(a) to (v) and are:
• compliance with all or specified enforceable obligations or
with the FS(CoD) Act (this includes directions or conditions
given under that Act - see subsection 4(2) of the Prudential
Supervision Bill);
• to remove an officer of the insurer;
• to ensure an officer of the insurer does not take part in the
management or conduct of the business of the insurer except
as permitted by APRA;
• to appoint a person as an officer of the insurer for such term
as APRA directs;
• to terminate the appointment of the appointed actuary of the
insurer and to appoint another actuary to hold office for such
term as APRA directs;
• not to give financial accommodation to any person;
• not to issue or renew any policy, undertake any liability
under any policy or collect any premium;
• not to issue or renew any policy, undertake any liability
under any policy or collect any premium;
• not to borrow any amount;
• not to accept any payment on account of share capital, except
payments in respect of calls that fell due before the direction
was given;
• not to repay any amount paid on shares, and not to pay any
dividends;
• not to discharge any policy or other liability;
• not to transfer any asset;
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Private Health Insurance (Prudential Supervision) Bill 2015
• not to pay or transfer any amount to any person, or create an
obligation (contingent or otherwise) to do so;
• not to undertake any financial obligation on behalf of any
other person;
• to hold, or otherwise deal in a specified way, with a specified
amount of capital;
• to provide, or further provide, in its accounts for the purposes
of the Prudential Supervision Bill, a specified amount or an
amount determined in a specified way in respect of its
liabilities or the value of a specified asset of the insurer;
• to order an actuarial investigation of the affairs of the insurer,
at the expense of the insurer, by an actuary chosen by APRA;
• to do, or to refrain from doing, an act that relates to the way
in which the affairs of the insurer are to be conducted or not
conducted;
• to modify the rules of the insurer;
• to take specified action to ensure, as far as practicable, that
the insurer will be able to meet the liabilities of a health
benefits fund conducted by the insurer out of the assets of the
fund as they become due;
• to take specified action to ensure, as far as practicable, that
assets of a health benefits fund conducted by the insurer will
provide adequate capital for the conduct of the business of
the fund in accordance with the Prudential Supervision Bill
and in the interests of the policy holders of the fund. [Part 4,
Division 3, subsection 97(1)]
5.31 A direction may deal with only some of the matters in
paragraphs 97(1)(a) to (v), a particular class of matters or make different
provision with respect to different matters, or classes of matters. [Part 4,
Division 3, subsection 97(3)]
5.32 A direction related to the transfer or payment of money under
paragraph 97(1)(m) and (n) does not apply to the payment or transfer of
money under a court order or a process of execution. [Part 4, Division 3,
subsection 97(2)]
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Prudential standards and directions
5.33 As noted above, APRA would generally only give a direction in
response to a serious prudential concern. The kinds of directions that may
be given need to be seen in this light. For example, a direction not to issue
a policy or to refrain from providing financial accommodation would
normally only be given to prevent the insurer from increasing its
exposures where there is a serious financial concern that affects the
interests of policy holders. For example, the financial position of the
health benefits fund(s) may be such that APRA may be considering the
appointment of an external manager, with the direction being an interim
step to halt any further exposures and protect the interest of existing
policy holders. It is not intended that the power to give a direction not to
issue a policy or grant financial accommodation, or any similar power, be
used to micromanage the business of the insurer or address issues of a
consumer nature. The concern would need to be general and relate to the
overall position or management of the insurer or a health benefits fund.
Power to comply with a direction
5.34 A private health insurer may comply with a direction under
section 96 despite anything in its constitution or business rules, or contract
or arrangement to which it is a party. [Part 4, Division 3, section 98]
Varying or revoking a direction
5.35 If APRA considers it is no longer necessary or appropriate,
APRA may, by notice in writing, vary or revoke a direction given under
section 96 to a private health insurer. [Part 4, Division 3, section 99]
When a direction ceases to have effect
5.36 A direction under section 96 ceases to have effect if APRA
revokes it under section 99. [Part 4, Division 3, section 100]
Directions not grounds for denial of obligations
5.37 If a private health insurer is subject to an APRA direction, and is
party to a contract (whether the contract is subject to Australian or foreign
law), neither the insurer, nor another party to the contract, may:
• deny obligations under the contract or accelerate any debt
under the contract; or
• close out any transaction relating to the contract. [Part 4,
Division 3, subsections 101(1) and (2)]
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Private Health Insurance (Prudential Supervision) Bill 2015
5.38 If APRA's direction prevents the insurer fulfilling its obligations
under the contract (other than a direction referred to in paragraph 97(1)(l)
not to discharge any policy or other liability) the other party is relieved
from contractual obligation owed to the insurer (subject to any orders
made under subsection 101(4)). [Part 4, Division 3, subsection 101(3)]
5.39 A party to such as contract may apply to the Federal Court for an
order relating to a direction's effect on the contract. The order may deal
with the requirement of a party to fulfil a contractual obligation or to take
some other action, considering any contractual obligations performed
before the order was made. The Federal Court's order must not require a
person to take any action that would contravene the direction, or another
direction made under section 96. [Part 4, Division 3, subsection 101(4)]
Supply of information about directions
Power to publish notice of directions in Gazette
5.40 APRA may publish notice of any direction given under
section 96 in the Gazette. If it does, the notice must include details of the
insurer and the direction. [Part 4, Division 3, subsection 102(1)]
Requirement to publish notice of variation or revocation of certain
directions in Gazette
5.41 If APRA publishes notice of a direction which it later varies or
revokes, APRA must publish in the Gazette notice of the variation or
revocation as soon as practicable. [Part 4, Division 3, subsection 102(2)]
Requirement to provide information about directions to Minister
5.42 APRA must comply with a request from the Minister to provide
information about a direction to a particular insurer or any directions
made in a specific period. [Part 4, Division 3, subsection 102(3)]
Power to inform Minister of directions
5.43 At any time, APRA may provide the Minister with any
information it considers appropriate about any directions, or variations to
or revocations of directions. [Part 4, Division 3, subsection 102(4)]
Requirement to inform Minister of revocation of direction if informed of
making direction
5.44 If APRA informs the Minister about a direction which it later
varies or revokes, APRA must notify the Minister of this as soon as
practicable after the revocation. [Part 4, Division 3, subsection 102(5)]
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Prudential standards and directions
Failure to comply with this section does not affect the validity of
directions etc.
5.45 A failure to comply with a requirement in section 101 does not
affect the validity of a direction, or revocation of a direction. [Part 4,
Division 3, subsection 102(6)]
Secrecy requirements
5.46 Information about directions and revocations of directions is
subject to secrecy requirements in Part 6 of the APRA Act, unless the
information has been published in the Gazette under section 102 of the
Prudential Supervision Bill. [Part 4, Division 3, section 103]
Non-compliance with a direction
5.47 It is an offence for a private health insurer to fail to comply with
a direction given to the insurer with a penalty of 30 penalty units for an
individual. [Part 4, Division 3, subsection 104(1)]
5.48 If a private health insurer commits such an offence, it does so in
respect of the first day the offence was committed and each subsequent
day the insurer continues to commit the offence. [Part 4, Division 3,
subsection 104(2)]
5.49 If an officer commits such an offence, and their duties include
ensuring compliance with APRA directions, the officer does so in respect
of the first day the offence was committed and each subsequent day the
insurer continues to commit the offence. [Part 4, Division 3, subsection 104(3)]
77
Chapter 6
Other obligations of private health
insurers
Outline of chapter
6.1 Part 5 to the Prudential Supervision Bill governs the additional
obligations of private health insurers, including requirements relating to
actuaries and disqualifications. Part 5 provides for:
• the requirement to appoint an actuary and process for
appointing and terminating the appointment of an actuary;
• the powers and obligations of actuaries;
• the prohibition on employing disqualified persons as officers
and actuaries;
• the automatic disqualification of certain persons from being
an officer or actuary;
• the Federal Court's power to disqualify and revoke or vary a
disqualification;
• how a disqualification proceeding interacts with the privilege
against self-incrimination;
• restrictions on insurers paying penalties on behalf of officers;
and
• giving reports and details about officers APRA.
6.2 Unless otherwise stated, all references in this Chapter relate to
the Prudential Supervision Bill.
Summary of new law
6.3 Part 5 largely replicates existing Part 4-5 of the PHI Act, but
amends the provisions to align the language around powers and
obligations of actuaries with the Life Insurance Act. This Part requires
insurers to appoint certain persons as actuaries and governs the powers
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Private Health Insurance (Prudential Supervision) Bill 2015
and obligations of actuaries. These include provisions around appointing
and removing actuaries, the actuary's role, their reporting obligations, and
their qualified privilege. Separately, the Part prohibits the appointment of
disqualified persons and governs which persons are disqualified, and the
removal of the privilege against self-incrimination during disqualification
proceedings.
6.4 The Part also replicates provisions around restricting payment of
penalties on behalf of officers of the insurer, to ensure that officers are
duly penalised if they commit an offence. The Part also includes the
insurer's requirement to give copies of reports to APRA, and to notify
APRA of the name and contact details of the insurer's officers.
Comparison of key features of new law and current law
New law Current law
Appointment of an actuary
Insurers must appoint an actuary Insurers must appoint an eligible
within six weeks of an actuary actuary within six weeks of an
ceasing. The actuary must meet the actuary ceasing.
eligibility criteria set in prudential Eligibility criteria are set out in the
standards, and not be disqualified. Private Health Insurance (Insurer
Obligations) Rules.
Terminating an actuary
An insurer must terminate an actuary The cessation of an actuary is dealt
if the actuary does not meet eligibility with by the eligibility criteria as set
criteria, or the insurer reasonably out in the Private Health Insurance
believes the actuary has failed to (Insurer Obligations) Rules.
perform their statutory duties and
functions, or the actuary is
disqualified.
Notification of appointment
The Prudential Supervision Bill Insurers must notify the Council of an
mirrors the current law: insurers must appointment, and the ceasing of an
notify APRA of an appointment, and appointment.
the ceasing of an appointment.
Role of an appointed actuary
The actuary must perform their The actuary must perform their
statutory functions and duties and the statutory functions and duties and the
insurer must assist the actuary to do insurer must assist the actuary to do
this. this. It is an offence for the insurer
not to assist the actuary.
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Other obligations of private health insurers
New law Current law
Actuary's obligation to report
The Prudential Supervision Bill is An actuary must report to an insurer
similar to the current law, an actuary if there is a risk the insurer will
must report to an insurer if there is a breach the Act, or report to the
risk the insurer will breach the Council if the contravention would
Prudential Supervision Bill, or report significantly affect the interests of
to APRA if the contravention would policy holders.
significantly affect the financial
interests of policy holders.
Actuary may give information to the regulator
A person who is or was the appointed No equivalent in the PHI Act.
actuary of a private health insurer
may give information or produce
documents relating to the insurer to
APRA and is protected if they do so
in good faith and without negligence.
Actuary's requirement to give information to the regulator
APRA may require an actuary to give Unless the requirement for an actuary
APRA certain information. to give the Council's information is
specified in the Private Health
Insurance (Insurer Obligations)
Rules, the actuary is not required to
do so.
Qualified privilege
The Prudential Supervision Bill An actuary receives qualified
mirrors the current law: an actuary privilege.
receives qualified privilege.
Referral to a professional association
If APRA considers that an actuary The Council does not have an express
has failed to adequately and properly power to refer an actuary to a
perform their statutory functions and professional association.
duties, or their functions and duties
under other Australian laws, or
otherwise not fit and proper, APRA
may refer this to the professional
association.
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Private Health Insurance (Prudential Supervision) Bill 2015
New law Current law
Disqualified persons
Disqualified persons must not act as Disqualified persons must not act as
officers or actuaries for insurers, and directors or senior management for
insurer must not employ disqualified insurers, and insurer must not allow
persons as officers or actuaries. These them to do so. The penalty is two
are offences with penalties of 12 years imprisonment or 120 penalty
months imprisonment and/or 60 units for disqualified persons, and
penalty units. 250 penalty units for the insurer.
The Federal Court can disqualify or The Council can disqualify a person
revoke a disqualification. Certain or revoke a disqualification. Certain
person are automatically disqualified. persons are automatically
disqualified.
Restriction of payment of behalf of officers
The Prudential Supervision Bill Insurers cannot pay penalties or
mirrors the current law: insurers amounts on behalf of officers that
cannot pay penalties or amounts those officers are liable for under the
officers are liable for on behalf of PHI Act.
officers.
Providing details to the regulator
Insurers must give certain reports and Insurers must give certain reports and
contact details of officers to APRA. contact details of the Chief Executive
Officer to APRA.
Detailed explanation of new law
Division 1 - Introduction
Simplified outline of this Part
6.5 The obligations of a private health insurer include requirements
to have an appointed actuary, to not allow disqualified persons to act as
officers or actuaries, and to not use the insurer's money to meet certain
liabilities of officers. The appointed actuary of a private health insurer
also has obligations, including requirements to draw certain matters to the
attention of the insurer's directors, and to provide information to APRA.
[Part, 5 Division 2, section 105)]
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Other obligations of private health insurers
Appointment
6.6 An insurer must appoint an actuary. If an actuary ceases to work
for the insurer, the insurer must appoint another actuary within six weeks.
This requirement ensures that the insurer has an actuary to carry out an
actuary's statutory functions and duties in relation to the insurer [Part 5,
Division 2, subsections 106(1) and (2)]
6.7 A private health insurer can only appoint an actuary that the
insurer is satisfied meets the eligibility criteria, which are set out in
APRA's prudential standards. This requirement ensures the actuary is
appropriately qualified and fit for appointment. [Part 5, Division 2,
subsection 106(3)]
6.8 A private health insurer must not appoint an actuary who is
disqualified. This protects the insurer from an actuary who is not fit or
proper. [Part 5, Division 2, subsection 106(4)]
6.9 If there is already an appointed actuary another actuary cannot
be appointed. [Part 5, Division 2, subsection 106(5)]
Ending an appointment as actuary
6.10 A private health insurer must end a person's appointment as
actuary if:
• the person does not meet the eligibility criteria in the
prudential standards; or
• the person is subject to a disqualification order under
section 119; or
• the insurer reasonably believes that the person has failed to
adequately and properly perform their statutory functions and
duties under the Prudential Supervision Bill. [Part 5, Division 2,
subsection 107(1)]
6.11 The test for whether an insurer has failed to adequately perform
their duties has both subjective and objective elements. That is, the insurer
must subjectively believe that the actuary has failed to perform their
duties, but this belief must be objectively reasonable. The intention here is
to prevent a situation where an insurer is being badly managed, and the
actuary brings that bad management to the insurer's attention, and the
insurer responds by forming an unreasonable view that the actuary has
failed to perform their duties adequately and properly.
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Private Health Insurance (Prudential Supervision) Bill 2015
Example 6.1
Laura is the appointed actuary of an insurer, TIM Health Co. a private
health insurer. Laura identifies a large and significant exposure relating
to a health benefits fund of the insurer. She informs APRA that, in her
assessment, this has caused TIM Health Co. to breach the Prudential
Supervision Bill. The directors of TIM Health Co. are displeased that
Laura has informed APRA of the breach and decide to terminate
Laura's appointment as actuary. They form the view that Laura has
failed to perform adequately her statutory functions and duties;
however this is not a reasonable view. Therefore, TIM Health Co.
cannot use section 107 to terminate Laura's appointment.
6.12 An actuary's statutory functions and duties include obligations
under the Prudential Supervision Bill, the PHI Act and the FS(CoD) Act,
including any relevant regulations, prudential standards and rules under
that Bill or those Acts. [Part 5, Division 2, subsection 107(2)]
6.13 The Prudential Supervision Bill allows directors of an insurer to
temporarily appoint another actuary even where the appointment is not in
accordance with the insurer's constitution or the insurer's rules (this is
where the power to appoint is not vested in the directors or the directors
alone), where an insurer has terminated an actuary under
subsection 107(1). The appointment must still be consistent with
subsection 106(3), which requires the appointment to meet the eligibility
criteria in the prudential standards. This power ensures that the insurer can
temporarily appoint an actuary pending an appointment in accordance
with the insurer's constitution or business rules. [Part 5, Division 2,
subsection 107(3)]
Notification of appointment etc.
6.14 An insurer that appoints an actuary must, within 14 days,
provide APRA with certain details about the appointed actuary and their
appointment. This requirement assists APRA to ensure the actuary is duly
qualified and allows APRA to regulate the actuary's conduct. [Part 5,
Division 2, subsections 108(1) and (2)]
6.15 If an actuary's appointment ends, the insurer has 14 days to
notify APRA in writing that the actuary's appointment has ceased. This
requirement ensures APRA's records of actuaries are up-to-date for the
purpose of regulating actuaries and their appointment. [Part 5, Division 2,
subsection 108(3) and (4)]
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Other obligations of private health insurers
Role of appointed actuary
6.16 An appointed actuary must perform the statutory functions and
duties set out in the prudential standards (some of which apply directly to
appointed actuaries). This ensures that the actuary fulfils the regulator's
requirements, and that (amongst other things) the insurer appropriately
provisions for claims. [Part 5, Division 2, subsection 109(1)]
6.17 The private health insurer must enable the appointed actuary to
perform their functions, including by providing actuaries with documents,
requiring officers and employees to answer questions and allowing
actuaries to attend and speak at meetings. The requirement is to ensure
that an actuary is capable of performing their role. [Part 5, Division 2,
subsection 109(2)]
Actuary's obligation to report
6.18 If the actuary considers that action must be taken to avoid
contravention of the Prudential Supervision Bill, the PHI Act or the
FS(CoD) Act, the actuary must bring this to the attention of the insurer,
the directors or an officer of the insurer. The intention here is to assist
insurers to avoid contraventions of the law. [Part 5, Division 2, paragraph
110(1)(a)]
6.19 If an actuary considers that action must be taken to avoid
prejudicing the interests of policy holders of a health benefits fund, the
actuary must bring this to the attention of the insurer or the directors of an
insurer. In this context 'the interests of policy holders' means their interest
in the insurer being prudentially sound, including being able to pay out
future claims (rather than, for example, the interest that a policy holder
might have as a consumer in having a lower premium or different policy
terms). [Part 5, Division 2, paragraph 110(1)(b)].
Example 6.2
Ryan is the appointed actuary of EA Health Insurance Co (EA), a
private health insurer. He has an obligation to report any matter to EA
or its directors that Ryan considers would prejudice the interests of the
policy holders. Ryan notices that EA is about to enter into a financial
transaction that may risk EA's ability to pay out policy holders in the
future. Ryan must report his concern to the director of EA or EA itself
(this might be by reporting to an officer of EA whose position and role
means that he or she has authority to receive the report and take the
matter further within EA).
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Private Health Insurance (Prudential Supervision) Bill 2015
Example 6.3
Shane is the appointed actuary of IM Health, a private health insurer.
Shane is aware that the directors of IM Health wish to raise the
premiums that policy holders pay. Shane does not need to report the
risk of a rise in premiums to IM Health or an officer, as in a rise in
premiums does not 'prejudice the interest of policy holders' in the
relevant sense.
6.20 If an actuary considers the insurer or an officer of the insurer
may have contravened the Prudential Supervision Bill or other law and
that the contravention is of such a nature that it may significantly affect
policy holders' interests, the actuary must notify APRA. The intention is
to warn APRA so that APRA can intervene to prevent a situation where
insurers are not able to fulfil their financial promises to policy holders.
[Part 5, Division 2, paragraphs 110(2)(a) and (b)]
6.21 The notification must be in writing and inform APRA of the
actuary's opinion and the information on which the opinion is based.
[Part 5, Division 2, paragraphs 110(2)(c) and (d)]
6.22 However, an actuary does not have an obligation to notify
APRA if an officer of the insurer has informed the actuary that the insurer
has already notified APRA in writing and the actuary has no reason to
disbelieve the officer. [Part 5, Division 2, subsection 110(3)]
6.23 It is an offence for an officer of the private health insurer to
deceive an actuary and tell an actuary that the APRA is informed about a
contravention if APRA has not been informed. For an offence to occur the
officer must know that there are reasonable grounds for believing that the
insurer has contravened the Prudential Supervision Bill or another law,
and the contravention is of such a nature that it may significantly affect
the interests of policy holders. The maximum penalty for this offence is
60 penalty units or 12 months imprisonment or both. This penalty is
appropriate given the offence involves deliberate deception which could
significantly risk the interests of policy holders. The severity of the
penalty is analogous to the offences with the same penalty in the
Attorney-General's Department's Guide to Framing Commonwealth
Offences, Infringement Notices and Enforcement Powers such as making
false statements in notices. [Part 5, Division 2, subsection 110(4)]
6.24 If an actuary has drawn a matter to the insurer's attention, and
the actuary is satisfied that the insurer has had reasonable time to take
action but has failed to take action, the actuary must inform APRA about
the matter in writing. [Part 5, Division 2, subsection 110(5)]
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Other obligations of private health insurers
6.25 An actuary is still subject to an obligation to inform APRA as
above even if the actuary's appointment ceases before the actuary has
informed APRA. [Part 5, Division 2, subsection 110(6)]
Appointed actuary may give information to APRA
6.26 A current or former actuary may give information, books,
accounts or documents about the private health insurer to APRA if the
actuary considers this will assist APRA in performing it functions under
the Prudential Supervision Bill, the FS(CoD) Act or the PHI Act. If an
actuary does this in good faith and without negligence, the actuary is not
liable for any claim or demand in respect of the information or document.
This provision ensures that actuaries do not refrain from giving APRA
useful information for fear of liability, for example in defamation. [Part 5,
Division 2, section 111]
Duty of appointed actuary to give information when required
6.27 APRA may give written notice to a current or former actuary
requiring the actuary to give APRA information, books, accounts or
documents relating to the insurer, if APRA considers it will assist in
performing APRA's functions under the Prudential Supervision Bill or the
FS(CoD) Act. The actuary has seven days or a reasonable period
(whichever is greater) to comply with APRA's notice [Part 5, Division 2,
subsection 112(1) and (2)]
Example 6.4
APRA requests large amount of documents from a former actuary,
Simon. Simon reasonably requires 14 days to respond to APRA's
request. Therefore Simon will have 14 days to respond.
6.28 Failure to comply with a notice under subsection 112(1) is an
offence, with a maximum penalty of 30 penalty units. However, to
commit the offence the actuary or former actuary must be capable of
complying with the notice. [Part 5, Division 2, subsections 112 (3) and (4)]
6.29 An actuary or former actuary must comply with a notice to give
information even if that information may incriminate them. However, the
information given in accordance with the notice is not admissible in
proceedings against the actuary or former actuary, except in a proceeding
for 137.1 and 137.2 of the Criminal Code (providing false or misleading
information or documents). That is, whilst an actuary cannot claim
privilege against self-incrimination in order to avoid complying with the
notice, the information provided in response to the notice cannot be used
in criminal proceedings or proceedings for a penalty (other than
disqualification). This ensures that APRA receives information which it
can use to protect the interests of policy holders and prudentially regulate.
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Private Health Insurance (Prudential Supervision) Bill 2015
However if an actuary/former actuary deliberately attempts to deceive
APRA by placing misleading or false information in the notice, then the
notice can still be used to prosecute the actuary/former actuary. [Part 5,
Division 2, subsections 112(2), (3) and (4)]
6.30 This provision provides 'use immunity' but not 'derivative use
immunity', that is, immunity in relation to anything obtained as a direct or
indirect consequence of the production of the information, document or
thing. In this respect the provision is consistent with self-incrimination
provisions in the other legislation administered by APRA, including 156F
of the Life Insurance Act. A difficulty with derivative use immunity is
that it means that further evidence obtained through a chain of inquiry
resulting from the protected evidence cannot be used in relevant
proceedings even if the additional evidence would have been uncovered
by the regulator through independent investigation processes. A related
issue is that it can be very difficult and time-consuming in a complex
investigation to prove whether evidence was obtained as a consequence of
the protected evidence or obtained independently. [Part 5, Division 2,
subsections 112(2), (3) and (4)]
Qualified privilege of appointed actuary
6.31 A current or former actuary of an insurer has a qualified
privilege in relation to any statement made for the purposes of their
statutory functions and duties. That is, the actuary will have a defence in
defamation proceedings in relation to a communication made in relation to
their statutory functions or duties. [Part 5, Division 2, sections 113]
Referring matters to professional associations for actuaries
6.32 APRA may refer a matter to an actuary's professional
association for consideration of disciplinary or other action if APRA
considers that the actuary failed to adequately perform their duties or
functions or is not a fit and proper person to be an actuary. This is another
mechanism for APRA to ensure an actuary fulfils their statutory
requirements, which is important given the actuary's unique role in
overseeing the insurer. [Part 5, Division 2, subsection 114(1)]
6.33 If APRA refers such a matter, APRA must also give written
notice of this to the actuary. [Part 5, Division 2, subsection 114(2)]
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Other obligations of private health insurers
APRA may direct removal of actuary
6.34 If an actuary is disqualified, is not a fit and proper person to be
an appointed actuary or has failed to adequately perform their duties or
functions under the Prudential Supervision Bill or the PHI Act, APRA
may give a written direction to the private health insurer to end the
person's appointment as actuary. [Part 5, Division 2, subsection 115(1) and (2)]
6.35 Before making such a direction, APRA must give a written
notice to the insurer and the actuary and give the actuary and the insurer a
reasonable opportunity to make submissions. The notice must include a
statement that APRA may discuss any submission with other persons that
APRA considers appropriate. [Part 5, Division 2, subsections 115(3) and (4)]
6.36 If a submission is made, APRA must consider the submission
and may discuss it with any persons APRA considers appropriate. [Part 5,
Division 2, subsection 115(5)]
6.37 A direction ending an actuary's appointment takes effect on the
day the direction specifies, which must be at least seven days after the
direction is made. APRA must give both the insurer and the actuary a
copy of the direction. [Part 5, Division 2, subsections 114(6) and (7)]
6.38 It is an offence with a penalty of 30 penalty units for a private
health insurer to fail to comply with a direction given under section 115.
[Part 5, Division 2, subsection 115(8)]
Division 3 - Disqualified persons
6.39 The Prudential Supervision Bill allows the Federal Court to
disqualify an officer or appointed actuary of an insurer, on application by
APRA. By contrast, the PHI Act gives the Council an administrative
power to make a determination that a person is disqualified. The
disqualification regime in the Prudential Supervision Bill therefore differs
by requiring APRA to approach a court for a determination that a person
is disqualified. This approach gives officers and actuaries the benefit of
having a disqualification order made by an independent judicial body. As
with the PHI Act, the Prudential Supervision Bill stipulates grounds upon
which a person is automatically disqualified, although the Prudential
Supervision Bill allows APRA or a disqualified person to approach the
court and seek a declaration that the person should not be treated as
disqualified.
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Private Health Insurance (Prudential Supervision) Bill 2015
Private health insurers not to allow disqualified persons to act as
directors
6.40 An insurer commits an offence if the insurer allows a
disqualified person to act as an officer or appointed actuary. The offence
carries a maximum penalty of 12 months imprisonment or 60 penalty
units or both. The penalty is set so that an insurer does not knowingly or
recklessly appoint someone who could risk the insurer's solvency and the
interests of policy holders. [Part 5, Division 3, subsection 116(1)]
6.41 An insurer does not commit an offence if APRA has told the
insurer that the disqualified person is not disqualified. [Part 5, Division 3,
subsection 116(2)]
Disqualified persons must not act for private health insurers
6.42 A disqualified person commits an offence, with a penalty of
12 months imprisonment or 60 penalty units or both, if they act as an
appointed actuary or officer of a private health insurer. This penalty
reflects the penalty for the equivalent offence in section 116. [Part 5,
Division 3, section 117]
Effect of non-compliance
6.43 The transactions and appointment of disqualified persons not
invalid because of the disqualification. [Part 5, Division 3, section 118]
Who is a disqualified person?
6.44 A person is a disqualified person if:
• the person has been convicted of an offence against or arising
out of the Prudential Supervision Bill, the FS(CoD) Act, the
PHI Act, the Corporations Act or former Corporations Law,
or to the corporations law of a foreign country; or
• the person has been convicted of an offence under Australian
law, or any corresponding law of a foreign country, and the
offence involves dishonest conduct or an offence relating to a
financial sector company, a private health insurer or a
superannuation entity; or
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Other obligations of private health insurers
• the person has been or becomes bankrupt, applies for relief
under a bankruptcy law or 'compounds' (enters into a
multi-party agreement in order to settle) with all of their
creditors; or
• the person has been disqualified by the Federal Court under
section 120. [Part 5, Division 3, subsection 119(1)]
6.45 The policy intent is that dishonest persons, persons who have
been bankrupt and persons who breach corporations law are not
appropriate persons to occupy the position of an officer or be actuaries.
6.46 A disqualified person includes a person who has been relieved
of a conviction due to section 19B of the Crimes Act or the corresponding
law of a foreign country. Section 19B of the Crimes Act allows a court to
discharge a person charged with a federal offence without proceeding to a
conviction where the charge is proved but the court considers it is
inexpedient to inflict punishment by reason of the nature of the offence or
extenuating circumstances. [Part 5, Division 3, subsection 119(2)]
6.47 The Prudential Supervision Bill does not affect the operation of
Part VIIC of the Crimes Act relating to spent convictions. [Part 5, Division 3,
subsection 119(3)]
Court power of disqualification
6.48 Upon APRA's application, the Federal Court may disqualify a
person from being an officer or appointed actuary of an insurer, if the
Court is satisfied that the person is both not a fit and proper person and the
disqualification is justified. [Part 5, Division 3, subsection 120(1)
6.49 The disqualification can be for all private health insurers, or a
particular private health insurer, or a particular class of insurer. [Part 5,
Division 3, subsection 120 (2)]
6.50 Prudential standards may set out criteria for whether a person is
fit and proper, which the Court may take into account, along with any
other matters in the prudential standards or any other matter the Court
considers relevant. [Part 5, Division 3, subsection 120(3)]
6.51 In deciding whether the disqualification is justified, the Federal
Court may consider:
• if the application relates to an officer - the person's conduct
in the management, business or property of any corporation;
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Private Health Insurance (Prudential Supervision) Bill 2015
• if the application relates to an actuary - the person's conduct
in relation to their functions or duties under the Prudential
Supervision Bill, the PHI Act, FS(CoD) Act, the Insurance
Act 1973, the Life Insurance Act or the Superannuation
Industry (Supervision) Act 1993 (SIS Act); and
• any other matter the court considers relevant. [Part 5,
Division 3, subsection 120(4)]
6.52 After the Federal Court disqualifies a person under section 120,
APRA must give details of the disqualification to the private health
insurer the disqualified person is working for and publish details of the
disqualification in the Gazette. [Part 5, Division 3, subsection 120(5)]
Court power to revoke or vary a disqualification etc.
6.53 Either the disqualified person, or APRA, can apply to the
Federal Court to vary or revoke a disqualification order or be deemed not
to be a disqualified person. APRA and the disqualified person must
inform the other if either makes such an application. The Court can put
conditions and exceptions on an order deeming a person not disqualified.
[Part 5, Division 3, section 121]
Privilege against exposure to penalty - disqualification under
section 120
6.54 The Prudential Supervision Bill specifies a person cannot refuse
to give evidence in proceedings arising under the Prudential Supervision
Bill or refuse to do something that is a requirement under the Prudential
Supervision Bill on the grounds that doing so would lead to a
disqualification order being made against the person. This means that a
person does not receive the benefit of 'use immunity' in
subsections 112(6) and 149(2) in relation to a disqualification order.
Accordingly, the evidence given may be used in disqualification
proceedings. This is reasonable because a disqualification order is not a
criminal penalty, and is it important to ensure that the policy holders'
interests are not risked by an insurer employing an inappropriate officer or
actuary. An insurer must not reimburse such an officer in relation to such
an amount. [Part 5, Division 3, subsections 122]
Restrictions on payment of pecuniary penalties etc.
6.55 The Prudential Supervision Bill prohibits insurers from paying
out pecuniary penalties for criminal offences or other liabilities under the
Prudential Supervision Bill for which an officer is personally liable. This
ensures that officers have financial incentives to avoid contravening the
law or causing harm to policy holders. [Part 5, Division 4, section 123]
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Other obligations of private health insurers
Giving APRA copies of reports made to policy holders
6.56 APRA rules may require insurers to give to APRA the reports it
provides to policy holders. This enables APRA to receive more
information which assists APRA to prudentially regulate. Reports under
this section will be consistent with Rule 5 of the Private Health Insurance
(Insurer Obligations) Rules 2009, made under section 169-1 of the
PHI Act. [Part 5, Division 4, section 124]
Notifying APRA of name and contact details of officers
6.57 APRA may also require a private health insurer to give the
names and contact details of its officers to APRA. This requirement may
assist APRA to prudentially regulate insurers. [Part 5, Division 4, section 125]
93
Chapter 7
Monitoring and investigation
Outline of chapter
7.1 Part 6 of the Prudential Supervision Bill provides for monitoring
and investigation provisions, including:
• power for APRA to request information and documents for
general supervisory purposes; and
• power to investigate a private health insurer, including the
appointment of an inspector, obtaining information and
warrants for entry of premises and the conduct of
examinations.
7.2 Unless otherwise stated, all references in this Chapter relate to
the Prudential Supervision Bill.
Summary of new law
7.3 These provisions draw on provisions from a number of different
pieces of legislation, including Divisions 194 and 214 of the PHI Act,
certain provisions from the SIS Act and the Regulatory Powers Act.
7.4 In general, the Regulatory Powers Act is intended to provide a
framework of standard powers for monitoring and information gathering
provisions. However, certain provisions in the Regulatory Powers Act, in
particular the investigation provisions in Part 3 of that Act, only apply
where there has been a breach of an offence provision or a civil penalty
provision.
7.5 The monitoring provisions are designed to ensure that APRA
has the power to require an insurer to provide information and documents
for general supervisory purposes without the need for suspecting the
contravention of a provision. Similar provisions exist in APRA's current
legislation (for example, sections 254(2) and 255 of the SIS Act and
section 62 of the Banking Act 1959). The inclusion of these provisions
will enable APRA to obtain information, where appropriate, for routine
monitoring purposes and for other purposes. There is no equivalent in the
Prudential Supervision Bill of section 191-1 of the PHI Act (which
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Private Health Insurance (Prudential Supervision) Bill 2015
provides that the Council may seek an explanation from a private health
insurer), as that capacity will be covered by the monitoring provisions.
7.6 The investigation provisions replace, and update, for APRA's
purposes, two overlapping investigation powers currently located in
Divisions 194 and 214 of the PHI Act. This will avoid the duplication
that currently exists in the PHI Act and the updating of certain provisions
(for example, in relation to warrants, obtaining consent to entry and
identity cards) will bring the investigation powers more into line with the
Regulatory Powers Act. The investigation powers will cover matters
relating to compliance with the risk equalisation fund provisions that will
remain in the PHI Act (including relating to the levy, which APRA will
collect).
7.7 APRA will be able to conduct an investigation where APRA
reasonably suspects that the affairs of an insurer are, or are about to be,
carried on in a way that is not in the interests of policy holders of a health
benefits fund, mirroring the trigger for an investigation by the Council
under section 214-1(1)(a) of the PHI Act. APRA will also have power to
investigate a contravention, or suspected contravention, of an enforceable
obligation, which is similar to the Council's power in section 194-1 of the
PHI Act to investigate where an insurer might have contravened a
Council-supervised obligation.
Comparison of key features of new law and current law
New law Current law
APRA the power to require The Council has the power to request
information and reports from insurers an explanation from an insurer about
in order to regulate. its operations, and the insurer must
respond.
APRA can appoint an inspector to Either the Health Minister or the
carry on an investigation of an Council could conduct an
insurer. With consent or with a investigation, and require a person to
warrant an inspector can access the give evidence. The Health Minister or
insurer's premises. the Council could appoint someone to
access records, books etc of an
insurer.
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Monitoring and investigation
Detailed explanation of new law
Part 6 - Monitoring and investigation
Division 1 - Introduction
Simplified outline of this Part
7.8 APRA may, for the purposes of the Prudential Supervision Bill
or the risk equalisation levy legislation, require insurers to provide
information, reports or documents, and may require officers of insurers to
provide documents. [Part 6, Division 1, section 126]
7.9 APRA may appoint an inspector to investigate the affairs of a
private health insurer in certain circumstances. The powers of an inspector
include power to require a person to provide documents or to appear for
examination, and power to enter premises (either with consent or under a
warrant) and exercise search powers. [Part 6, Division 1, section 126]
Division 2 - Monitoring
Purposes for which powers may be exercised etc.
7.10 The monitoring powers in Division 2 may be exercised for the
purposes of the Prudential Supervision Bill or the risk equalisation levy
legislation. Section 4 of the Prudential Supervision Bill defines 'risk
equalisation levy legislation' to mean the Risk Equalisation Levy Act
2003 and the provisions of the PHI Act that apply in relation to the Risk
Equalisation Levy Act 2003 and the Risk Equalisation Special Account.
The powers cannot be exercised for another purpose. [Part 6, Division 2,
subsection 127(1)]
7.11 The monitoring powers of Division 2 may be exercised in
relation to a particular private health insurer, even if an investigation is
being conducted in relation to the affairs of the insurer. [Part 6, Division 2,
subsection 127(2)]
7.12 All information and reports provided to APRA by private health
insurers under sections 128 and 129 will be covered by the secrecy
provisions in section 56 of the APRA Act (as amended by the
Consequential Amendments and Transitional Provisions Bill) as well as
the Privacy Act 1988, unless the information is already in the public
domain.
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Private Health Insurance (Prudential Supervision) Bill 2015
Power to require private health insurer to provide information and
reports
7.13 APRA may give a written notice requiring an insurer to give
APRA particular information, or a report on particular matters, relating to
the affairs of the insurer, by a specified time. The period specified in the
notice must be reasonable, and must end at least seven days after the day
on which the notice is given. [Part 6, Division 2, section 128]
7.14 A refusal or failure to comply with the notice is an offence under
section 148 of the Prudential Supervision Bill with a maximum penalty of
30 penalty units for an individual.
Power to require production of documents
7.15 APRA may give a written notice requiring a private health
insurer or an officer of the insurer to produce to APRA any documents
relating to the insurer's affairs at a reasonable time and place. APRA, or
an APRA staff member, may inspect, take extracts or make copies of such
a document. The time specified in the notice must be reasonable, and
must be at least seven days after the day on which the notice is given. The
place specified in the notice must also be reasonable. [Part 6, Division 2,
subsections 129(1), (2) and (4)]
7.16 APRA may require any such produced document which is not in
English to be produced in written English. [Part 6, Division 2,
subsection 129(3)]
7.17 Refusal or failure to comply with this requirement is an offence
under section 148 of the Prudential Supervision Bill with a maximum
penalty of 30 penalty units for an individual.
Division 3 - Investigation
Investigation of private health insurers by inspectors
7.18 APRA may in writing appoint an APRA staff member to be an
inspector to investigate the affairs of a private health insurer if APRA has
reason to suspect:
• that the affairs of the insurer are not, or are about to not be,
carried on in the interests of the policy holders of a health
benefits fund of the insurer (this reflects
paragraph 214-1(1)(a) of the PHI Act); or
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Monitoring and investigation
• a contravention of an enforceable obligation (this reflects
section 194-1(2) of the PHI Act. [Part 6, Division 3,
subsection 130(1)]
7.19 The first test (affairs of the insurer not being carried on in
interests of policy holders of a health benefits fund) is intended to focus
on concerns of a general or prudential nature, for example a concern about
the ability of the insurer to meet its obligations to policy holders.
7.20 APRA must not appoint an APRA staff member to be an
inspector unless APRA is satisfied that the staff member has suitable
qualifications and experience to exercise properly the powers of an
inspector. The inspector's instrument of appointment must specify:
• what APRA suspects and why; and
• the matters the investigation will relate to. [Part 6, Division 3,
subsection 130(2) and (3)]
7.21 APRA may, in writing, at any time terminate an investigation; or
terminate the appointment of a person as an inspector; or appoint another
APRA staff member to be an inspector for the purposes of an
investigation. [Part 6, Division 3, subsection 130(4)]
Identity cards for inspectors
7.22 APRA must issue an identity card to each inspector. The card
must be in the form prescribed under APRA rules and contain a recent
photograph [Part 6, Division 3, subsections 131(1) and (2)]. An inspector must
carry the card at all times when exercising their powers under the
Prudential Supervision Bill. [Part 6, Division 3, subsection 131(5)]
7.23 It is an offence if a person who ceased to be an inspector does
not return their identity card to APRA within 14 days after ceasing to be
an inspector. This does not apply if the card was lost or destroyed. [Part 6,
Division 3, subsection 131(3) and (4)]
Power of inspectors
7.24 An inspector may, by written notice, require a person who the
inspector believes to have some knowledge of the affairs of the private
health insurer under investigation:
• to produce to the inspector any or all of the records under the
person's custody or control that relate to the insurer; or
• to give the inspector all reasonable assistance in the person's
power in connection with the investigation; or
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Private Health Insurance (Prudential Supervision) Bill 2015
• to appear before the inspector for examination concerning
relevant matters within the knowledge of the person. [Part 6,
Division 3, subsection 132(1)]
7.25 The period specified in the notice must be reasonable, and must
end at least seven days after the day on which the notice is given. It is an
offence to refuse or fail to comply with a notice (see section 148). [Part 6,
Division 3, subsections 132(1) and (2)]
7.26 An inspector may take possession of records produced under
subsection 131(1) for as long as the inspector thinks necessary, and to take
copies or extracts of the records. [Part 6, Division 3, subsection 132(3)]
7.27 An inspector must allow a person to inspect the records if the
person would have been able to inspect them if the insurer was not
holding them. [Part 6, Division 3, subsection 132(4)]
Person may be represented by lawyer when being examined
7.28 A lawyer acting for a person being examined by an inspector
may attend the examination and, to the extent that the inspector allows,
address the inspector and examine the person in relation to matters on
which the person has been questioned. [Part 6, Division 3, section 133]
Access to premises
The functions of an inspector under this section
7.29 An inspector who is empowered to investigate all or part of the
affairs of a private health insurer and enters premises under
subsections 134(3) or (4) may exercise search powers in relation to
records that the inspector reasonably believes to relate to the affairs of the
insurer. [Part 6, Division 3, subsections 134(1) and (2)]
Entry with consent
7.30 An inspector may enter any premises with the consent of the
occupier to carry out their functions. [Part 6, Division 3, subsection 134(3)]
Entry under warrant
7.31 An inspector may apply for a warrant to enter premises (see
section 135) if the inspector believes, on reasonable grounds, that records
are held there relating to the private health insurer whose affairs the
inspector is investigating. [Part 6, Division 3, subsection 134(4)]
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Monitoring and investigation
General provisions relating to obtaining consent to enter premises
7.32 Before obtaining an occupiers' consent for the purposes of
subsection 134(3), an inspector must tell the occupier they can refuse
consent. [Part 6, Division 3, subsection 135(1)]
7.33 An occupier's consent is only valid if it is voluntary and the
occupier remains free to withdraw consent at any time or to consent to
entry only during a certain time period. [Part 6, Division 3, subsections 135(2),
(3) and (4)]
7.34 An inspector or authorised person must leave the premises if
consent is withdrawn. [Part 6, Division 3, subsection 135(5)]
7.35 If an inspector enters premises with consent of the occupier, but
the inspector has not shown his or her identity card before entering the
premises, the inspector must do so as soon as practicable after entering the
premises. [Part 6, Division 3, subsection 135(6)]
Investigation warrants
7.36 An inspector may apply to a magistrate for an investigation
warrant. The magistrate may issue the warrant if satisfied there are
reasonable grounds for suspecting there are documents at the premises (or
may be within the next 72 hours) about the insurer's affairs which the
inspector is investigating. [Part 6, Division 3, subsections 136(1) and (2)]
7.37 The warrant must not be issued by the magistrate unless the
inspector (or another person) has given the magistrate orally or by
affidavit any further information the magistrates requires about the
reasons for the warrant. [Part 6, Division 3, subsection 136(3)]
7.38 The warrant must state the details specified in subsection 136(4)
which include setting out the legislative power under which the warrant is
issued, the name of the inspector who applied for it, what the warrant
authorises and when it expires (which must be no later than a week from
its issue). [Part 6, Division 3, subsection 136(4)]
Announcement before entry under investigation warrant
7.39 Before entering a premises under an investigation warrant, the
inspector must announce they are authorised to enter the premises, show
their identity card to the occupier (or their representative) if present, and
give the occupier the opportunity to provide access. [Part 6, Division 3,
subsection 137(1)]
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Private Health Insurance (Prudential Supervision) Bill 2015
7.40 An inspector need not do this if they believe on reasonable
grounds they must immediately enter the premises to ensure the execution
of the warrant is not frustrated. [Part 6, Division 3, subsections 137(2)]
7.41 This is subject to an exception where the inspector believes on
reasonable grounds that immediate entry is required, in which case the
inspector must as soon as practicable after entering the premises show his
or her identify card to the occupier or other person. [Part 6, Division 3,
subsection 137(3)]
Inspector to be in possession of investigation warrant
7.42 When executing an investigation warrant, the inspector must
have the warrant, or a copy of it. [Part 6, Division 3, section 138]
Details of warrant etc. to be given to occupier
7.43 An inspector is required to provide a copy of the warrant to the
occupier of the premises, or an occupier's apparent representative, if either
are present, and to inform the person of their rights and responsibilities
under sections 140 (right to observe execution warrant) and 141
(responsibility to provide facilities and assistance). This obligation
ensures that occupiers and representatives, who are present when a
warrant is executed, are granted an opportunity to examine the warrant
and are informed about their rights and responsibilities. [Part 6, Division 3,
section 139]
Right to observe execution of warrant
7.44 The occupier of premises or their representative (or the person is
apparently their representative), who is present when a warrant is
executed, has a right to observe the execution of the warrant on their
premises. This right does not limit how the warrant may be executed, or
place an occupier or their representative under an obligation to witness all
of an authorised person's activities, but it does recognise that a person
should not be excluded during the execution of a warrant unless they
attempt to obstruct the inspection. [Part 6, Division 3, subsections 140(1) and (2)]
7.45 This right does not prevent an execution of warrants in more
than one place at the same time. [Part 6, Division 3, subsection 140(3)]
Responsibility to provide facilities and assistance
7.46 An occupier of premises, or their apparent representative has an
obligation to provide reasonable facilities and assistance to the authorised
person and any person assisting, as required to effectively carry out the
warrant powers. This obligation recognises that investigation powers are
authorised by issuing officers for the purpose of determining whether laws
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Monitoring and investigation
are being complied with and should not be impeded by lack of reasonable
co-operation. The failure of an occupier or their representative to provide
reasonable facilities and assistance carries a penalty of 30 penalty units.
[Part 6, Division 3, section 141]
Concealing etc. records
7.47 A person commits an offence with a penalty of 60 penalty units
or imprisonment for 12 months or both if the person engages in conduct
that results in the concealment, destruction, mutilation or alteration of the
documents relating to particular affairs of a private health insurer whose
affairs are being investigated. [Part 6, Division 3, subsection 142(1)]
7.48 It is a defence if the person did not act with intent to defeat the
purposes of this Division or delay or obstruct the investigation. [Part 6,
Division 3, subsection 142(2)]
Reports of inspectors
7.49 An inspector must report in writing to APRA on completion of
the investigation and comply with any directions of APRA to provide
reports. The section also allows the inspector to make one or more
additional reports, at the inspector's discretion, during the investigation.
[Part 6, Division 3, subsection 143(1)]
7.50 The inspector may make any recommendation in the report they
consider is appropriate, but is precluded from including in a report
recommendations relating to criminal proceedings or opinions that a
person has committed a criminal offence. The inspector must state any
opinion that criminal proceedings ought to be instituted or that a person
has committed a criminal offence, in writing, to APRA, but this must be
done separately from the report. [Part 6, Division 3, subsections 143(2),
(3)and (4)]
Dissemination of reports
7.51 APRA must give a copy of an inspector's report under
paragraph 143(1)(a) to the private health insurer to which it relates, unless
APRA thinks that a copy should not be provided having regard to
proceedings that have been or might be instituted. [Part 6, Division 3,
subsections 144(1) and (2)]
7.52 If APRA has given a copy of the report to the insurer it may, if it
thinks it in the public interest, publish the whole or part of a report.
[Part 6, Division 3, subsection 144(3)]
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Private Health Insurance (Prudential Supervision) Bill 2015
7.53 A court hearing proceedings under the Prudential Supervision
Bill or risk equalisation levy legislation against an insurer or another
person in respect of matters dealt with in a report may order that a copy of
the report be provided to the insurer or other person. [Part 6, Division 3,
subsection 144(4)]
Liability for publishing reports etc.
7.54 A person (excluding APRA or an APRA staff member)
publishing in good faith a copy of, or a fair extract from, an inspector's
report published under subsection 144(3) is protected from any action or
proceeding. [Part 6, Division 3, section 145]
7.55 An action is generally in good faith if the person making it is nor
actuated by ill will or any other improper motive.
7.56 APRA and its staff will be covered by the indemnity in
section 58 of the APRA Act in relation to the above matters.
Powers of magistrates
7.57 The power conferred on a magistrate under Division 3 is
conferred on the magistrate in their personal capacity and not as a
representative of the court. A magistrate is not obligated to accept the
power conferred. Magistrates are granted the protection and immunities of
the court and members of the court when exercising these powers. This
recognises that issuing a warrant is an executive function and not an
exercise of judicial power. [Part 6, Division 3, section 146]
Delegation by inspectors
7.58 An inspector may delegate in writing any of their powers under
Division 3 to an APRA staff member. [Part 6, Division 3, subsection 147(1)]
7.59 A delegate must produce the instrument of delegation (or a
copy) to any person who may be affected by the exercise of the delegated
powers and who asks to see the instrument. [Part 6, Division 3,
subsection 147(2)]
Division 4 - Other matters
Refusing or failing to comply with requirements
7.60 A person commits an offence with a penalty of 30 penalty units
if the person fails to comply with a requirement under section 128, 129 or
132. The person need only comply with such a requirement to the extent
they are capable of doing so. [Part 6, Division 4, section 148]
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Monitoring and investigation
Self-incrimination
7.61 A person is not excused from providing answers, information, or
a report or document, in an investigation on the ground that they may be
incriminated or liable to a penalty on the ground that this might
incriminate them or make them liable to a penalty. In order to protect the
integrity of the regulatory regime, and protect the interests of policy
holders, it is necessary to override the privilege against self-incrimination
so that APRA can acquire all relevant information relating to the financial
position of a private health insurer and the insurer's and other relevant
persons' compliance with the regulatory regime. This is consistent with
the approach taken in the PHI Act (for example, section 214-15, relating
to compliance with requirements of inspectors) and other legislation
administered by APRA (for example section 287 of the SIS Act). [Part 6,
Division 4, subsection 149(1)]
7.62 However, if the person is an individual, any information,
document or thing obtained because of a person's assistance is not
admissible in evidence against them in any proceedings (either criminal or
civil) except proceedings in relation to section 137.1 or 137.2 of the
Criminal Code (which relate to the provision of false or misleading
information) or proceedings under section 120 for disqualification (see
subsection 122(4)). This provides immunity in relation to direct use of the
information, document or thing in other proceedings (except, as noted,
where the other proceedings are for disqualification under section 120). It
does not provide for derivative use immunity, that is, immunity in relation
to anything obtained as a direct or indirect consequence of the production
of the information, document or thing. [Part 6, Division 4, subsection 149(2)]
7.63 In this respect the provision is consistent with the majority of
self-incrimination provisions in the other legislation administered by
APRA, including section 287 of the SIS Act. A difficulty with derivative
use immunity is that it means that further evidence obtained through a
chain of inquiry resulting from the protected evidence cannot be used in
relevant proceedings even if the additional evidence would have been
uncovered by the regulator through independent investigation processes.
A related issue is that it can be very difficult and time-consuming in a
complex investigation to prove whether evidence was obtained as a
consequence of the protected evidence or obtained independently. In other
respects section 149 offers broader protection than similar provisions in
other legislation in that it does not require the person to first state that the
answer might tend to incriminate them, and the protection applies to civil
proceedings (other than for disqualification) as well as criminal
proceedings.
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Private Health Insurance (Prudential Supervision) Bill 2015
Protection from liability
7.64 A person's compliance with a requirement made of the person
under Part 6 or of an inspector does not lead them to incur any liability to
any other person because of that compliance. [Part 6, Division 4, section 150]
106
Chapter 8
Enforceable undertakings
Outline of chapter
8.1 Part 7 of the Prudential Supervision Bill relates to APRA's
ability to accept enforceable undertakings.
8.2 Unless otherwise stated, all references in this Chapter relate to
the Prudential Supervision Bill.
Summary of new law
8.3 Part 7 is based on equivalent provisions in the
Life Insurance Act. It enables APRA to obtain an enforceable
undertaking from an insurer or a person who has had involvement with an
insurer (for example, an actuary or officer), including in circumstances
where lengthy legal action might otherwise be taken against that person.
Comparison of key features of new law and current law
New law Current law
APRA make accept an enforceable The Council may accept an
undertaking from a person in enforceable undertaking from a
connection with a matter in relation to private health insurer if the Council
which APRA has a power or function considers that compliance with the
under the Prudential Supervision Bill undertaking will be likely to improve
or the risk equalisation levy the insurer's operations in relation to
legislation. a Council-supervised obligation.
Detailed explanation of new law
Part 7 - Enforceable undertakings
Simplified outline
8.4 APRA may accept an undertaking given by a person in
connection with matters relating to the Prudential Supervision Bill or the
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Private Health Insurance (Prudential Supervision) Bill 2015
risk equalisation levy legislation. APRA may apply to the Federal Court
for an order (for example, an order directing compliance) if APRA
considers that an undertaking has been contravened. [Part 7, Division 1,
section 151]
Enforceable undertakings
8.5 APRA may accept a written undertaking from a person in
connection with matters in relation to which APRA has a power or
function under the Prudential Supervision Bill (which will include
prudential standards and APRA rules) or the risk equalisation fund
legislation. [Part 7, subsection 152(1)]
8.6 The enforceable undertaking may be withdrawn or varied at any
time, if APRA consents. [Part 7, subsection 152(2)]
8.7 A decision to consent or not to consent is given on a case by
case basis and is therefore not a legislative instrument. Therefore the
statement in subsection 152(3) therefore does not constitute a substantive
exemption from the Legislative Instruments Act, rather it is a statement of
the 'status quo'. This decision is not listed as a reviewable decision in
section 168 of the Prudential Supervision Bill. This is to ensure that
enforceable undertakings can be used to finalise issues and to avoid
ongoing litigation. Furthermore, insurers voluntarily enter into
enforceable undertakings. [Part 7, subsection 152(3)]
8.8 If APRA considers a person has breached an enforceable
undertaking, it may apply to the Federal Court for various orders,
including ordering:
• compliance with the undertaking;
• the person to pay to the Commonwealth any amount gained
due to the breach; or
• compensation to any other person who has suffered loss due
to the breach. [Part 7, subsection 152(4) and (5)]
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Chapter 9
Remedies in the Federal Court
Outline of chapter
9.1 Part 8 of the Prudential Supervision Bill relates to remedies
available in the Federal Court for a private health insurer's
non-compliance with an enforceable obligation.
9.2 Unless otherwise stated, all references in this Chapter relate to
the Prudential Supervision Bill.
Summary of new law
9.3 The provisions of Part 8 of the Prudential Supervision Bill are
based on Division 203 of the PHI Act (other than section 203-20 which
relates to an adverse publicity order).
9.4 Division 203 will continue to remain in the PHI Act, but with
references to the Council omitted.
Comparison of key features of new law and current law
New law Current law
The Health Minister will continue to The Health Minister has same powers
have powers under Division 203 of as the Council under Division 203,
the PHI Act, including power to seek but the Health Minister's powers
an adverse publicity order, but these extend to all 'enforceable obligations'
powers will be confined to within the meaning of the PHI Act.
enforceable obligations under the They also include power to seek an
PHI Act. They will not extend to the adverse publicity order and seek a
Prudential Supervision Bill. compensation order.
Accordingly there will be no overlap
between the Health Minister's powers
and responsibilities in this area and
APRA's powers. APRA will not have
power to seek an adverse publicity
order.
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Private Health Insurance (Prudential Supervision) Bill 2015
New law Current law
APRA may apply to the Federal The Council may apply to the Federal
Court for a declaration that a private Court for a declaration that a private
health insurer has contravened an health insurer has contravened a
enforceable obligation within the Council-supervised obligation with
meaning of the Bill. the meaning of the PHI Act.
The application must be brought The application must be brought
within four years of the alleged within six years of the alleged
contravention. contravention.
'Enforceable obligation' is defined in 'Council-supervised obligation'
section 4 to mean any of the means a provision of the PHI Act, or
following: rules regulations or a direction under
• a provision of the Prudential the Act, that relate to risk equalisation
Supervision Bill; or health benefits funds or prudential
standards.
• a direction given under the
Prudential Supervision Bill;
• a provision of the risk equalisation
levy legislation;
• any condition on an insurer's
registration; and
• if the insurer is a restricted access
insurer, a provision in its
constitution or rules in order to
comply with the requirements in
subsection 15(3).
The new law mirrors the current law. If the court is satisfied that an officer
of the private health insurer failed to
take reasonable steps to prevent the
insurer contravening the obligation,
the declaration of contravention must
specify that officer.
The new law mirrors the current law. If the declaration of contravention
specifies an officer, the court may
order the officer to pay the
Commonwealth a pecuniary penalty.
If the court has made a declaration of Only if the Minister (not the
contravention, the court may order regulator) has applied to the court for
the private health insurer specified in a declaration of contravention, if the
the declaration to compensate an court has made a declaration of
individual for injury or loss suffered contravention, the court may order
by the individual as a result of the the private health insurer specified in
contravention. the declaration to compensate an
individual for injury or loss suffered
by the individual as a result of the
contravention.
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Remedies in the Federal Court
New law Current law
The new law mirrors the current law. If the court has made a declaration of
If the court has made a declaration of contravention, the court may make
contravention, the court may make any other order that the Council
any other order that APRA applies applies for.
for.
The court must not make a civil This mirrors the new law.
penalty order against an officer if the
officer has been convicted of an
offence based on substantially the
same relevant conduct, and
proceedings for a civil penalty order
against are stayed if there are criminal
proceedings based on substantially
the same conduct.
Criminal proceedings may be This mirrors the new law.
commenced after civil proceedings
under Part 8 even if they relate to
substantially the same conduct, but
evidence given in the civil
proceedings is not admissible in
certain circumstances.
APRA may require a person to assist This largely mirrors the new law.
in relation to proceedings for a
declaration of contravention or for a
civil penalty order. However, it must
appear to APRA that the person from
whom assistance is sought is unlikely
to have (i) contravened the
enforceable obligation to which the
application relates or (ii) committed
an offence based on the same or
substantially the same conduct.
A person against whom and order is This largely mirrors the new law
sought imposing liability in respect of
a contravention of an enforceable
obligation may apply to the court for
full or partial exoneration (where it
appears they have acted honestly and
in all the circumstances should be
excused from liability).
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Private Health Insurance (Prudential Supervision) Bill 2015
Detailed explanation of new law
Part 8 - Remedies in the Federal Court
Simplified outline of this Part
9.5 If APRA is satisfied that a private health insurer has contravened
an enforceable obligation, APRA may apply to the Federal Court for a
range of remedies. These may include a civil penalty order against an
officer of the insurer who failed to take reasonable steps to prevent the
contravention. An enforceable obligation is defined in section 4 of the
Prudential Supervision Bill and includes a provision of the Prudential
Supervision Bill, rules or standards, a direction under the Act, a provision
of the risk equalisation levy legislation, a registration condition or an
obligation in the insurer's constitution. [Part 8, Division 1, section 153]
APRA may apply to the Federal Court
9.6 APRA may apply to the Federal Court for a declaration of
contravention, and seek, APRA is satisfied that a private health insurer
has contravened an enforceable obligation, one or more of:
• an order imposing a civil penalty under section 156;
• a compensation order under section 157; and/or
• any other order that APRA considers will redress the
contravention. [Part 8, subsection 154(1)]
9.7 An application must be made within four years of the alleged
contravention. [Part 8, subsection 154(2)]
9.8 These provisions apply in relation to all enforceable obligations
including a contravention of risk equalisation levy legislation. However,
these provisions do not apply to a contravention of any of the other
APRA-administered levy legislation.
Declarations of contravention
9.9 If the Federal Court is satisfied that a private health insurer has
contravened an enforceable obligation it must make a declaration of
contravention specifying:
• the enforceable obligation that was contravened;
• the contravening insurer;
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Remedies in the Federal Court
• the conduct that constituted the contravention; and
• the officer (only if the Federal Court is satisfied that an
officer of the insurer failed to take reasonable steps to
prevent the contravention). [Part 8, subsection 155(2)]
9.10 The Federal Court's declaration is conclusive evidence of these
matters. [Part 8, subsection 155(3)]
Civil penalty order
9.11 As currently provided under subsection 203-10(1) of the
PHI Act, the Federal Court may order the officer to pay the
Commonwealth a pecuniary penalty of up to 1,000 penalty units, if it has
made a declaration of contravention that specifies an officer. [Part 8,
subsection 156(1)]
9.12 An order given under subsection 156(1) is a civil penalty order.
[Part 8, subsection 156(2)]
9.13 If the Federal Court is satisfied that a court has ordered the
officer to pay punitive damages in respect of the contravention, or the
officer's failure to take reasonable steps to prevent the contravention, it
must not make a civil penalty order. [Part 8, subsection 156(3)]
9.14 An order given under subsection 156(3) is a civil debt payable to
the Commonwealth. [Part 8, subsection 156(4)]
9.15 The Commonwealth may enforce an order made in civil
proceedings against the officer to recover the officer's debt. This debt is
taken to be a judgment debt. [Part 8, subsection 156(5)]
9.16 The provision allows the Court to impose a large maximum
pecuniary penalty. However, civil penalties must be large enough to act as
an effective deterrent to the offence and also to reflect the seriousness of
the offence. This is because civil penalties do not carry the criminal
convictions/the stigma attached to a criminal offence.
Compensation order
9.17 If the Federal Court has made a declaration of contravention
under section 155, it may order the private health insurer to compensate
an individual for any injury or loss suffered as a result of the
contravention. In the PHI Act, this Court could only make this order when
the Health Minister had applied to the Court. It is necessary to confer this
power on APRA, even though it is not a current Council power, because
the Health Minister will not undertake enforcement actions in relation to
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Private Health Insurance (Prudential Supervision) Bill 2015
contraventions of enforceable obligations under the Prudential
Supervision Bill. [Part 8, subsection 157(1)]
9.18 The order must specify the amount of compensation and that it
may be enforced as if it were a judgment of the Federal Court.
[Part 8, subsections 157(2) and (3)]
Other order
9.19 If the Federal Court has made a declaration of contravention, it
may make any order sought by APRA, which will be enforced as if it
were a judgement of the Federal Court. [Part 8, section 158]
Civil evidence and procedure rules for declarations and orders
9.20 The Federal Court must apply the rules of evidence and
procedure for civil matters in proceedings under Part 8. [Part 8, section 159]
9.21 The standard of proof in civil proceedings is determined under
section 140 of the Evidence Act 1995 as the balance of probabilities.
Civil proceedings after criminal proceedings
9.22 The Federal Court must not make a civil penalty order against an
officer of a private health insurer if the officer has been convicted of an
offence involving substantially the same conduct to which the court had
regard when determining that the officer failed to take reasonable steps to
prevent the insurer from contravening the enforceable obligation. [Part 8,
section 160]
Criminal proceedings during civil proceedings
9.23 Proceedings for a civil penalty order against an officer remain if:
• criminal proceedings are started against the officer for an
offence; and
• the offence is constituted by conduct that is substantially the
same as the conduct which would led the Federal Court to
impose a civil penalty. [Part 8, subsection 161(1)]
9.24 The proceedings are dismissed if the officer is convicted of the
offence. [Part 8, subsection 161(2)]
Criminal proceedings after civil proceedings
9.25 Criminal proceedings may be started against a person for
conduct substantially the same as the conduct constituting a contravention
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Remedies in the Federal Court
of an enforceable obligation regardless of whether a declaration of
contravention has been made under Part 8 or an order for a civil penalty or
to pay compensation has been made against the person. [Part 8, section 162]
Evidence given in proceedings for penalty not admissible in criminal
proceedings
9.26 Evidence of information or documents produced by an officer of
a private health insurer is not admissible in criminal proceedings against
the officer if:
• the officer previously gave the evidence or produced the
documents in proceedings for a civil penalty order against the
officer (whether or not the order was made); and
• the conduct alleged to constitute the offence is substantially
the same as the conduct to which the Federal Court had
regard in satisfying itself that the officer failed to take
reasonable steps to prevent the insurer contravening an
enforceable obligation under paragraph 155(2)(d). [Part 8,
section 163]
9.27 This protection does not apply to criminal proceedings against
the officer for providing false evidence in the proceedings for the civil
penalty order. [Part 8, section 163]
APRA may require person to assist
9.28 APRA may, in writing, require a person to give all reasonable
assistance in connection with an application by APRA for:
• a declaration of contravention in relation to a private health
insurer; or
• a declaration of contravention that specifies an officer of a
private health insurer; or
• a civil penalty order in relation to an officer of a private
health insurer. [Part 8, subsection 164(1)]
9.29 A person commits an offence with a penalty of 5 penalty units if
they do not comply with a requirement under subsection 164(1). [Part 8,
subsection 164(1)]
9.30 APRA may require a person to assist in connection with an
application for a declaration or order under subsection (1) only if:
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Private Health Insurance (Prudential Supervision) Bill 2015
• it appears to APRA that the person from whom assistance is
sought is unlikely to have contravened the enforceable
obligation, or committed an offence constituted by the same,
or substantially the same, conduct to which the application
relates; and
• APRA reasonably suspects or believes the person required to
assist can give relevant information. [Part 8, subsection 164(3)]
9.31 APRA cannot require a person to assist if the person is, or has
been, a lawyer for the person suspected of contravening the enforceable
obligation. [Part 8, subsection 164(4)]
9.32 APRA may apply to the Federal Court to order the person to
comply with the requirement to assist in a specified way. Only APRA
may apply for such an order. [Part 8, subsection 164(5)]
9.33 It does not matter whether the application mentioned in
subsection (1) has actually been made for the purposes of this section.
Requirements under subsection 164(1) do not abrogate or affect the law
relating to legal professional privilege, or any other immunity, privilege or
restriction that applies to the disclosure of information, documents or
other things. [Part 8, subsection 164(6)]
116
Chapter 10
Miscellaneous
Outline of chapter
10.1 Part 9 of the Prudential Supervision Bill relates to:
• relief from liability;
• annual publication of information relating to health benefits
funds;
• the decisions of APRA that are internally reviewable and
reviewable by the AAT;
• approvals and determinations by APRA;
• powers of the Federal Court;
• approved forms;
• delegation by the Minister; and
• APRA rules.
10.2 Unless otherwise stated, all references in this Chapter relate to
the Prudential Supervision Bill.
Comparison of key features of new law and current law
New law Current law
When civil liability is imposed under No right to apply for relief on this
certain part s of the act, a person who basis in relation to the corresponding
has acted honestly can apply to the liability.
Federal Court to seek whole or partial
relief.
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Private Health Insurance (Prudential Supervision) Bill 2015
New law Current law
APRA is required to publish The Council is required to produce an
information relating to health benefits annual report on private health
funds. This will reflect the current insurers to the Minister.
requirements applying to the Council
in relation to content. Accordingly it
will provide for APRA to continue
the publication of the annual report
on the operations of private health
insurers.
The AAT can review certain The AAT can review certain
decisions. decisions (section 328-5 of the
PHI Act).
Affected parties are entitled to The PHI Act does not provide for an
internal review of reviewable internal review process.
decisions.
APRA can make certain rules. Certain Private Health Insurance
Rules are made by the Council. The
Health Minister has power to make
rules, including the registration rules
and the enforcement rules, under
section 333-20 of the PHI Act.
Detailed explanation of new law
Part 9 - Miscellaneous
Simplified outline of this Part
10.3 Part 9 deals with miscellaneous matters such as relief from
liability in certain proceedings under this Act, annual publication of
information relating to health benefits funds, review of decisions,
approved forms and APRA rules. [Part 9, section 165]
Relief from liability
10.4 Part 9 of the Prudential Supervision Bill allows a person,
including an officer of an insurer to apply to the Federal Court to grant
relief from liability, where the officer has acted honestly and the
circumstances are such that the Court decides it would be fair to grant
whole or partial relief from liability. The purpose of this provision is to
align directors duties with those of the Corporations Act, and to 'excuse
company officers from liability in situations where it would be unjust and
oppressive not to do so, recognising that such officers are business men
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Miscellaneous
and women who act in an environment involving risk and commercial
decision making.'1 [Part 9, section 166)]
10.5 A person can apply for relief if there are proceedings underway
for liability for losses caused by an insurer contravening the Prudential
Supervision Bill (section 46), losses caused by a transaction made while
the fund was under management (subsection 76(1)), losses caused a
failure to remedy a contravention (section 89) and liability following
contravention of an enforceable undertaking. A person can also apply for
relief if they consider the proceedings described above will begin. [Part 9,
subsections 166(1) (2) and (3)].
Annual publication of information relating to health benefits funds
10.6 The Council provided various data and reports to the industry
and the public and it is intended that these will continue following
transition to APRA. These reports are important to the efficient and
effective operation of the industry, and among other benefits, provide
transparency around risk equalisation calculations.
10.7 The Prudential Supervision Bill will provide for APRA to
continue the publication of the Annual Report on the Operation of Private
Health Insurers, currently published by the Council under the PHI Act.
Following 30 September each year, APRA will publish the following
information on its website, in respect of the operations during that
financial year, of each health benefits fund conducted by an insurer:
• premiums payable to the fund;
• other amounts payable to the fund;
• fund benefits payable out of the fund;
• management expenses;
• other amounts payable out to the fund;
• the balance of the fund at the end to that financial year;
• details of how the reserves of the fund have been invested;
and
1
Daniels v Anderson (1995) 37 NSWLR 438 at 525.
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Private Health Insurance (Prudential Supervision) Bill 2015
• any other information required by APRA rules made for the
purpose of section 166A. [Part 9, subsection 167(1)]
10.8 None of the information published may be personal information
relating to a person insured under a private health insurance policy. [Part 9,
subsection 167(2)]
10.9 Section 167 of the Prudential Supervision Bill is based on
sections 264-15 of the PHI Act and section 348A of the SIS Act.
10.10 The Council also releases data collected, which is distributed
and published through a number of mechanisms, to the private health
insurance industry. In some cases, the data is released at an aggregate
industry level. In other cases, the data is released or published at an
individual entity level.
10.11 This data assists with benchmarking and transparency of risk
equalisation payments (and the underlying gross deficit and calculated
deficit, and movements and trends in these amounts by state and by
insurer). The data is also used for various other purposes to assist the
industry.
10.12 From commencement, such data will be collected under the
FS(CoD) Act (as amended), which will enable APRA to continue to
collect information from private health insurers as specified in the
reporting standards.
10.13 The Private Health Insurance Ombudsman will continue to
publish the State of the Health Funds report on its website, using data
collected by APRA.
Review of decisions
10.14 An application may be made to the AAT for review of the
decisions set out in the table in section 168. [Part 9, section 168]
Reviewable decisions
Item Decision Provision under which
decision is made
1 to refuse an application for registration as a section 15
private health insurer
2 to grant an application, subject to terms and section 15
conditions, for registration as a private
health insurer
3 to refuse an application for approval for a section 20
private health insurer to convert to being
registered as a for profit insurer
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Miscellaneous
Reviewable decisions
Item Decision Provision under which
decision is made
4 to refuse to approve the crediting of an subparagraph 27(3)(b)(ii)
amount to a health benefits fund of a private
health insurer
5 to refuse to approve a restructure of the section 32
health benefits funds of a private health
insurer
6 to refuse to approve a transfer of the health section 33
benefits funds of one or more private health
insurers
7 to refuse to approve a termination of the section 37
health benefits funds of a private health
insurer
8 to make, vary or revoke a prudential section 92
standard referred to in paragraph 92(3)(c)
9 to give a direction under section 96 on a section 96
ground specified in paragraphs 96(1)(a), (b)
or (c)
10 to vary, or to refuse to vary or revoke, a section 99
direction that was given under section 96 on
a ground specified in paragraphs 96(1)(a),
(b) or (c)
11 to give a direction to end the appointment of section 115
a person as appointed actuary
10.15 The Prudential Supervision Bill establishes an internal review
process, and allows a person affected by one of the reviewable decisions
in the table above to request APRA to reconsider the decision (within
21 days of receiving notice of the original decision or such further time as
APRA allows). This gives insurers an additional opportunity for
challenging APRA's decisions. [Part 9, subsection 168(2)]
10.16 Persons whose decisions that are confirmed or varied by APRA
may then make applications to the AAT to review those decisions. [Part 9,
subsection 168(7)]
10.17 An application made to the AAT will be subject to section 41 of
the Administrative Appeals Tribunal Act 1975 and its provisions on the
operation and implementation of decisions that are subject to review.
[Part 9, Division 1, subsections 168(8) and (9)]
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Private Health Insurance (Prudential Supervision) Bill 2015
Statements to accompany notification of decisions
10.18 When a reviewable decision is made and notice of the decision
is in writing, APRA must inform the affected party that they can have the
decision reconsidered in accordance with subsection 167(8) of the
Prudential Supervision Bill and that, if dissatisfied with the
reconsideration decision, they may then apply to the AAT for review of
that decision. [Part 9, subsection 169(1)]
10.19 If APRA confirm or varies a decision under subsection 168(4)
and gives a person notice in writing of that decision, the notice must
include a statement that a person whose interests are affected by the
decision may apply to the AAT for review of the decision. However, a
failure to provide a statement under subsection 169(1) or (2) of the
Prudential Supervision Bill will not affect the validity of the decision.
[Part 9, subsection 169(2) and (3)]
Approvals, determinations etc. by APRA
10.20 APRA is authorised to give approval, make a determination or
do an act under a provision of the Prudential Supervision Bill, if the
Prudential Supervision Bill refers to such actions but does not expressly
authorise APRA to take those actions. [Part 9, section 170]
Powers of Federal Court
10.21 The powers conferred on the Federal Court by this Prudential
Supervision Bill do not affect any other power of the Federal Court.
[Part 9, section 171]
Approved forms, and giving documents not required to be in approved
forms
10.22 A notice, statement, application or other document is in the
approved form if:
• it is in the form approved in writing by APRA;
• contains information that the form requires (including being
accompanied by other documentation that the form requires);
• is signed by a person in accordance with any applicable
requirements specified in the form or APRA rules; and
• the giving of the form is in accordance with any applicable
requirements specified in the form or APRA rules. [Part 9,
subsection 172(1)]
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Miscellaneous
10.23 Requirements for the giving of forms electronically may be
specified in the form or APRA rules. For example, a form may include
requirements relating to electronic signatures, or for the use of specified
software. [Part 9, subsection 172(2)]
10.24 The Prudential Supervision Bill allows APRA to make rules on
the manner in which other documents (that are not required to be in
approved forms) are to be given. [Part 9, subsection 172(4)]
Delegation by Minister
10.25 The Minister may delegate their powers in writing under the
Prudential Supervision Bill to an SES employee (or acting SES employee)
in the Department. [Part 9,Division 1, section 173]
10.26 Section 15 of the APRA Act allows APRA to delegate any
functions or powers by any law of the Commonwealth to an APRA
member or an APRA staff member. This includes APRA's existing
powers to make prudential standards under a range of Acts. Section 15 of
the APRA Act will apply to all the powers and functions conferred on
APRA by the Prudential Supervision Bill, including APRA's powers to
make prudential standards and rules.
10.27 Sections 92 and 174 of the Prudential Supervision Bill limit the
delegation of the powers to make prudential standards and rules to senior
APRA people.
APRA rules
10.28 APRA may, by legislative instrument, make rules which
prescribe matters which the Prudential Supervision Bill requires or
permits APRA to make, or is necessary or convenient for APRA to make
for carrying out or giving effect to the Prudential Supervision Bill. This
power is subject to subsection 174(3) of this Prudential Supervision Bill,
which broadly ensures that the APRA rules cannot impose requirements
that would normally be in an Act, such as powers of arrest. It is envisaged
that the APRA rules will carry over some of the rules which used to be
made under the PHI Act, such as rules around the eligibility criteria for
registration as a private health insurer and rules governing how a health
benefits fund is managed. In particular, APRA proposes to substantially
remake current rules under the PHI Act relating to: the expenditure and
application of health benefits funds; the restructure of health benefits
funds; the merger and acquisition of health benefits funds; notification
requirements; registration (including replicating current descriptions of
restricted access groups); risk equalisation administration; and
enforcement (including external management of health benefits funds).
[Part 9, subsection 174(1)]
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Private Health Insurance (Prudential Supervision) Bill 2015
10.29 APRA rules may provide for APRA to exercise powers and
discretions under the rules. [Part 9, subsection 174(2)]
10.30 APRA's rules may not create an offence or civil penalty,
provide powers to arrest, detain, enter, search or seize, impose a tax,
appropriate an amount from the Consolidated Revenue Fund or amend
this Prudential Supervision Bill. This limits delegation of power to APRA.
Paragraph 174(3)(e) prohibits the making of rules that directly amend the
text of the Act. 'Directly amend' means make an amendment that would
need to be incorporated in any reprint of the Act by the Government
Printer (see section 2 of the Acts Publication Act 1905). The paragraph
does not prohibit a rule that modifies the effect of a provision, such as by
providing that a provision has effect as if it had been amended in a
specified way (for example, as permitted by section 85) , but does not
make a direct amendment of any Act. [Part 9, subsection 174(3)]
10.31 Under section 15 of the APRA Act, APRA may delegate its
power to make, vary or revoke APRA rules. The delegation of powers is
to an APRA Member or an APRA staff member who is an Executive
General Manager level, which is the highest level within APRA below an
APRA member. In practice, all prudential standards will ordinarily be
considered in detail at meetings of APRA's executive group meetings,
which include includes all APRA members and Executive General
managers, prior to being finalised. The ability to delegate to an Executive
General Manager gives APRA some administrative flexibility, as there are
only three APRA members, and the members are often required to travel
overseas, and therefore delegation to an Executive General Manager may
be required. [Part 9, subsection 174(4)]
124
Chapter 11
Consequential Amendments and
Transitional Provisions
Outline of chapter
11.1 This Chapter provides an explanation of the Consequential
Amendments and Transitional Provisions Bill which forms part of the
package that gives effect to the transfer of the Council's functions to
APRA.
11.2 Unless otherwise stated, all references in this Chapter relate to
the Consequential Amendments and Transitional Provisions Bill.
Context of amendments
11.3 The Prudential Supervision Bill will confer prudential
supervision functions relating to private health insurers, currently
conferred on the Council under the PHI Act, on APRA. Consequential
amendments are required in relation to a number of Acts to facilitate the
transfer of functions to APRA and remove duplication of functions
between the PHI Act and the Prudential Supervision Bill.
Summary of new law
11.4 The Consequential Amendment and Transitional Provisions Bill
includes amendments to:
• the APRA Act to provide for matters relating to secrecy of
information concerning private health insurers, and to
provide for the administration of industry levies;
• the FISLC Act to cater for the collection of the private health
insurance supervisory levy and the collection of the collapsed
insurance levy;
• the FS(CoD) Act to facilitate the collection of data relating to
private health insurers by APRA;
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Private Health Insurance (Prudential Supervision) (Consequential Amendments and
Transitional Provision) Bill 2015
• the ITAA 1997 to update or replace references to the
Prudential Supervision Bill;
• the Life Insurance Act to replace a reference to the PHI Act;
• the Medibank Private Sale Act to include references to the
Prudential Supervision Bill in certain provisions that
currently refer to the PHI Act;
• the Ombudsman Act to enable the sharing of information
with APRA; and
• the PHI Act to remove the prudential supervision powers,
remove references to the Council and to repeal the provisions
creating the Council.
11.5 In addition, transitional provisions will ensure that legal actions
taken prior to the transfer day, such as the registration of private health
insurers, and other processes, such as legal proceedings, will continue
under the Prudential Supervision Bill. Finally, the Consequential
Amendments and Transitional Provisions Bill contains machinery
transitional provisions for the transfer of the Council staff, assets,
liabilities and records from the Council to APRA.
Comparison of key features of new law and current law
New law Current law
Part 1 - Amendments
Divisions 1 - Main amendments
Subsection 3(2) of the APRA Act will The APRA Act does not specify
be amended to include private health private health insurers as bodies
insurers in the definition of 'body regulated by APRA for the purposes
regulated by APRA'. The Prudential of the secrecy provision in section 56
Supervision Bill and the risk or for the purposes of the
equalisation levy legislation will be FS(CoD) Act.
included in the definition of
'prudential regulation framework
law' in subsection 3(1) of the
APRA Act, which will ensure that a
document or information obtained for
the purposes of such legislation will
be protected under section 56 of the
APRA Act.
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New law Current law
The APRA Act will include a new The machinery provisions for levies
Special Account to administer the in the APRA Act do not cater for
Collapsed Insurer Levy, should there private health insurance industry
be a requirement for it to be levied, levies.
and section 50 will be amended to
ensure that the Minister's annual
supervisory levy determination works
appropriately in relation to the Private
Health Insurance Supervisory Levy.
The FISLC Act will provide for the The FISLC Act does not provide for
collection of the Private Health the collection of private health
Insurer Supervisory Levy and the insurance industry levies by APRA.
Collapsed Insurer Levy.
The inclusion of private health The FS(CoD) Act does not currently
insurers in the definition of 'body provide for the collection of data
regulated by APRA' in section 3(2) from private health insurers by
of the APRA Act will flow through to APRA.
the definition of 'regulated entity' in
the FS(CoD) Act and ensure that data
can be collected from private health
insurers under that Act. An additional
amendment to the objects clause in
the FS(CoD) Act to put it beyond
doubt that APRA can collect data
from private health insurers for the
purposes of the Risk Equalisation
Special Account (as well as
prudential supervision purposes).
The PHI Act will cease to include The PHI Act contains provisions
references to the Council (which will relating to the Council, including its
cease to exist) and will no longer constitution and functions, and
include prudential regulation confers prudential supervision and
supervision and enforcement enforcement functions on the
functions (as these will move to the Council. The PHI Act also contains
Prudential Supervision Bill). The provisions under which the Council
Council's roles in relation to the collects the Risk Equalisation,
collection of the Risk Equalisation Council Administration and
Levy and the administration of the Collapsed Insurer Levies and
Risk Equalisation Special Account administers the Risk Equalisation
(formerly the Risk Equalisation Trust Trust Fund.
Fund) will be given to APRA.
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New law Current law
Part 2 - Specific transitional provisions
A number of transitional provisions The PHI Act contains provisions
have been provided for to ensure that relating to:
legal actions taken prior to the • registration of private health
transfer day and other processes will insurers;
continue under the Prudential
Supervision Bill. • health benefit funds - restructures,
mergers and acquisitions, and
terminating and external
management;
• other obligations of private health
insurers;
• enforcement; and
• financial and other matters.
Part 3 - General transitional provisions
Machinery transitional provisions that No equivalent provisions in the
provide for the transfer of the Council PHI Act.
staff, assets, liabilities and records
from the Council to APRA.
Detailed explanation of new law
Schedule 1 - Consequential amendments
Commencement
11.6 The Consequential Amendment and Transitional Provisions Bill
has multiple commencement dates. Sections 1 to 3 commence on Royal
Assent. Division 1 of Schedule 1 and Part 2 of Schedule 1 commence at
the same time as the Prudential Supervision Bill. Items 178-180 of
Schedule 1 commence immediately after the commencement certain items
of the Private Health Insurance Amendment Act 2015 or at same time as
the Prudential Supervision Bill, whichever is the later date. Item 181 of
Schedule 1 (which amends the Prudential Supervision Bill) commences
either after the commencement of the Norfolk Island Legislation
Amendment Act 2015 or the commencement of the Prudential Supervision
Bill, whichever is the later date. Item 182 of Schedule 1 (which also
amends the Prudential Supervision Bill) commences either after the
commencement of the Acts and Instruments (Framework Reform) Act
2015, or the commencement of the Prudential Supervision Bill, whichever
is the later date. Schedule 2 commences the day after Royal Assent.
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Division 1 - Main amendments
APRA Act
11.7 The APRA Act establishes APRA, sets out secrecy obligations
and provisions concerning certain aspects of the administration of levies,
makes provision for other matters relating to the operations of APRA as
an organisation, and outlines the broad functions and powers that APRA
has as Australia's prudential regulator. The amendments to the APRA Act
will:
• ensure that information relating to private health insurers is
subject to APRA's secrecy provision;
• ensure APRA can collect data in relation to private health
insurers under the FS(CoD) Act; and
• contribute to bringing levies relating to private health
insurers within APRA's levy framework.
11.8 The following definition has been inserted into the Dictionary in
Schedule 1. [Schedule 1, Part 1, item 1]
• Collapsed Insurer Special Account: see subsection 54F(1)
(which establishes that Special Account, and is discussed
further below).
11.9 The definition of 'prudential regulation framework law' in
definitions provision in subsection 3(1) of the APRA Act has been
amended to include the Prudential Supervision Bill and the risk
equalisation levy legislation (within the meaning of that Bill). The
definition has also been amended to remove 'Acts'. [Schedule 1, Part 1,
items 2 and 3]
11.10 The definition of 'body regulated by APRA' in subsection 3(2)
of the APRA Act has also been amended to include a private health
insurer, as defined within the Prudential Supervision Bill. This, together
with the change noted in the previous paragraph, will ensure that
information and documents relating to private health insurers are covered
by the secrecy provision in section 56 of the APRA Act and that
information and data relating to private health insurers can be collected by
APRA under the FS(CoD) Act. [Schedule 1, Part 1, item 4]
11.11 There is a minor amendment to section 8 of the APRA Act,
which sets out APRA's purposes, to recognise that the purposes listed in
the section are not APRA's exclusive purposes, having regard to the fact
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that APRA will have functions in relation to the risk equalisation Special
Account. [Schedule 1, Part 1, item 5]
11.12 The definition of a 'levy' in subsection 50(6) of the APRA Act
has been amended to exclude levies imposed under the Collapsed Insurer
Levy Act. This means that the Collapsed Insurer Levy will not be subject
to the determination by the Minister, under section 50 of the APRA Act,
which allocates the appropriate portion of supervisory levy to APRA.
That determination is only intended to apply to APRA supervisory levies.
The risk equalisation levy falls outside the definition of 'levy' in
section 50(6) as it is not collected under the FISLC Act but rather under
the PHI Act. [Schedule 1, Part 1, item 6]
11.13 The rules regarding debits from the APRA Special Account have
been modified to ensure that the Special Account cannot be debited for
collapsed insurer assistance payments within the meaning of section 54H
(that is, for payments in line with the purposes of the Collapsed Insurer
Special Account) or payments described in paragraph 318-10(1)(a) of the
PHI Act (that is, payments in line with the purposes of the Risk
Equalisation Special Account). [Schedule 1, Part 1, item 7]
11.14 New sections 54F, 54G, and 54H will be added to the
APRA Act in order to establish and set out the functions and purposes of
the Collapsed Insurer Special Account. Section 54F establishes the
Collapsed Insurer Special Account and declares it to be a Special Account
for the purposes of the Public Governance, Performance and
Accountability Act 2013. [Schedule 1, Part 1, item 8]
11.15 The Collapsed Insurer Special Account does not exist under the
current law. Under the current law, if an insurer collapsed and the
Minister imposed the Collapsed Insurer Levy, the levy would be paid to
the Council and banked by the Council pending the making of payment
from that levy to the collapsed insurer or its external manager to help meet
policy liabilities. The Council is legally separate to the Commonwealth
and has had the capacity to hold money (including moneys related to the
Collapsed Insurer Levy) on its own account. APRA holds money on
behalf of the Commonwealth. For that reason, and to ensure that there is a
clear separation between APRA's money for general administrative
purposes (which is credited to the APRA Special Account) and the
Collapsed Insurer Levy, the Consequential Amendments and Transitional
Provisions Bill provides for the establishment of the Collapsed Insurer
Special Account. [Schedule 1, Part 1, item 8]
11.16 A Special Account is a mechanism that provides for
appropriations for payments made by the Commonwealth. Under
section 80 of the Public Governance, Performance and Accountability
Act 2013, if an Act (such as the APRA Act) establishes a Special Account,
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then the consolidated revenue fund is appropriated for expenditure of the
purposes of the Special Account, up to the balance for the time being for
the Special Account. In this case, any Collapsed Insurer Levy imposed
(see Chapter 14) will be credited to the account, and amounts paid to
policy holders of a collapsed insurer will be debited against the Special
Account.
11.17 Section 54G provides that amounts collected under Part 3B of
the FISLC Act can be credited to the Special Account. That is:
• amounts received by APRA by way of a Collapsed Insurer
Levy and late payment penalty in respect of that levy.
[Schedule 1, Part 1, item 8]
11.18 Subsection 54H(1) establishes the purpose of the Collapsed
Insurer Special Account and the purposes for which it can be debited.
Specifically, the purposes of the Collapsed Insurer Special Account are:
• for APRA to make payments (collapsed insurer assistance
payments) to help meet a collapsed insurer's liabilities to the
people insured under its complying health insurance policies
(that it cannot meet itself); and
• to meet the costs of administering the Special Account and
meeting any costs associated with the making of collapsed
insurer assistance payments. [Schedule 1, Part 1, item 8]
11.19 These arrangements are similar to the arrangements in place
where levy is collected, and amounts expended by APRA, in the event
that the Financial Claims Scheme is activated. Money to pay claims is
credited to and debited from the Financial Claims Scheme Special
Account.
11.20 It is appropriate that collapsed insurer payments be funded by a
separate levy (as has been the case under the Council) and accounted for
in a separate Special Account because APRA is a cost recovery agency
and only recovers through general supervisory levies what it expects to
spend on each industry in each year. As a result, unexpected costs due to
the activation of the Collapsed Insurer Levy (and likewise, in a banking or
general insurance context, the Financial Claims Scheme) are not budgeted
for, or collected from industry, in any year.
11.21 To ensure that costs related to one industry (for example, private
health insurers in the activation of the Collapsed Insurer Levy) are not
subsidised by another industry (for example, the supervisory levies paid
by general insurers), it is appropriate that these amounts be recovered
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from the private health insurance sector through a separate Collapsed
Insurer Levy (as has been the position under the Council).
11.22 Subsection 54H(2) notes that the Minister may, by written notice
to the collapsed insurer (or an external manager or terminating manager of
a collapsed insurer) specify conditions upon which any collapsed insurer
assistance payments are made. This could include repayment conditions
for the collapsed insurer. The purpose of this is to ensure that the
Commonwealth has a right to require repayment of collapsed insurer
assistance payments, or at least partial repayment (for example, via a
dividend in the winding up of the private health insurer) in the event of the
insolvency of the private health insurer. If amounts are repaid then they
will be credited to the Risk Equalisation Special Account, as discussed
further below, so that they can be returned to industry via adjustments to
risk equalisation payments. The Minister's notice is not a legislative
instrument because it is specific to the insurer, therefore the statement in
subsection 54H(3) does not constitute a substantive exemption, but is a
statement of the 'status quo'. [Schedule 1, Part 1, item 8]
11.23 In section 54H, 'collapsed insurer' and 'complying health
insurance policy' have the same meanings as used in the Collapsed
Insurer Levy Act and the PHI Act respectively. [Schedule 1, Part 1, item 8]
Financial Institutions Supervisory Levies Collection Act 1998
11.24 The Consequential Amendments and Transitional Provisions
Bill provides for the collection of supervisory and other industry levies by
APRA. Part 2 relates to the collection of supervisory levies and is
amended to cover the collection of supervisory levies in relation to private
health insurers. Parts 3 and 3A relate to levies which in general terms
relate to failed superannuation funds, ADIs and general insurers. A new
Part 3B will be inserted for the purpose of collecting the Collapsed Insurer
Levy (which is currently collected under the PHI Act).
11.25 A definition of 'private health insurer' is inserted into section 6.
It has the same meaning as in the Prudential Supervision Bill. [Schedule 1,
Part 1, Item 9]
11.26 In section 7, the definition of 'leviable body' has been expanded
to include private health insurers. The definition of a levy has also been
expanded to include (in respect of a private health insurer) a levy imposed
by the Supervisory Levy Imposition Bill. [Schedule 1, Part 1, Item 10 and 11]
11.27 Subsection 8(4A) has been amended to expand the list of bodies
that APRA is liable to levy to include, for 2015-16, private health insurers
that are liable to pay a levy in respect of each quarter in that financial
year. [Schedule 1, Part 1, Item 12]
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Consequential Amendments and Transitional Provisions
11.28 This, and the associated definitions in subsection (4B), have
been inserted to ensure that in 2015-16, the Private Health Insurance
Supervisory Levy is collected in the same way as the Private Health
Insurance Council Administration Levy would have been collected had
the Council continued to operate. [Schedule 1, Part 1, Item 12]
11.29 Subsection 8(4C) has been amended to expand the list of bodies
that APRA is liable to levy to include (from 1 July 2016 onwards) entities
that are a private health insurer at any time during that financial year or
later financial years. This is to harmonise the treatment of private health
insurers with other body corporates levied by APRA from 2016-17
onwards. [Schedule 1, Part 1, Item 12]
11.30 Subsection 9(1) has been amended to ensure that in 2015-16
private health insurers will not be required to pay the Private Health
Insurance Supervisory Levy in the same way as other entities supervised
by APRA pay their levy. As noted, the intention is that the supervisory
levy for 2015-16 will be paid quarterly, as it would if the Council
remained in existence and the related amendments were not made, and not
annually in the same way as other APRA supervisory levies. [Schedule 1,
Part 1, Item 13]
11.31 To this end, subsection 9(3) has been inserted to state that the
levy payable by a private health insurer for a quarter under
subsection 8(4A) is payable on the 14th day after the liability day.
[Schedule 1, Part 1, Item 14]
11.32 From 2016-17 onwards, the Private Health Insurance
Supervisory Levy will be imposed and payable in the same timeframe as
other entities supervised by APRA (except superannuation entities) under
section 9(1).
11.33 Section 10 has been amended to ensure that the late payment
penalty rate for entities other than private health insurers will remain at
20 per cent, while for private health insurance entities it will be
15 per cent unless the Minister (a Treasury Minister) specifies a lower rate
in a legislative instrument. This change aligns the late payment penalty
regime for private health insurers with that imposed by the Council.
[Schedule 1, Part 1, Item 15 and 16]
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11.34 Subsection 14(3) has been added to ensure that nothing in a law
passed before or (unless the law is explicit) after the commencement of
the Supervisory Levy Imposition Bill will exempt a levy paying entity
from liability to pay the levy. [Schedule 1, Part 1, Item 17]
Part 3B - private health insurance collapsed insurer levy
11.35 Part 3B has been inserted into the FISLC Act to empower
APRA to collect and administer any levy payable under the Collapsed
Insurer Levy Act. This levy was previously the responsibility of the
Council and was collected under Division 307 of the PHI Act. [Schedule 1,
Part 1, Item 18]
11.36 The following definitions have been inserted into Part 3B:
• collapsed insurer levy day has the same meaning as in the
Collapsed Insurer Levy Act;
• late payment penalty means penalty payable under
section 26M;
• levy means levy imposed by the Collapsed Insurer Levy Act;
and
• levy determination, in relation to a collapsed insurer levy
day, means the determination under section 7 of the
Collapsed Insurer Levy Act that specifies the day that is a
collapsed insurer levy day. [Schedule 1, Part 1, Item 18]
11.37 Part 3B also establishes that a private health insurer is liable to
pay a levy imposed on the insurer on the collapsed insurer levy day. A
collapsed insurer levy day is the day that levy is due and payable as
specified in a legislative instrument (the levy determination) issued under
the Collapsed Insurer Levy Act. [Schedule 1, Part 1, Item 18]
11.38 Section 26M has been inserted to establish that if any levy
payable has not been paid by the due date, and remains unpaid after the
penalty calculation day, then the insurer is liable to pay a late payment
penalty at the applicable rate which will be either 15 per cent, or a lower
rate if specified by the Minister in a legislative instrument. [Schedule 1,
Part 1, Item 18]
11.39 The penalty calculation day under section 26M is:
• if the levy is paid on or after the first day of a month and
before the sixth day of that month--the 20th day of the
immediately preceding month; or
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• if the levy is paid on or after the sixth day of a month and
before the 20th day of that month--the sixth day of that
month; or
• if the levy is paid on or after the 20th day of a month and on
or before the last day of that month--the 20th day of that
month. [Schedule 1, Part 1, Item 18]
11.40 The levy and late payment penalty are payable to APRA on
behalf of the Commonwealth. However the Minister may waive (or
delegate the power to APRA to waive) any levy or late payment penalty
payable. If no waiver is given of any levy that is due and payable, and/or
any late payment penalty that is due and payable, APRA may bring
proceedings, on behalf of the Commonwealth, to recover those amounts.
[Schedule 1, Part 1, Item 18]
11.41 Section 26R makes clear that no law made before or after the
commencement of this section exempts an insurer from the liability to pay
a levy, unless the exemption expressly refers to the Collapsed Insurer
Levy. [Schedule 1, Part 1, Item 18]
11.42 Subsection 27(10) is amended to make clear that the decision
maker in relation to a request for waiver of late payment penalty relating
to the Collapsed Insurer Levy is the Minister and that a decision of the
Minister in relation to the Collapsed Insurer Levy is a reviewable
decision. [Schedule 1, Part 1, Items 19 and 20]
Financial Sector (Collection of Data) Act 2001
11.43 Under the FS(CoD) Act, APRA has power to make reporting
standards requiring financial sector entities to provide information to
APRA as specified in the standards.
11.44 The FS(CoD) Act covers financial sector entities
(subsection 5(2)), which includes both regulated entities (that is, bodies
regulated by APRA within the meaning of subsection 3(2) of the
APRA Act) and registered entities (these are non-regulated entities that
conduct certain forms of financial business, for example finance
companies).
11.45 A private health insurer will be a regulated entity within the
meaning of subsection 5(4) of the Act, consistent with the amendment to
subsection 3(2) the APRA Act to include a private health insurer as a body
regulated by APRA. Accordingly, APRA will have power to collect data
from the insurer under the FS(CoD) Act.
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11.46 The FS(CoD) Act applies to all other industries regulated by
APRA.
11.47 A private health insurer will not be a registered entity under the
FS(CoD) Act. Therefore, Part 2 of the FS(CoD) Act will not apply to
private health insurers.
11.48 The purposes for which APRA may collect information is
outlined in the object of the FS(CoD) Act (section 3). Currently, APRA
can collect information for the purpose of:
• assisting the prudential regulation or monitoring of bodies in
the financial sector;
• enabling APRA to publish information;
• assisting another financial sector agency to perform its
functions or exercise its powers; and
• assisting the Minister (a Treasury Minister) to formulate
financial policy.
11.49 To put it beyond doubt that APRA can collect information for
the purposes of administering the Risk Equalisation Trust Fund, as well as
for APRA's core prudential purposes (including supervision of private
health insurers), the object of the Act has been amended to enable APRA
to perform its functions or exercise its powers under other laws.
[Schedule 1, Part 1, item 21]
11.50 There is also a minor consequential amendment to
paragraph 7(2)(d) of the FS(CoD) Act to update the definition of 'private
health insurer' to refer to an entity registered under the Prudential
Supervision Bill. [Schedule 1, Part 1, item 22]
11.51 The power to make reporting standards will replace a range of
existing powers used by the Council to impose obligations to report data
into a single legislative power.
11.52 A reporting standard is a legislative instrument. Under the
FS(CoD) Act, regulated institutions must comply with reporting
standards.
11.53 Each reporting standard sets out or states:
• the purpose for which data is being collected;
• the legal authority under which it is collected;
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Consequential Amendments and Transitional Provisions
• that specified data in an attached form is to be provided
according to prescribed instructions;
• the method and timing for submission;
• the required approach to auditing and quality control; and
• who can authorise the submission of data on behalf of a
private health insurer.
11.54 Each reporting standard specifies the information that must be
provided, and attaches the related instructions specifying how the form is
to be completed.
11.55 Data submitted to APRA under the FS(CoD) Act is protected
information under section 56 of the APRA Act. However, APRA can
ensure the continued release and publication of data in a number of ways,
including:
• APRA can release protected information under
subsection 56(4) of the APRA Act, when the person to whose
affairs the information or document relates has agreed in
writing to the disclosure or production of the information; or
• APRA can determine the data to be non-confidential,
following consultation with industry, under the process
outlined in section 57 of the APRA Act, to enable the
continued release and publication of data; or
• APRA can disclose protected information or the production
of a protected document if the publication is to another
person and is approved by APRA by an instrument in writing
under paragraph 56(5)(b) of the APRA Act.
11.56 Under subsection 56(4) of the APRA Act, APRA would require
a one-off written consent from individual insurers. This is broadly
consistent with section 323-25 of the PHI Act, which provides that the
Council may disclose information to a person(s) who is expressly or
impliedly authorised by the person whom the information relates to obtain
it.
11.57 If the data is declared non-confidential under section 57 of the
APRA Act, all such data would also become available for a third party to
make a request under the Freedom of Information Act 1982 as the data
will be non-confidential generally. APRA may then be obliged to release
the data in accordance with that Act. Similar situations currently exist in
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other industries regulated by APRA where data is non-confidential but not
published.
Income Tax Assessment Act 1997
11.58 Consistent with the broader changes, amendments to the
ITAA 1997 update existing definitions of 'private health insurer' and
'policy holder' in the ITAA 1997 to refer to the Prudential Supervision
Bill. [Schedule 1, Part 1, Items 23, 24, 25, 28, 30, 31, 32 and 33]
11.59 Recognising that APRA will now be approving the
demutualisations of not for profit private health insurers additional
changes are made to Division 315 'Demutualisation of private health
insurers' of the ITAA 1997 to reflect these new processes. [Schedule 1,
Part 1, Items 26, 27, and 29]
Life Insurance Act 1995
11.60 Section 16ZB of the Life Insurance Act, which relates to
friendly societies carrying on health insurance business, has been
amended to include a reference to the Prudential Supervision Bill.
[Schedule 1, Part 1, Item 34]
Medibank Private Sale Act 2006
11.61 Consequential amendments are made to Schedule 2 to the
Medibank Private Sale Act. Medibank Private and its Board, among
others, may still be required to undertake activities which assist the sale.
11.62 Schedule 2 of the Medibank Private Sale Act contains provisions
designed to facilitate the sale. A number of these provisions are expressed
to operate despite the PHI Act and have been amended to add a reference
to the Prudential Supervision Bill or to replace reference to a specific
provision of the PHI Act with an updated reference to the replacement
provision in the Prudential Supervision Bill.
11.63 Item 9 of Schedule 2 to the Medibank Private Sale Act is a
provision often seen in 'privatisation' legislation and provides that
Medibank Private, or a member of the Medibank Private Board, may give
assistance to the Commonwealth in connection with the sale, either on
their own initiative or when requested in writing by the Minister for
Finance.
11.64 Subitem 9(7) provides that, to avoid doubt, the giving of that
assistance, and certain actions by the Minister under item 9, will not result
in liability or remedy under particular Acts, including the PHI Act. The
subitem has been amended to add a reference to the Prudential
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Consequential Amendments and Transitional Provisions
Supervision Bill so that there will be no liability under that Bill in relation
to matters covered by the subitem. This gives the sale company and its
board (among others) confidence that acts undertaken in pursuance of the
sale do not cause them to breach a law or duty. [Schedule 1, Part 1, item 35]
11.65 Item 10 of Schedule 2 to the Medibank Private Sale Act contains
ancillary provisions in support of item 9. Subitem 10(7) provides that
Medibank Private may make a payment from the Medibank Private fund
(which is a health benefits fund) for the purpose of paying expenses
incurred by it in relation to giving assistance under item 9 or paying
expenses incurred by a member of a Medibank Private Board in relation to
giving such assistance.
11.66 Subitem 10(8) provides that this will not breach section 137-10
of the PHI Act, which limits the payment of expenses from a health
benefits fund to certain purposes. Given section 137-10 of the PHI Act is
being repealed and replaced with section 28 of the Prudential Supervision
Bill, the reference has been amended to refer to section 28 of the
Prudential Supervision Bill. [Schedule 1, Part 1, item 36]
11.67 Assistance provided under item 9 of Schedule 2 to the Medibank
Private Sale Act may take the form of the provision of information.
Item 14 provides that the fact that particular information was requested or
required under item 9 is not a ground on which Medibank (or the holding
company) can be required to disclose or notify that or other information
under a provision of an Act listed in item 14, which includes the PHI Act.
11.68 The purpose of item 14 is to ensure that disclosure of
information under item 9 does not result in the company losing any right,
that might otherwise have had, to resist a purported requirement, under
one of the listed Acts, to disclose the information (for example, to resist
on the basis that the information is subject to legal professional privilege).
Item 14 is amended to list the Prudential Supervision Bill and the
FS(CoD) Act, which both contain provisions for the submission of
information to APRA. [Schedule 1, Part 1, item 37] The Prudential
Supervision Bill provides APRA with investigatory powers, including a
power to require a private health insurer to provide information
(section 127) and to produce documents (section 128).
11.69 Item 15 of Schedule 2 to the Medibank Private Sale Act
provides that the Minister for Finance may prepare a written statement
about the privatisation and give the statement to Medibank, together with
a direction to the company to take steps to provide the statement to
contributors to the Medibank Private fund and make a copy available on
the company's website. Subitem 15(3) provides, for the avoidance of
doubt, that complying with such a direction does not result in a
contravention of, or liability or a remedy under, various Acts including the
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Private Health Insurance (Prudential Supervision) (Consequential Amendments and
Transitional Provision) Bill 2015
PHI Act. This item has been amended to include a reference to the
Prudential Supervision Bill. [Schedule 1, Part 1, item 38]
11.70 Item 16 of Schedule 2 to the Medibank Private Sale Act
provides that Medibank Private may make a payment from the Medibank
Private fund (the health benefits fund) for the purpose of applying
expenses incurred by complying with a direction under item 15.
Subitem 16(2) provides that such a payment does not contravene section
137-10 of the PHI Act which, as noted above, limits the kinds of expenses
to that can be paid out of a health benefits fund. This subitem has been
amended to refer to section 28 of the Prudential Supervision Bill, which,
as noted, replicates and replaces section 137-10. [Schedule 1, Part 1, item 39]
11.71 A similar amendment is made to subitem 21(2), which allows
the company to make a payment from the Medibank Private fund for the
purpose of paying an expense incurred by modifying its constitution or
rules, and providing information to contributors in relation to that, in
accordance with a requirement under item 20. [Schedule 1, Part 1, item 39]
11.72 Although the Commonwealth will no longer be directing
Medibank Private in regards to information statements, subitems 16(2)
and 21(2) may both be relevant if a direction has been provided in the
past. This is relevant as the Department of Finance is still working with
Medibank Private on the reimbursement of Medibank Private's sale costs.
11.73 A similar amendment has also been made to subitem 22(3),
which relates to the recovery of expenses of preparing an information
statement of the kind referred to in item 22, relating to modifications to
rules and the constitution. [Schedule 1, Part 1, item 40]
11.74 Subitems 23(2) and 58(8) have been similarly updated to refer to
section 28 of the Prudential Supervision Bill. [Schedule 1, Part 1, item 41]
11.75 Subitems 58(5) and 58(6) require Medibank Private to pay
compensation where the operation of item 20 (change of profit status -
modifying Medibank Private's constitution and rules) or item 57 (which
provides that an amount shown in the company's account as retained
earnings is taken to be profits) results in an acquisition of property from
the person on other than just terms. Subitem 58(7) provides that the
company may make the compensation payment from the Medibank
Private fund. Subitem 58(8) provides that this will not contravene section
137-10 of the PHI Act and, as noted, this will be updated to refer to
section 28 of the Prudential Supervision Bill.
140
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Private Health Insurance Act 2007
Chapter 1 - Introduction
11.76 The prudential regulation of the private health insurance
industry will be the responsibility of APRA under the Prudential
Supervision Bill.
11.77 The whole of the PHI Act will continue to be administered, by
the Administrative Arrangements Orders, by the Department of Health
(despite APRA's role under some provisions relating to levies). An
inter-departmental agreement will be used to deal with APRA's role under
the PHI Act.
11.78 The PHI Act has been amended to abolish the Council and
repeal provisions relating to the Council and its functions and
responsibilities. As a result, a number of amendments have been made to
the introductory provisions of the PHI Act to reflect its revised scope.
11.79 Item 1 of the table to subsection 1-10(6) of the PHI Act, which
dealt with how references to the Council throughout the PHI Act were
identified, has been repealed as they are redundant. [Schedule 1, Part 1,
item 42]
11.80 Paragraph 3-1(c) has been repealed to reflect that the PHI Act no
longer imposes requirements about how insurers conduct health insurance
business. These will now be imposed under the Prudential Supervision
Bill. A minor technical amendment has been made to paragraph 3-1(b) as
a consequence of the repeal of paragraph 31(c). [Schedule 1, Part 1, items 43
and 44]
11.81 A note is inserted at the end of section 3-1 to signpost to readers
that the Prudential Supervision Bill sets out the registration process for
private health insurers, imposes requirements about how insurers conduct
health insurance business and deals with other matters in relation to the
prudential supervision of insurers. [Schedule 1, Part 1, item 45]
11.82 A new section 3-15, which gives an overview of Chapter 4 of
the PHI Act, is substituted to reflect the revised contents of Chapter 4
following the removal of the functions that were previously performed by
the Council. Chapter 4 now defines the concepts of health insurance
business and health benefits funds and deals with some related matters. It
also imposes a number of miscellaneous obligations on private health
insurers. [Schedule 1, Part 1, item 46]
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Chapter 2 - Incentives
11.83 Chapter 2 establishes the premiums reduction scheme (the
Australian Government Rebate on private health insurance) and the
lifetime health cover scheme. No amendments have been made to
Chapter 2.
Chapter 3 - Complying Health Insurance Products
11.84 Chapter 3 of the PHI Act sets out requirements for complying
health insurance products, establishes the principle of community rating,
and also includes a number of requirements for insurers to keep
consumers and relevant Commonwealth government agencies informed
about the health insurance they offer.
11.85 A limited number of amendments have been made to Chapter 3.
11.86 The PHI Act prohibits an insurer from offering health insurance
business in any form other than a complying health insurance policy and
also from offering or advertising policies including health insurance
business that are not in the form of complying health insurance policies.
Section 84-10 of the PHI Act deals with the granting of and injunction
against an insurer who is contravening, or is proposing to contravene,
these prohibitions. Paragraph 84-10(3)(b) has been repealed to remove
reference to the Council's power to apply for such an injunction. The
Health Minister and other persons retain the capacity to apply for an
injunction under section 84-10. [Schedule 1, Part 1, item 47]
11.87 Section 90-1, which introduces Part 3-4, has been amended to
reflect that insurers no longer have obligations under this Part to provide
information to the Council about their health insurance business.
[Schedule 1, Part 1, item 48]
11.88 Subsection 93-20(4) of the PHI Act sets out an insurer's
obligation to notify policy-holders when the health benefits fund to which
their policy is referable is changed. One of the reasons a policy may
become referable to a new fund is a restructure, merger or acquisition of
the fund to which it was originally referable. Division 146 of the PHI Act,
which dealt with these matters, has been repealed. The restructure, merger
and acquisition of health benefits funds are now dealt with under
Division 4 of Part 3 of the Prudential Supervision Bill. The note to
subsection 93-20(4) has been amended to refer to Division 4 of Part 3 of
the Prudential Supervision Bill. [Schedule 1, Part 1, item 49].
11.89 Division 96 of the PHI Act sets out various obligations on
insurers to provide information about their complying health insurance
products and policies to a number of Commonwealth Government
agencies. A number of amendments to Division 96 have been made:
142
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• Paragraphs 96-1(b), 96-5(b) and 96-10(b) required insurers to
give Standard Information Statements (SISs) to the Council
on request, when a new complying health insurance product
was made available or when a product changed. Insurers will
not be required to provide SISs to APRA under the PHI Act
and these provisions have been repealed. [Schedule 1, Part 1,
item 51]
• Paragraph 96-15(1)(b) has been repealed to remove the
requirement for insurers to give additional information to the
Council regarding complying health insurance products or
policies on request. Insurers will not be required to give
information to APRA about complying health insurance
products or policies under the PHI Act. [Schedule 1, Part 1,
item 51]
• As a result of the amendments to sections 96-1, 96-5, 96-10
and 96-15, the offence under section 96-20 for failing to give
information to a person when required by those provisions
will have no application in relation to the Council. The
heading to section 96-20 has therefore been amended to
remove reference to the Council. [Schedule 1, Part 1, item 52]
• Paragraph 96-25(b) provides that the Private Health
Insurance (Complying Product) Rules may set out persons to
whom information specified in the rules must be given.
Reference to the Council has been repealed. [Schedule 1, Part 1,
item 53]
11.90 No amendments have been made to the requirements for
complying health insurance products and policies, including the
requirement that policies meet the community rating requirement and the
requirement to offer minimum benefits. The Health Minister will also
continue to approve increases to insurance premiums.
11.91 An amendment to the heading of Division 96 to reflect that
insurers no longer have obligations to provide information to the Council
under the Division has also been made. [Schedule 1, Part 1, item 50]
Chapter 4 - Private health insurers
11.92 Chapter 4 of the PHI Act defined the concepts of health
insurance business, health-related business and a health benefits fund. It is
also prohibited for anyone other than a registered private health insurer
from carrying on health insurance business and regulated the operation of
health benefits funds by insurers, which was overseen by the Council.
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Part 4-1 - Introduction
11.93 Chapter 4 still defines the key concepts of health insurance
business and a health benefits fund, and imposes miscellaneous
obligations on insurers. The heading and introduction to the Chapter in
Part 4-1 have been amended to reflect its revised content. [Schedule 1, Part 1,
items 54 and 55]
Part 4-2 - Health insurance business
11.94 The most significant change to Part 4-2 is the repeal of
Division 118, which prohibited insurers from carrying on health insurance
business without registration and enabled an injunction to be sought
restraining a person from carrying on health insurance business while not
registered. [Schedule 1, Part 1, item 59]
11.95 Corresponding provisions are now found in Division 2 of Part 2
of the Prudential Supervision Bill.
11.96 Consequential amendments have been made to the heading to
Part 4-2 and to sections 115-1 and 115-5 to reflect that Part 4-2 no longer
deals with the carrying on of health insurance business. [Schedule 1, Part 1,
items 56 and 57]
11.97 The definitions of health insurance business, general treatment
and hospital treatment in Part 4-2 have not been amended and continue to
be found in sections 121-1 to 121-30. There have also been no
amendments to requirements for the making of hospital declarations under
section 121-5.
11.98 The Health Minister will continue to make Private Health
Insurance (Health Insurance Business) Rules for the purposes of Part 4-2.
However section 115-5, which deals with the rules, has been repealed and
replaced to reflect that the rules will no longer include matters relating to
the carrying on of health insurance business such as the operation of
health benefits funds. [Schedule 1, Part 1, item 58]
11.99 As APRA, the new prudential regulator of private health
insurers and health insurance business, sits within a different portfolio,
new subsection 115-5(2) provides that before making Private Health
Insurance (Health Insurance Business) Rules the Health Minister is to
consult with APRA. A failure to consult does not affect the validity of the
rules. [Schedule 1, Part 1, item 58]
Part 4-3 - Registration
11.100 Part 4-3, which provided for the registration of bodies as
insurers has been repealed. Registration of insurers will be managed by
144
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APRA under Division 3 of Part 2 of the Prudential Supervision Bill.
[Schedule 1, Part 1, item 60]
Part 4-4 - Health benefits funds
11.101 Part 4-4 of the PHI Act will contain a single Division 131,
which will have the same heading as the Part. This is the same structure as
is currently used for Part 4-3 of the PHI Act. Division 131 will also
contain an equivalent to current section 137-30 of the PHI Act, which then
allows for the whole of Division 137 to be repealed. [Schedule 1, Part 1,
items 61-64]
11.102 Divisions 134, 137, 146, 149 and 152, which required private
health insurers to have health benefits funds, regulated the operation of
health benefits funds and their restructure, merger and acquisition and
termination, and established special duties and liabilities of directors of
insurers in relation to contraventions of the Act in relation to funds. These
Divisions have been repealed and these matters will be supervised by
APRA under Divisions 2 to 5, 8 and 9 of Part 3 of the Prudential
Supervision Bill. [Schedule 1, Part 1, item 65]
11.103 Divisions 140, 143 and 163, which enabled the Council to
establish solvency, capital adequacy and prudential standards and issue
binding directions to insurers on these matters, have also been repealed.
APRA's general prudential standard and direction making powers are
contained in Part 4 of the Prudential Supervision Bill. [Schedule 1, Part 1,
items 65 and 71]
11.104 Section 131-5 of the PHI Act will include a requirement for the
Health Minister to consult with APRA before making rules for the
purposes of section 131-15 of the PHI Act. The only other purposes, in
Part 4-4, for which these rules will be able to be made after these
amendments commence is to the new subsections 131-20(1) and (2), and
new section 131-25 (which is a relocated version of current
section 137-30 of the PHI Act). The consultation requirement in
subsection (2) above will not apply to rules made for those provisions.
11.105 Sections 131-10 and 131-15 of the PHI Act continue to define a
health benefits fund and health-related business, respectively. No
amendments have been made to these definitions.
11.106 The Health Minister will continue to make Private Health
Insurance (Health Benefits Fund Policy) Rules for the purposes of
Part 4-4. However, section 131-5 has been amended to provide that prior
to making Private Health Insurance (Health Benefits Fund Policy) Rules
relating to the definition of health-related business, the Minister must
consult with APRA. However, a failure to consult will not invalidate the
rules. [Schedule 1, Part 1, item 63]
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11.107 A new section 131-20 has been inserted into Part 4-4.
Subsection 131-20(1) provides that the Private Health Insurance (Health
Benefits Fund Policy) Rules, made by the Health Minister, may specify
risk equalisation jurisdictions. [Schedule 1, Part 1, item 64]
11.108 The Private Health Insurance (Health Benefits Fund Policy)
Rules do not currently specify any circumstances in which a private health
insurer may have more than one health benefits fund. The 'necessary or
convenient' rule making power for the matters dealt with in the above
subsections will be provided by the current paragraph 333 20(1)(b) of the
PHI Act.
11.109 The risk equalisation jurisdictions were previously specified in
the Private Health Insurance (Health Benefits Fund Administration) Rules
made by the Council. With the transfer of the Council's functions to
APRA, those rules are no longer made and the matters dealt with in those
rules will generally be covered in APRA Rules. However, as the Health
Minister retains overall policy responsibility for risk equalisation, the
specification of risk equalisation jurisdictions has not been transferred to
APRA.
11.110 Subsection 131-20(2) provides that the Health Insurance (Health
Benefits Fund Policy) Rules may also set out circumstances in which an
insurer may have more than one health benefits fund in respect of a risk
equalisation jurisdiction, despite subsection 23(4) of the Prudential
Supervision Bill. [Schedule 1, Part 1, item 64]
11.111 The power for the rules to allow insurers to have multiple funds
per risk equalisation jurisdiction in certain circumstances was previously
provided for in subsection 134-1(4) of the PHI Act, which has been
repealed. [Schedule 1, Part 1, item 65]
11.112 A new section 131-25 has also been added to Part 4-4. Where an
insurer has a health benefits fund in respect of both health insurance
business and some or all of its health-related business, the insurer must
comply with any requirements in the Private Health Insurance (Health
Benefits Fund Policy) Rules about the conduct of the health-benefits
business. New section 131-25 replaces section 137-30, which was
repealed as part of the repeal of Division 137 and was identical in terms to
section 131-25. [Schedule 1, Part 1, item 65]
11.113 A number of minor technical amendments to the heading to and
introduction for Division 131 have also been made to reflect its revised
scope. [Schedule 1, Part 1, items 61 and 62]
146
Consequential Amendments and Transitional Provisions
Part 4-5 - Miscellaneous obligations of private health insurers
11.114 Part 4-5 of the PHI Act sets out a number of miscellaneous
obligations of insurers.
11.115 The following Divisions have been repealed from the PHI Act:
• Division 160, which dealt with appointed actuaries of private
health insurers. Appointed actuaries are now dealt with under
Division 2 of Part 5 of the Prudential Supervision Bill.
[Schedule 1, Part 1, item 71]
• Division 163, which enabled the Council to establish
prudential standards and issue binding prudential directions.
APRA's general prudential standard and direction making
powers are contained in Part 4 of the Prudential Supervision
Bill. [Schedule 1, Part 1, item 71]
• Division 166, which prohibited insurers from allowing
disqualified persons from acting as directors or in senior
management positions. This is now dealt with under
Division 3 of Part 5 of the Prudential Supervision Bill.
[Schedule 1, Part 1, item 71]
• Sections 169-1, 169-5 and 169-15, which required insurers to
provide the Council with copies of any reports to policy
holders and annual financial accounts and statements, and
also to keep the Council and the Secretary of the Department
of Health informed about the identity of the chief executive
officer of the insurer, have all been repealed. [Schedule 1,
Part 1, items 73 and 75]
11.116 However insurers will still be required to notify the Secretary of
the Department of Health about any proposed changes to their rules under
section 169-10. If the Health Minister directs an insurer not to make the
proposed change the Minister must give a copy of the direction to APRA
(rather than the Council). [Schedule 1, Part 1, item 74]
11.117 Division 172 sets out a number of miscellaneous obligations on
insurers. Rules relating to agreements between insurers and medical
practitioners in section 172-5 are unchanged, as is the requirement under
section 172-10 for insurers to give the Secretary of the Department of
Health certain information specified in the Private Health Insurance (Data
Provision) Rules.
11.118 The prohibition in section 172-15 on an insurer using its money
to pay a penalty imposed on a director or officer because of an offence
under the PHI Act, or an amount that a director or officer is liable to pay
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as a result of an order made under Division 203 of the PHI Act, or to
reimburse a director or officer in respect of such penalties or liabilities,
remains. However, redundant references in the section to provisions of the
PHI Act repealed as part of these amendments have been removed.
[Schedule 1, Part 1, item 78]
11.119 A number of minor consequential amendments to Part 4-5 of the
PHI Act have been made to reflect the revised contents of the Chapter
resultant on the abolition of the Council and the transfer of its functions to
APRA. [Schedule 1, Part 1, items 66 to 70, 72 and 76]
11.120 With the abolition of the Council and APRA's assumption of the
prudential supervision of private health insurers under the Prudential
Supervision Bill, the majority of Chapter 4 of the PHI Act became
redundant and have been repealed.
Chapter 5 - Enforcement
11.121 Chapter 5 of the PHI Act previously provided for the main
enforcement powers of both the Health Minister and the Council. APRA's
enforcement powers in relation to prudential supervision of the private
health insurance industry are located in the Prudential Supervision Bill.
References to the Council's enforcement powers have been repealed from
Chapter 5.
11.122 The nature of the Health Minister's current enforcement powers
under Chapter 5 is largely unchanged. However some minor amendments
to clarify the limits of the enforcement responsibilities of the Minister
under the PHI Act have been made, given that APRA will have exclusive
responsibility for enforcing the prudential regulation of insurer under the
Prudential Supervision Bill.
Parts 5-1 and 5-2 - Introduction and general enforcement methods
11.123 Minor technical amendments have been made to sections 180-1
and 185-1, which provide introductions to the enforcement mechanisms in
Chapter 5 and Division 185 of the PHI Act, respectively, to reflect the
removal of any enforcement role for the Council. [Schedule 1, Part 1,
items 79 and 80]
11.124 Section 185-5 defines the 'enforceable obligations' of insurers
and other persons under the PHI Act.
11.125 There will be overlap between definitions of enforceable
obligation in the Prudential Supervision Bill and the PHI Act.
11.126 The definition of enforceable obligation in the Prudential
Supervision Bill will cover 'a provision of the risk equalisation fund
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Consequential Amendments and Transitional Provisions
legislation' which is defined in section 4 to include the provisions of the
PHI Act as they apply in relation to the Risk Equalisation Levy and the
Risk Equalisation Trust Fund.
11.127 The same provisions of the PHI Act, as applying in relation to
Risk Equalisation Levy and the Risk Equalisation Trust Fund, will also be
covered by the PHI Act under subsection 185(5).
11.128 Restricted access insurer's will be required to comply with their
constitution or rules under subsection 15(3), and will be covered by both
definitions.
11.129 A Memorandum of Understanding between the Department of
Health and APRA will determine the responsible agency for enforcement
action in relation to a breach in an area of overlap.
11.130 Paragraph 185-5(b) has been amended to remove reference to
provisions of rules made by the Council under section 333-25 of the
PHI Act as being enforceable obligations under the PHI Act. [Schedule 1,
Part 1, item 81]
11.131 Although APRA will take over responsibility for making one of
the sets of rules formerly made by the Council, the Private Health (Risk
Equalisation Administration) Rules, enforcement powers in relation to
those rules will sit exclusively with APRA under the Prudential
Supervision Bill.
11.132 The enforceable obligations include, at paragraph 185-5(e), a
provision in a restricted access insurer's constitution or rules included to
meet requirements for its restricted access status (for example that it will
not offer insurance to anyone outside its restricted access group).
Paragraph 185-5(e) has been amended to remove the reference to
subsection 126-20(6) of the PHI Act and substitute a reference to
subsection 15(3) of the Prudential Supervision Bill, which now details
relevant requirements for a restricted access insurer's rules or constitution.
[Schedule 1, Part 1, item 82]
11.133 Whether a restricted access insurer complies with restrictions on
the groups to which it offers insurance remains relevant for the
community rating provisions in Chapter 3 of the PHI Act.
11.134 Section 185-10 has been repealed, as there will no longer be a
concept of 'Council-supervised obligations' under the PHI Act. [Schedule 1,
Part 1, item 83]
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Division 188 - performance indicators
11.135 No changes have been made to the Health Minister's capacity to
set performance indicators for insurers in relation to community rating
under Division 188.
Division 191 - explanations from insurers
11.136 Division 191 deals with seeking explanations from insurers
about their operations. Section 191-1 has been amended to remove all
references to the Council's power to seek explanations from insurers.
[Schedule 1, Part 1, item 84]
11.137 The Health Minister will retain current powers to ask an insurer
for an explanation of its operations if the Minister believes that, having
regard to information available to the Minister or performance indicators
specified in the Private Health Insurance (Complying Product) Rules, as
an insurer might have contravened an enforceable obligation under the
PHI Act. The Minister will have no power under Division 191 to ask
insurers for an explanation of their operations in respect of their
obligations under the Prudential Supervision Bill.
11.138 A number of technical drafting amendments to Division 191
have been made as a result of the removal of references to the Council.
[Schedule 1, Part 1, items 85-87]
Division 194 - investigations
11.139 Division 194 of the PHI Act enables investigations into the
operations of private health insurers. An investigation may involve giving
officers, employees or agents of an insurer a notice to produce documents,
give information or evidence. It may also involve examination of the
books of an insurer.
11.140 Section 194-1A has been inserted to establish the circumstances
in which the powers under Division 194 may be exercised. It provides that
the powers may only be exercised for the purposes of the PHI Act but may
not be exercised for the purpose of the PHI Act as it relates to Risk
Equalisation Levy or the Risk Equalisation Special Account. APRA will
have investigative powers in relation to these matters under the Prudential
Supervision Bill. Section 194-1 has been repealed as it is redundant.
[Schedule 1, Part 1, items 88 and 91]
11.141 Subsection 194-30, which expressly enabled the Health Minister
to consult the Council and ask it to take over part of an investigation
where the Minister believed issues concerning Council-supervised
obligations had been raised, has also been repealed. The Health Minister
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Consequential Amendments and Transitional Provisions
and APRA will consult more generally under a Memorandum of
Understanding. [Schedule 1, Part 1, item 97]
11.142 A number of consequential amendments have been made to
Division 194 to reflect that the Health Minister is the only person who
may now exercise powers to conduct investigations under the Division.
[Schedule 1, Part 1, items 89 and 90, 92 to 96 and 98 to 100]
11.143 There has been no other change to the powers of the Health
Minister under Division 194.
Division 197 - enforceable undertakings
11.144 Division 197 of the PHI Act deals with enforceable undertaking
that may be sought from private health insurers. All references to the
Council's power to seek and accept an undertaking from an insurer have
been repealed. [Schedule 1, Part 1, items 101-104]
11.145 The Health Minister will retain the powers to seek and accept
undertakings under the PHI Act and to apply to the Federal Court to
enforce an undertaking if the Minister considers an insurer has
contravened the terms of an undertaking (see sections 197-1 and 197-5).
An insurer also retains the capacity to withdraw or vary an undertaking at
any time, with the consent of the Minister (see subsection 197-1(3)).
11.146 APRA will have the power to accept undertakings from insurers
under Part 7 of the Prudential Supervision Bill in connection with matters
in relation to which APRA has powers or functions under the Prudential
Supervision Bill or the legislation governing the Risk Equalisation Special
Account or Risk Equalisation Levy.
Division 200 - directions
11.147 Division 200 of the PHI Act previously enabled the Health
Minister or the Council to give a direction to an insurer requiring the
insurer to modify its day to day operations or its rules in a particular
respect and, for a restricted access insurer, to modify its rules or
constitution in order to comply with requirements relating to its restricted
access status.
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11.148 All reference to the Council's power to give directions to
insurers has been removed by the substitution of new subsections 200-1(1)
and (2) and the amendment of subsection 200-1(3). New subsections
200-1(1) and (2) also contain an updated reference to subsection 15(3) of
the Prudential Supervision Bill, under which the requirements with which
the rules or constitution of a restricted access insurers must comply are
set. [Schedule 1, Part 1, item 107]
11.149 A number of technical drafting changes to reflect that the
Minister now has exclusive power to issue directions under Division 200
have also been made.[Schedule 1, Part 1, items 105, 106 and 108 to 111]
11.150 The Health Minister will not be required to provide a copy of
any direction to APRA. This is because the Health Minister and APRA
will consult more generally under a Memorandum of Understanding.
11.151 APRA's main prudential direction making power, including in
relation to enforceable obligations under the Prudential Supervision Bill,
is in Division 3 of Part 4 of that Bill.
11.152 There has been no alteration to the grounds on which the Health
Minister may issue a direction to an insurer, namely if the Minister
considers it will assist in preventing improper discrimination or considers
there appears to be a contravention of an enforceable obligation under the
PHI Act involving improper discrimination. There has also been no
alteration to the nature of the directions that the Minister may give.
Division 203 - remedies
11.153 Division 203 sets out the remedies available in the Federal Court
where an insurer has contravened its enforceable obligations under the
PHI Act. These remedies were previously available on application to the
Federal Court by the Health Minister or the Council.
11.154 The Division has been amended to repeal all references to the
Council, including references to the Council's former powers to apply to
the Federal Court for declarations and orders and to require a person to
give assistance in relation to an application by the Council. [Schedule 1,
Part 1, items 112 to 122]
11.155 The Health Minister remains able to seek a number of remedies
from the Federal Court, specifically a declaration of contravention and
one or more of a pecuniary penalty order, a compensation order, an
adverse publicity order or any other order the Minister considers
appropriate (see section 203-1). There also has been no change to the
grounds on which the Minister may seek a remedy, namely where the
Minister is satisfied an insurer has contravened an enforceable obligation.
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Consequential Amendments and Transitional Provisions
11.156 Under Part 8 of the Prudential Supervision Bill, APRA is able to
seek remedies in the Federal Court for breaches of enforceable obligations
under that Bill.
Part 5-3 - health benefits fund enforcement
11.157 Part 5-3 of the PHI Act, dealt with the enforcement of health
benefits fund requirements, including investigations into the affairs of
private health insurers by appointed inspectors and the external
management of health benefits funds. Powers under Part 5-3 of the
PHI Act were exclusively exercised by the Council and the Part has been
repealed in its entirety. [Schedule 1, Part 1, item 123]
11.158 APRA has similar powers under Divisions 3 and 4 of Part 6 and
Division 6 of Part 3 of the Prudential Supervision Bill to investigate the
affairs of insurers and to place health benefits funds into external
management where this is in the best interests of policy holders.
Chapter 6 - Administration
Parts 6-1 and 6-3 - Introduction and the Council
11.159 Part 6-1 of the PHI Act sets out the contents of Chapter 6.
Paragraphs 203-1(b) and (d), which referred to former functions of the
Council have been repealed. [Schedule 1, Part 1, item 124]
11.160 A consequential amendment has also been made to change
reference in paragraph 203-1(f) to the Risk Equalisation Trust Fund to a
reference to the Risk Equalisation Special Account. [Schedule 1, Part 1,
item 125]
11.161 Part 6-3 of the PHI Act established the Council, provided for its
general purposes, functions and powers and set out governance
arrangements for the Council and its staff. Part 6-3 has been repealed in its
entirety, with the effect of abolishing the Council. [Schedule 1, Part 1,
item 126]
Part 6-4 - administration of premiums reduction scheme
11.162 No amendments have been made to Part 6-4 and the
administration of the premiums reduction scheme by the Department of
Human Services will not be affected by the transfer of the Council's
functions to APRA.
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Part 6-5 - matters incidental to external and terminating management
11.163 Part 6-5 of the PHI Act sets out a number of matters relating to
the external management and terminating management of health benefits
funds. These included the powers of external and terminating managers,
obligations on directors and officers of insurers to deliver certain records
to mangers and dealing with the property of a fund under management.
11.164 The external management and terminating management of
health benefits funds is now regulated under Part 3 of the Prudential
Supervision Bill and Part 6-5 of the PHI Act has therefore been repealed
in its entirety. [Schedule 1, Part 1, item 126]
Part 6-6 - private health insurance levies
11.165 Part 6-6 of the PHI Act deals with matters relating to the
collection and administration of private health insurance levies.
11.166 APRA has taken full responsibility for the Collapsed Insurer
Levy and the Prudential Supervisory Levy, which replaces the Council
Administration Levy. The collection and administration of these two
levies by APRA will be in accordance with the relevant levy imposition
Acts, including the Supervisory Levy Imposition Bill, and with the
FISLC Act.
11.167 While the Health Minister retains overall policy responsibility
for the Risk Equalisation Levy, APRA will take over from the Council
responsibility for the collection of the levy. APRA will administer the
Risk Equalisation Levy in accordance with the Risk Equalisation Levy
Amendment Bill and Part 6-6 of the PHI Act.
11.168 The remaining private health insurance levies under the
PHI Act, the National Joint Replacement Register Levy and the
Complaints Levy, which funds the operation of the Private Health
Insurance Ombudsman, will remain under the PHI Act and no
amendments have been made to their operation.
Divisions 304 and 307 - Collection and recovery of private health
insurance levies
11.169 Divisions 304 and 307 of the PHI Act contain a general
introduction to Part 6-6 and set out when private health insurance levies
are payable, penalties for late payment of levies and waiver of levies and
late payment penalties.
11.170 All references to the Collapsed Insurer Levy and Council
Administration Levy and the Council's administration of those levies have
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been repealed from Divisions 304 and 307 [Schedule 1, Part 1, items 127,
129 to 132 and 134 to 136].
11.171 A note has been added at the end of section 304-10 informing
readers that insurers are liable to pay the Collapsed Insurer and
Supervisory Levies, that Part 6-6 of the PHI Act does not apply in relation
to those levies and that the collection of those levies is dealt with in the
FISLC Act. [Schedule 1, Part 1, item 128]
11.172 Amendments to Division 307 in relation to the Risk Equalisation
Levy are:
• Risk Equalisation Levy, as well as any late payment penalty
in respect of the Levy, is to be paid to APRA, on behalf of
the Commonwealth, in accordance with subsection
307-10(2), for the purpose of the Private Health Insurance
Risk Equalisation Special Account (formerly the Risk
Equalisation Trust Fund); [Schedule 1, Part 1, item 132]
• subsection 307-15(3) has been amended to allow APRA (as
agent of the Commonwealth) to recover a debt to the
Commonwealth that is Risk Equalisation Levy that is due
and payable or any late payment penalty in respect of the
levy; and [Schedule 1, Part 1, item 133]
• subsection 307-20(2) has been amended to provide that
APRA (rather than the Council) may waive the whole or part
of an amount of late payment penalty in respect of an unpaid
amount of risk equalisation levy if APRA considers that there
are good reasons for doing so. [Schedule 1, Part 1, items 134
and 135]
Division 310 - requirements of private health insurers
11.173 Division 310 imposes requirements on private health insurers to
lodge returns with the Commonwealth for the purposes of certain private
health insurance levies, retain records relating to levies and provide
documents relevant to whether the insurer is liable to pay a private health
insurance levy or the amount of levy payable.
11.174 Section 310-1 of the PHI Act previously required private health
insurers to lodge returns with the Council in respect of the Collapsed
Insurer and Council Administration Levies and with the Secretary of the
Department of Health in respect of the Complaints Levy. All references to
the Council and the Collapsed Insurer and Council Administration Levies
have been repealed from Division 310, with consequential technical
changes made to reflect that the section now only applies to the
Complaints Levy. [Schedule 1, Part 1, items 137 to 139]
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11.175 Section 310-5 of the PHI Act imposes requirements on insurers
to retain records relevant to whether the insurer is liable to pay a private
health insurance levy or the amount of levy payable. Insurers will still be
required under section 310-5 to keep records relevant to the remaining
private health insurance levies remaining under the PHI Act.
11.176 Subsection 310-5(2) of the PHI Act has been amended to allow
the Secretary of the Department of Health, rather than the Council, to
approve a form of records, other than an electronic form, in which
documents relevant to the Complaints Levy may be kept and to allow
APRA to do the same in relation to documents relevant to the Risk
Equalisation Levy. [Schedule 1, Part 1, item 140]
11.177 Subsection 310-10(1) of the PHI Act previously provided for the
Council to request information or records from an insurer if it believed
that the insurer was capable of giving information relevant to whether the
insurer was liable to pay any private health insurance levy (other than the
Complaints Levy) or the amount of levy payable. Subsection 310-10(1) of
the PHI Act has been amended to give APRA the power to ask insurers
for information or records relevant to whether the insurer is liable to pay
the Risk Equalisation Levy or the amount of that levy the insurer is liable
to pay. [Schedule 1, Part 1, item 141 and 142]
11.178 As was the case for the Council, APRA's belief must be on
reasonable grounds. The Secretary of the Department of Health has
similar powers in relation to the Complaints Levy and these remain
unchanged.
11.179 APRA does not have power under section 310-10 to ask insurers
for documents or records relating to the Collapsed Insurer or Prudential
Supervisory Levies.
Division 313 - Power to enter premises and search for documents
11.180 Division 313 of the PHI Act provides powers to enter premises,
either with the consent of the occupier or under a warrant issued by a
magistrate, to search for documents containing information relevant to
whether an insurer is liable to pay a private health insurance levy or the
amount of levy that the insurer is liable to pay. Formerly, either a member
of the staff of the Council or a person authorised in writing by the Health
Minister could exercise powers under the Division.
11.181 The only levy-related documents that may be searched for now
under Division 313 are documents relevant to liability to pay the
Complaints Levy or the amount of Complaints levy for which an insurer
may be liable.
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11.182 All references to the Council have been repealed from
Division 313 and APRA will not exercise powers under Division 313.
Subsection 313-1(1) has been amended to reflect that only persons
authorised in writing by the Health Minister may now enter premises for
the purposes of the Division, either with consent or a pursuant to a
warrant. [Schedule 1, Part 1, item 144]
11.183 Additionally, subsection 313-1(2) has been amended with the
effect that the only documents that may be searched for under
Division 313 are documents relevant to liability to pay the Complaints
Levy or the amount of Complaints Levy for which an insurer may be
liable. [Schedule 1, Part 1, item 145]
11.184 A consequential amendment to the heading to the section
reflecting this has been made. [Schedule 1, Part 1, item 143]
11.185 The Secretary of the Department of Health has taken over
responsibility for issuing identity cards to authorised officers under
section 313-20, formerly the responsibility of the Council. [Schedule 1,
Part 1, item 146]
Part 6-7 - Private Health Insurance Risk Equalisation Special Account
11.186 Part 6-7 of the PHI Act deals with the Private Health Insurance
Risk Equalisation Special Account, the replacement for the Private Health
Insurance Risk Equalisation Trust Fund. The Health Minister will retain
overall policy responsibility for the Special Account, with APRA having a
similar role administering the Account as the Council had administrating
the Risk Equalisation Trust Fund.
11.187 A Special Account is an appropriation mechanism that
notionally sets aside amounts within the Consolidated Revenue Fund for
expenditure on specific purposes. The conversion of the Risk Equalisation
Trust Fund into a Special Account is required because of the different
financial arrangements of APRA and the Council.
11.188 The Council was legally separate to the Commonwealth and
could hold money, including the Trust Fund, on its own behalf and
separately from the Consolidated Revenue Fund. While APRA is a body
corporate legally separate to the Commonwealth, under its establishing
legislation it holds all money on behalf of the Commonwealth.
11.189 A new Part 6-7 of the PHI Act has been substituted to effect the
conversion. [Schedule 1, Part 1, item 147]
11.190 Section 318-1 of the PHI Act establishes the Private Health
Insurance Risk Equalisation Special Account Fund and declares it to be a
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special account for the purposes of the Public Governance, Performance
and Accountability Act 2013.
11.191 The conversion of the Risk Equalisation Trust Fund into the
Risk Equalisation Special Account is not intended to result in any
practical changes for insurers. The same kinds of amounts will be payable
into the Special Account under section 318-5 of the PHI Act as were
payable into the Risk Equalisation Trust Fund, specifically:
• amounts received by APRA by way of Risk Equalisation
Levy and late payment penalty in respect of that levy
(subparagraph 318-5(a)(i) and (ii));
• amounts paid to APRA under paragraph 45(b) of the
Prudential Supervision Bill by a non-profit insurer where the
insurer has assets left in its health benefits funds at the
completion of a termination of those funds
(subparagraph 318-5(b)(i));
• amounts paid to APRA under section 46 of the Prudential
Supervision Bill by the officers of an insurer where the
insurer contravenes that Bill in relation to the conduct of a
health benefits fund, the contravention resulted in a loss to
the fund and the fund has been terminated
(subparagraph 318-5(b)(i));
• repayments of collapsed insurer assistance payments (within
the meaning of section 54H of the APRA Act
(subparagraph 318-5(b)(ii)); and
• amounts paid to the Commonwealth or APRA, by a State or
Territory, for crediting to the Risk Equalisation Special
Account (paragraph 318-5(c)). Note that the full amount of
all risk equalisation levy payments, and related late payment
penalty, is to be credited to the Special Account and is based
on paragraph 318-5(1)(b) of the PHI Act. [Schedule 1, Part 1,
item 147]
11.192 A note to section 318-5 provides that an Appropriation Act may
contain a provision to the effect that, if any of the purposes of a Special
Account is a purpose covered by an item in the Act, then amounts may be
debited against the appropriation for that item and credited to the Special
Account.
11.193 Subsection 318-10(1) provides that the purpose of the Risk
Equalisation Special Account is for APRA to make payments to insurers
in accordance with the Private Health Insurance (Risk Equalisation
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Policy) Rules to meet the expenses of administering the Account. A
statement on the purposes of a Special Account is standard when
establishing a statutory Special Account.
11.194 Subsection 318-10(2) provides that the Private Health Insurance
(Risk Equalisation Policy) Rules, which will continue to be made by the
Health Minister, must specify:
• the circumstances in which funds can be debited from the
Account for payment to private health insurers; and
• the methods for working out the amount to be debited from
the Account to a private health insurer and the amount of
Risk Equalisation Levy that an insurer is liable to pay.
[Schedule 1, Part 1, item 147]
11.195 Subsection 318-10(3) requires the Health Minister to consult
with APRA before making changes to the Private Health Insurance (Risk
Equalisation Policy) Rules, noting that a failure to consult APRA does not
affect the validity of those rules. [Schedule 1, Part 1, item 147]
11.196 Section 318-15 provides for the Private Health Insurance (Risk
Equalisation Administration) Rules to be made setting out requirements
for insurers that are liable to Risk Equalisation Levy to keep particular
kinds of records, and also requirements about how records are to be kept.
11.197 Requirements for provision of information to APRA will instead
be dealt with by standards to be made under the FS(CoD) Act.
Part 6-8 - disclosure of information
11.198 Part 6-8 of the PHI Act deals with the disclosure of 'protected
information'.
11.199 Amendments to the Part are required to:
• enable the disclosure of protected information obtained under
the PHI Act to APRA and APRA officers to assist them to
carry out their duties, functions and powers in relation to
private health insurance;
• ensure that APRA officers performing functions under the
PHI Act (in relation to the Risk Equalisation Special Account
or Risk Equalisation Levy) are not subject to the secrecy
regime in the PHI Act. APRA officers will be subject to the
secrecy regime in the APRA Act when performing these
functions; and
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• repeal redundant provisions from Division 323.
11.200 Under section 323-1 of the PHI Act, a person commits an
offence if the person has or had a duty, function or power under the
PHI Act, the person discloses 'protected information' to another person
and the disclosure is not an 'authorised disclosure'.
11.201 In order to exclude APRA officers from the PHI Act information
disclosure regime:
• information obtained by a person in the course of performing
an 'APRA duty, function or power' has been excluded from
being 'protected information' as defined in
paragraph 323-1(2)(a); and [Schedule 1, Part 1, item 150]
• the offence for the disclosure of protected information will
not apply where a person has or had an APRA duty, function
or power. [Schedule 1, Part 1, item 148]
11.202 An 'APRA private health insurance duty, function or power' is
defined in new subsection 323-1(1A). [Schedule 1, Part 1, item 149]
11.203 It is a duty, function or power of APRA, or that a person has as
an officer of APRA, under:
• the PHI Act;
• the Prudential Supervision Bill; or
• the FISLC Act as that Act applies in relation to levies
imposed on insurers or the FS(CoD) Act as that Act applies
to private health insurers.
11.204 A note has been included to new subsection 323-1(1A)
providing that the disclosure of information regime for information
obtained under APRA private health insurance duties, functions and
powers exists in Part 6 of the APRA Act, rather than Division 323 of the
PHI Act.
11.205 Section 323-5 of the PHI Act specifies a number of authorised
disclosures that may be made in the course of official duties.
11.206 However, a new paragraph, paragraph 323-5(aa), has been
inserted in order to provide that a disclosure of information made for the
purpose of enabling another person to perform or exercise an APRA
private health insurance duty, function or power is an authorised
disclosure under section 323-5 of the PHI Act. [Schedule 1, Part 1, item 153]
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Consequential Amendments and Transitional Provisions
11.207 With the abolition of the Council, references to equivalent
authorised disclosures to and by the Council and employees of or
consultants to the Council have been removed from section 323-10.
[Schedule 1, Part 1, item 154]. This is because the disclosure of information
by APRA is to be regulated under the APRA Act rather than the PHI Act.
11.208 Section 323-25 of the PHI Act previously provided for the
Council or the Secretary of the Department of Health or the Council to
disclose information to a person expressly or implied authorised to obtain
it by the person to whom the information relates. All reference to the
Council has been repealed from the section and only the Secretary
remains able to make an authorised disclosure under this section.
[Schedule 1, Part 1, items 155 and 156]
11.209 Section 323-35 previously enabled the Council to make an
authorised disclosure of information to the extent necessary to perform its
public information function (making statistics and other financial
information about an insurer available to the public) and its agency
cooperation function (cooperating with other regulatory agencies on
matters affecting insurers and the private health insurance industry
generally and providing information to the Private Health Insurance
Ombudsman for the purposes of the State of the Health Funds Report).
Section 323-35 has been repealed in its entirety. [Schedule 1, Part 1, item 157]
11.210 As a consequence, reference to disclosure under section 323-35
as a form of authorised disclosure has also been removed from
subsection 323-1(3). [Schedule 1, Part 1, item 151]
11.211 Section 323-25 is being inserted to ensure that a disclosure of
information is an authorised disclosure. [Schedule 1, Part 1, item 155]
11.212 Ordinarily, section 323 prohibits disclosure if a person who has
a duty, but not an APRA duty, discloses info that was obtained under
PHI Act, but not while doing an APRA duty. For transitioning staff, they
will have obtained info while doing a PHI Act duty and want to use it.
Part 6-9 - review of decisions
11.213 Part 6-9 of the PHI Act deals with review of decisions made
under the Act by the AAT.
11.214 The table in section 328-5 of the PHI Act sets out decisions for
which review by the AAT is available. Items 5 to 30 and item 44 of the
table, which related to decisions made exclusively by the Council, have
been repealed. [Schedule 1, Part 1, items 158 and 160]
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11.215 AAT review of decisions made by APRA under the Prudential
Supervision Bill, is dealt with in section 167 of that Bill. Review of
decisions in relation to the waiver of Collapsed Insurer Levy or late
payment penalty for made under the FISLC Act are dealt with in
section 27 of that Act.
11.216 Item 43 of the table in section 328-5 previously excluded from
review decisions not to waive or to only partially waive late payment
penalty in respect of the Collapsed Insurer Levy, as review of such
decisions was provided for by item 44 of the table.
11.217 As the Collapsed Insurer Levy is no longer administered under
the PHI Act this exclusion has become redundant and item 43 has been
amended to remove reference to the Collapsed Insurer Levy. Access to
AAT review of decisions not to waive or to only partially waive late
payment penalty in respect of the Complaints Levy, the Risk Equalisation
Levy and the National Joint Replacement Register Levy is still available
under this item. [Schedule 1, Part 1, item 159]
11.218 Access to AAT review of decisions by the Health Minister not to
waive or to only partially waive late payment penalty in respect of the
Complaints Levy, the National Joint Replacement Register Levy is still
available under this item. AAT review of similar decisions by APRA in
respect of the Risk Equalisation Levy will also be available under item 43
of table to section 328-5.
11.219 The general introduction to Part 6-9 in section 328-1 has been
amended to remove the reference to the review of decisions made by the
Council (among others) and substitute reference to APRA.
Part 6-10 - Miscellaneous
11.220 Part 6-10 of the PHI Act deals with a number of miscellaneous
matters, including the delegation of powers, the making of approved
forms and Private Health Insurance Rules made under the Act.
11.221 With the abolition of the Council, reference in
subsection 333-1(1) to the Health Minister delegating powers to the
Council is redundant and has been repealed. [Schedule 1, Part 1, items 161
and 162]
11.222 Section 333-10 of the PHI Act provides for the making of
approved forms. The Council previously approved a range of forms,
mainly forms for applications and notices made under Part 4 of the
PHI Act in relation to the operation of health benefits funds. All reference
to the Council's power to approve forms for the purposes of the PHI Act
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Consequential Amendments and Transitional Provisions
has been removed from section 333-10 by the repeal of item 3 of the table
to subsection 333-10(1). [Schedule 1, Part 1, item 163]
11.223 Sections 333-20 and 333-25 of the PHI Act empower the
making of legislative rules under the Act. With the transfer of the
prudential regulation of private health insurers to APRA, some matters
dealt with in rules previously made by the Health Minister or the Council
are now dealt with in corresponding APRA Rules made under the
Prudential Supervision Bill, or have become wholly redundant. As a
result, references to the making of following rules have been repealed
from sections 333-20 and 333-25 of the PHI Act:
• the Private Health Insurance (Registration) Rules;
• Private Health Insurance (Health Benefits Fund
Enforcement) Rules;
• Private Health Insurance (Management) Rules; and
• Private Health Insurance (Council) Rules. [Schedule 1, Part 1,
item 164]
11.224 A note has been inserted to advise that there are consultation
requirements that apply in relation to the making of rules mentioned in
items 6, 8 and 15 of the above table: see subsections 115-5(2), 131-5(2)
and 318-10(3). [Schedule 1, Part 1, item 165]
11.225 Section 333-25, which previously dealt with Private Health
Insurance Rules made by the Council, has been replaced with a new
section 333-25. The new section provides that APRA may make Private
Health Insurance (Risk Equalisation Administration) Rules providing for
matters mentioned in section 318-15 (record-keeping for insurers liable
for the Risk Equalisation Levy). It also provides that, to the extent that
Private Health Insurance (Risk Equalisation Administration) Rules deal
with matters dealt with in rules made by the Health Minister under section
333-20, they must not be inconsistent. [Schedule 1, Part 1, item 166]
11.226 Section 333-25 enabled the making of Private Health Insurance
(Health Benefits Fund Administration) Rules and Private Health Insurance
(Insurer Obligation) Rules by the Council. Matters previously dealt with
in those rules will be included in APRA Rules made under the Prudential
Supervision Bill.
Schedule 1 - Dictionary
11.227 The following definitions are being repealed from the Dictionary
in Schedule 1 as they are expressions that will no longer be used in the
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PHI Act after it is amended by the Consequential Amendments and
Transitional Provisions Bill. [Schedule 1, Part 1, items 167, 169, 171, 173, and
177] For example, the definition of policy liability is being repealed
because that expression is currently used only in sections 137-10(2),
146-1(4), 146-5(5) and in the dictionary definition of net asset position: all
those provisions are being repealed by the Consequential Amendments
and Transitional Provisions Bill:
• ADI;
• application provision;
• applied Corporations Act provision;
• appointed actuary;
• assets;
• capital adequacy direction;
• capital adequacy standard;
• census day;
• Chief Executive Officer;
• collapsed insurer levy;
• Commissioner;
• Council;
• Council administration levy;
• Council-supervised obligation;
• Deputy Commissioner;
• disqualified person;
• external management;
• external manager;
• fringe benefit;
• Human Services Department;
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• Human Services Minister;
• inspector;
• makes a capital payment;
• manager;
• member;
• net asset position;
• policy group;
• policy liability;
• prudential direction;
• prudential matters;
• prudential standard;
• registered as a for profit insurer;
• responsible insurer;
• restricted access group;
• Risk Equalisation Trust Fund;
• senior manager;
• solvency direction;
• solvency standard;
• terminating management;
• terminating manager;
• termination day; and
• voluntary deed of arrangement.
11.228 The definition of personal information in the PHI Act has been
retained. It is noted that after the amendments made by the Consequential
Amendments and Transitional Provisions Bill and the Private Health
Insurance Amendment Bill (No. 2) 2014, the PHI Act will not actually use
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the expression personal information. However, the definition is retained
because the Private Health Insurance Amendment Bill (No. 2) 2014
includes a provision inserting into section 3(1) of the Ombudsman Act a
definition of 'personal information' that cross-refers to the definition of
personal information in the PHI Act.
11.229 The definition of 'private health insurer' mirrors the definition in
the PHI Act in order to reduce the risk of cross-referencing becoming
unlinked.
11.230 New definitions for the following terms have been inserted into
the Dictionary in Schedule 1 [Schedule 1, Part 1, items 168 and 176]:
• APRA - defined as meaning the Australian Prudential
Regulation Authority;
• 'APRA private health insurance duty, function or power' -
readers are referred to subsection 323-1(1A). This definition
is relevant for identifying the types of information protected
under the disclosure of information provisions of the PHI Act
in Division 323; and
• 'Risk Equalisation Special Account' - readers are referred to
subsection 318-1(1) of the PHI Act. The Risk Equalisation
Special Account replaces the Risk Equalisation Trust Fund.
11.231 The definition of private health insurer in the Dictionary has
been amended to 'private health insurer means a body that is registered
under Division 3 of Part 2 of Prudential Supervision Bill' to reflect that
APRA has assumed the role of registering insurers under that Bill.
[Schedule 1, Part 1, item 170]
11.232 The definition of restricted access insurer in the Dictionary has
also been amended to 'restricted access insurer has the same meaning as
in the Prudential Supervision Bill'. That Bill defines a restricted access
insurer as an insurer registered under Division 3 of Part 2 of that Bill as a
restricted access insurer. [Schedule 1, Part 1, item 174]
11.233 The definition of 'referable', which specifies the health benefits
fund, previously provided that a policy was referable to a fund if:
• it was identified by an insurer as referable to the fund under
section 93-15 of the PHI Act when an adult first became
insured under the policy and had not been made referable to
another fund under a restructure, merger or acquisition of
funds under Division 146 of the PHI Act; or
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• had been made referable to the fund under Division 146.
11.234 The reference to Division 146 of the PHI Act has been updated
to refer to Division 4 of Part 3 of the Prudential Supervision Bill, under
which restructures, mergers and acquisitions of health benefits funds are
now regulated. [Schedule 1, Part 1, item 172]
11.235 The definition of 'risk equalisation jurisdiction' has also been
amended to refer readers to subsection 131-20(1) of the PHI Act, which
provides that an area is a risk equalisation jurisdictions if Private Health
Insurance (Health Benefits Fund Policy) Rules so provide. These rules are
made by the Health Minister (following consultation with APRA). The
jurisdictions were previously set in the Private Health Insurance (Health
Benefits Fund Administration) Rules made under subsection 146-1(6) of
the PHI Act, which has been repealed. [Schedule 1, Part 1, item 175]
Division 2 - Other amendments
Ombudsman Act 1976
11.236 To enable the sharing of information, the secrecy provisions in
section 35 of the Ombudsman Act 1976 have been amended.
11.237 Subection 35(6D) provides that an officer may, if the disclosure
is made in accordance with any requirements of the Private Health
Insurance (Information Disclosure) Rules, disclose the information to
certain people.
11.238 The Private Health Insurance Ombudsman could previously
disclose these categories of information to the same recipients under
section 323-10 of the PHI Act, which also provides for the sharing of
information about insurers between agencies.
11.239 As the Council will no longer exist, subsection 35(6D) has been
amended to repeal:
• a member of the Council (paragraph35(6D)(d); and
• a person employed, or a consultant engaged, by the Council
(paragraph35(6D)(e). [Schedule 1, Part 1, item 178]
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11.240 Instead of the Council, information is now able to be disclosed
to:
• an APRA member (within the meaning of the APRA Act); or
• an APRA staff member (within the meaning of the
APRA Act);
in addition to the other people listed in subsection 35(6D). [Schedule 1,
Part 1, item 178]
Private Health Insurance Act 2007
11.241 Section 323-10 of the PHI Act makes the sharing of certain
information between specified persons, including the Secretary of the
Department of Health, APS employees within the Department of Health,
the Private Health Insurance Ombudsman and the Chief Executive
Medicare (eligible persons), an authorised disclosure. The information
must not be information of a kind specified in the Private Health
Insurance (Information Disclosure) Rules as information that may not be
shared under the section.
11.242 Section 323-10 has been amended to allow eligible persons to
disclose information about private health insurers, applicants to become
an insurer, persons carrying on health insurance business and directors
and officers of insurers to APRA, an APRA member or APRA staff
member as an authorised disclosure. [Schedule 1, Part 1, item 179]
11.243 An amendment to new subsection 323-10(1A), as proposed to be
inserted by item 17 of Schedule 1 to the Private Health Insurance
Amendment Bill (No. 2) 2014 has been made. The current intention is that
this Bill be drafted on the assumption that the Private Health Insurance
Amendment Bill (No. 2) 2014 will commence on the same day as, or after
(but not before) these amendments. The commencement provision ensure
that the amendment to subsection 323-10(1A) will commence
immediately after item 17 of the Private Health Insurance Amendment
Bill (No. 2) 2014. [Schedule 1, Part 1, item 179]
11.244 Section 328-1 has been amended to remove reference to the
Council and replace it with APRA. The reference to APRA is needed
because APRA will, in relation to late payment penalty on the risk
equalisation levy, be making decisions which are reviewable because of
item 43 of the table in section 328-5. [Schedule 1, Part 1, item 180]
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Private Health Insurance (Prudential Supervision) Act 2015
11.245 The Prudential Supervision Bill will be extended to Norfolk
Island on and after the commencement of Part 1 of Schedule 2 to the
Norfolk Island Legislation Amendment Act 2015 [Schedule 1, Part 1, item 181].
11.246 Paragraph 92(7)(b) will be amended to update the reference
from the Legislative Instruments Act to the Legislation Act 2003. The
amendment is contingent on the commencement of the Acts and
Instruments (Framework Reform) Bill 2014. [Schedule 1, Part 1, item 182]
Part 2 - Repeals
11.247 The Private Health Insurance (Council Administration Levy)
Act 2003 has been repealed in its entirety. [Schedule 1, Part 1, item 183]
Schedule 2 - Transitional provisions
11.248 A number of transitional provisions have been provided relating
to the repeal of provisions establishing the Council and the transfer of
functions of the Council to APRA.
11.249 Such provisions are needed to ensure that legal actions
undertaken or deemed to be undertaken under the PHI Act immediately
before the transition time are taken to be undertaken under equivalent
provisions in the Prudential Supervision Bill. This includes certain
instruments.
11.250 However, it should be noted that the Council's capital, solvency
and prudential standards are not grandfathered under the transitional
provisions. Instead APRA will be making new prudential standards
(including prudential standards relating to capital and solvency) under the
Prudential Supervision Bill to take effect on commencement of that Bill.
11.251 The new prudential standards will largely replicate the
requirements of the Council's capital, solvency and prudential standards.
Accordingly it will not be necessary for the transitional provisions to
preserve the Council's standards
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Part 2 - Specific transitional provisions
Division 1 - Registration of private health insurers
Proceedings for injunctions relating to carrying on health insurance
business without registration
11.252 If proceedings for an injunction relating to carrying on health
insurance business without registration are pending in the Federal Court
under section of the 118-5 of the PHI Act, immediately before the
transition time, then these proceedings will continue. If the proceedings
were commenced by the Health Minister or Council then they will
continue as if the proceedings had been commenced by an application by
APRA under section 11 of the Prudential Supervision Bill, therefore
APRA will take them over. [Schedule 2, Part 2, item 2, subitems 1 and 2]
11.253 If proceedings were initiated by someone else, then the
proceedings will continue as if that person had standing to commence the
proceedings under section 11 of the Prudential Supervision Bill, therefore
that person will continue to bring the proceedings. [Schedule 2, Part 2, item 2,
subitem 3]
Continuing the registration of private health insurers
11.254 If before transition, an insurer is registered under Part 4-3 of the
PHI Act, then from the transition time the registration is taken to be a
registration of the body under Division 3 of Part 2 of the Prudential
Supervision Bill subject to the same terms and conditions as would have
applied immediately before the transition time. [Schedule 2, Part 2, item 3,
subitem 1(a) and (b)]
11.255 Registrations will also retain the appropriate status as under the
PHI Act, whether it be a restricted access insurer or a for profit insurer.
[Schedule 2, Part 2, item 3, subitem 1(c)]
11.256 At the transition time, an insurer can, in writing, request APRA
to vary the body's registration terms and conditions by amending or
revoking one or more of the terms and conditions. [Schedule 2, Part 2, item 3,
subitem 3(a) and (b)]
11.257 This power allows amendment or revocation of one or more
conditions, but it does not allow the imposition of additional terms or
conditions.
11.258 APRA may, by written notice to the insurer, vary the body's
registration terms and conditions, as per the insurer's request. If APRA
decides not to agree to the insurer's request, that will not be a reviewable
decision. This is because this provision is intended to allow APRA to
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'clean up' obviously out-of-date registration conditions rather than to
allow private health insurers to seek a more fundamental re-examination
of existing conditions. This provides industry certainty about the
continuation of registration conditions during the transition from
regulation by the Council to APRA. [Schedule 2, Part 2, item 3, subitem 4]
11.259 This provides insurers with the opportunity to review their
registration terms and conditions and seek to update them if they are no
longer valid or dated.
Applications for registration as private health insurer
11.260 Registration applications made under section 126-10 of the
PHI Act, but not yet decided upon by the transition time, will continue to
progress as if the application had been made under section 12 of the
Prudential Supervision Bill. [Schedule 2, Part 2, item 4, subitem 1]
11.261 For the purposes of whether APRA requires additional
information (section 13) or whether APRA can refuse an application
(section 17) under the Prudential Supervision Bill, the application is taken
to have been made at the transition time. Accordingly, under section 13,
APRA will have 90 days from the transition time, rather than the time the
application was made, to give the applicant written notice requiring
information about the application. Under section 17, deemed refusal of an
application will occur 90 days after the transition time or 90 days after the
applicant provides information under s 13 (as the case may be). [Schedule 2,
Part 2, item 4, subitem 2]
11.262 Further, if under section 126-15 of the PHI Act, the Council
gave the applicant notice that further information was required for the
purposes of the application, but the information has not yet been provided
by the transition time, the notice is taken to have been given by APRA
under section 13 of the Prudential Supervision Bill at the transition time.
[Schedule 2, Part 2, item 4, subitem 3]
11.263 These transitional provisions will ensure that APRA has
sufficient time to properly assess an application for registration made but
not determined before the transition time.
Conversion to for profit status
11.264 If under section 126-42 of the PHI Act, an insurer has been
approved to convert to being registered as a for profit insurer, then the
approval will continue as if it were made by APRA under section 20 of
the Prudential Supervision Bill. [Schedule 2, Part 2, item 5, subitem 1]
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11.265 If an application made to the Council has not yet been completed
by the transition time, then section 20 of the Prudential Supervision Bill
will apply as if the application had been made under that section.
[Schedule 2, Part 2, item 5, subitem 2(a)]
11.266 In addition, acts undertaken by the Council (such as causing a
notice to be published or giving an applicant notice requiring further
information) will be deemed to have been taken by APRA. [Schedule 2,
Part 2, item 5, subitems 2(b) and 2(c)]
Division 2 - Health benefits funds - restructures, mergers and
acquisitions, and terminating and external management
Restructures of health benefits funds
11.267 If under section 146-1 of the PHI Act an approval was in place
for a restructure, then from the transition time the approval has effect as if
it were made by APRA under section 32 of the Prudential Supervision
Bill. [Schedule 2, Part 2, item 6, subitem 1]
11.268 If an application made to the Council before the transition time
under section 146-1 of the PHI Act has not yet been decided upon by the
transition time, section 32 of the Prudential Supervision Bill applies in
relation to the application. [Schedule 2, Part 2, item 5, subitem 2]
Mergers and acquisitions of health benefits funds
11.269 If under section 146-5 of the PHI Act an approval was in place
for a merger or acquisition, then from the transition time the approval has
effect as if it were made by APRA under section 33 of the Prudential
Supervision Bill. [Schedule 2, Part 2, item 7, subitem 1)]
11.270 If an application made to the Council before the transition time
under section 146-5 of the PHI Act has not yet been decided upon by the
transition time, section 33 of the Prudential Supervision Bill applies in
relation to the application. [Schedule 2, Part 2, item 7, subitem 2]
Terminating management and external management of health benefits
funds
11.271 If under section 149-10 of the PHI Act an approval was in place
for a termination of health benefits funds, then from the transition time the
approval has effect as if it were made by APRA under section 37 of the
Prudential Supervision Bill. [Schedule 2, Part 2, item 8, subitem 1]
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11.272 If under section 149-1 of the PHI Act an application for approval
of a termination of health benefits funds had been made to the Council but
not yet decided, then from the transition time the application is taken to
have been made to APRA under section 35 of the Prudential Supervision
Bill. [Schedule 2, Part 2, item 8, subitem 2]
11.273 Further, for the purposes of sections 36 and 38 of the Prudential
Supervision Bill, the application is taken to have been made by APRA at
the transition time. Section 36 of the Prudential Supervision Bill is based
on section 149-5 of the PHI Act and provides that, within 28 days after a
termination application is made, APRA may give the applicant written
notice requiring the applicant to give such further information relating to
the termination application as is specified in the notice. Section 38 of the
Prudential Supervision Bill is based on section 149-15 of the PHI Act and
provides that an application for termination is taken to have been refused
if APRA does not notify the applicant of its decision the application
within 90 days of it being made or within 90 days after information has
been given in compliance with a notice seeking further information.
11.274 The time limits specified in sections 36 and 38 will start to run
from the transition time. This will ensure that, if an application for
termination under Division 149 of the PHI Act is made but not determined
before the transition time, APRA will have sufficient time to seek
information and consider the application.
11.275 In addition, if before the transition time, the Council gave the
applicant notice under section 149-5 of the PHI Act requiring the
provision of further information, and it has not yet been provided, then the
notice is taken to have been given by APRA, under section 36 of the
Prudential Supervision Bill, at the transition time. [Schedule 2, Part 2, item 8,
subitems 3 and 4]
11.276 Appointment of terminating managers that are in force under the
PHI Act immediately before the transition time will continue to have
effect from the transition time as if it were made under section 37 of the
Prudential Supervision Bill (where the original appointment was made by
the Council under section 149-10 of the PHI Act) or Division 7 of Part 3
of the Prudential Supervision Bill (where the original appointment was
made via the court process in Division 220 of the PHI Act). [Schedule 2,
Part 2, item 8, subitem 5]
11.277 A health benefits fund that is under terminating management, or
external management, immediately before the transition time will
continue to be so under the Prudential Supervision Bill. Things done, by
or in relation to the Council under the PHI Act will be taken to be done,
by or in relation to APRA under the corresponding provision of the
Prudential Supervision Bill. Things done by or in relation to the
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terminating manager or external manager under a provision of the
PHI Act will, likewise, be taken to be done by or in relation to the
terminating manager or external manager under the corresponding
provision of the Prudential Supervision Bill. [Schedule 2, Part 2, item 8,
subitem 6]
11.278 The Minister may make rules that relate to how a terminating
management or external management is to continue under the Prudential
Supervision Bill. [Schedule 2, Part 2, item 8, subitem 7]
Division 3 - Other obligations of private health insurers
Directions
11.279 Directions given to a private health insurer that are in force
immediately before the transition time will continue in effect as if it were
a direction given by APRA under section 96 of the Prudential Supervision
Bill. This will apply for directions given under the following provisions of
the PHI Act:
• section 140-20 (solvency direction);
• section 143-20 (capital adequacy directions);
• section 163-15 (directions to comply with standards); and
• section 200-1 (other directions). [Schedule 2, Part 2, item 9,
subitem 1]
11.280 Section 104 of the Prudential Supervision Bill, which sets
penalties for non-compliance with an APRA direction under that Bill will
not apply in relation to a grandfathered Council direction, unless it was
given under section 163-15 of the PHI Act. This is to ensure that the
penalty under section 104 only applies to a Council direction to which a
criminal penalty already applied (that is, to a direction under
section 163-15). [Schedule 2, Part 2, item 9, subitem 2]
11.281 If a direction is to apply for a certain period, then the direction
will continue to cease to have effect at the end of the specified period.
[Schedule 2, Part 2, item 9, subitem 3]
Actuaries
11.282 Actuaries of private health insurers that are appointed under
section 160-1 of the PHI Act immediately before the transition time will
continue as if it were an appointment under section 106 of the Prudential
Supervision Bill. [Schedule 2, Part 2, item 10]
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Disqualified persons
11.283 The definition of 'disqualified person' (subsection 119(1)) in the
Prudential Supervision Bill also includes a person who was disqualified
under section 166-20 of the PHI Act. [Schedule 2, Part 2, item 11]
11.284 APRA may revoke a disqualification grandfathered under the
above provision upon application by the person or of its own initiative and
the revocation will take effect on the day on which it is made. This
ensures that a person disqualified by the Council's administrative
processes may seek to have their disqualification revoked by APRA via an
administrative process, rather than having to approach the court under the
new provisions in the Prudential Supervision Bill. [Schedule 2, Part 2, item 11]
11.285 When APRA makes a decision on an application for revocation
of a grandfathered Council disqualification, APRA must give the person
written notice of a revocation of the disqualification, or of a refusal to
revoke the disqualification. APRA may also give notice in any other way
that it considers appropriate. [Schedule 2, Part 2, item 11]
11.286 An application regarding a refusal of revocation of a
grandfathered disqualification may be made to APRA for internal review
and then, if dissatisfied with the decision on internal review, to the AAT
for a review of a decision made by APRA.
Division 4 - Enforcement
Investigations
11.287 Investigations that the Council had commenced into a private
health insurer under Division 194 or 214 of the PHI Act at the transition
time, but were not yet completed, will continue under Division 194 or 214
of the PHI Act (as the case may be) as if the relevant investigation
provisions remained in force. [Schedule 2, Part 2, item 12, subitems 1 and 2]
11.288 The investigation will continue as if references to the Council in
the grandfathered investigation provisions were references to APRA and
things done, by or in relation to the Council, before the transition time,
will be taken to have been done, by or in relation to APRA. [Schedule 2,
Part 2, item 12, subitems 1 and 2]
11.289 An appointment of an inspector under section 214-1(1) of the
will also continue as if APRA had appointed the inspector. [Schedule 2,
Part 2, item 12, subitem 3]
11.290 If required, the Minister may make rules under item 43 in
relation to how an investigation will continue to apply. [Schedule 2, Part 2,
item 12, subitem 4]
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11.291 Under Division 3, Part 6 of the Prudential Supervision Bill,
APRA will be able to investigate breaches of Council-supervised
obligations that occurred pre-transition. This will ensure that APRA can
investigate breaches that occurred prior to the transition time, as well as
breaches that occurred from that time. [Schedule 2, Part 2, item 12, subitem 5]
Enforceable undertakings
11.292 Enforceable undertakings that were accepted by the Council
under subsection 197-1(2) of the PHI Act pre-transition will continue as if
accepted by APRA under subsection 152(1) of the Prudential Supervision
Bill. [Schedule 2, Part 2, item 13]
Federal Court remedies
11.293 Proceedings commenced by the Council under Division 203 of
the PHI Act will continue after transition with APRA substituted for the
Council as a party. Division 203 of the PHI Act includes power for the
Council to apply to the Federal Court seeking a declaration of
contravention of a Council-supervised obligation under the PHI Act, and
also seek certain other orders such as an order for pecuniary penalty or
another order redressing the contravention. [Schedule 2, Part 2, item 14]
11.294 As a result, Division 203 will continue in relation to proceedings
commenced, but not concluded, at the transition time. In continuing these
proceedings, references in Division 203 to the Council shall be read as
references to APRA and things done, by or in relation to the Council,
prior to the transition time, will be taken to have been done, by or in
relation to APRA. [Schedule 2, Part 2, item 14]
11.295 APRA is not able to commence proceedings under Division 203
after the transition time. If APRA wants to commence proceedings after
the transition time in relation to a contravention of a Council-supervised
obligation that is continuing at the transition time, or to a contravention of
such an obligation that occurred prior to transition time, proceedings will
need to commence under Part 8 of the Prudential Supervision Bill. To this
end, Part 8 of the Prudential Supervision Bill will have effect as if
references in that Part to enforceable obligations also included references
to Council-supervised obligations. [Schedule 2, Part 2, item 14]
Proceedings for injunctions relating to non-complying policies
11.296 If immediately prior to the transition, proceedings for an
injunction are pending in the Federal Court under section 84-10 of the
PHI Act (for example, in relation to conduct concerning complying
policies or false representation of policies as complying policies), and the
proceedings were commenced by the Council, then the proceedings will
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Consequential Amendments and Transitional Provisions
continue, from the transition time, with the Health minister substituted for
the Council as a party. [Schedule 2, Part 2, item 15]
Division 5 - Financial matters
Crediting of Council money to special accounts
11.297 Upon transition, all money held by the Council (Council money)
must be credited to a special account. There are three special accounts
under the new legislative regime:
• a Risk Equalisation Special Account, established under
Division 318 of the PHI Act, as amended;
• a Collapsed Insurer Special Account, established under the
new Division 2A of Part 5 of the APRA Act, as amended;
and
• the (existing) APRA Special Account, under Division 1 of
Part 5 of the APRA Act, which relates mainly to APRA's
costs of administration. [Schedule 2, Part 2, item 16, subitem 1]
11.298 For the Risk Equalisation Special Account, the following
amounts should be credited:
• amounts that were credited to the Risk Equalisation Trust
Fund immediately prior to transition;
• any amounts of Council money that, immediately before the
transitional time, were required by section 318-5 of the
PHI Act, to be paid to the Risk Equalisation Trust Fund but
that had not been paid prior to transition; and
• any other amount of Council money that consists of a
repayment to the Council of a payment made, before the
transition time, for the purpose of helping to meet liabilities
as described in section 6 of the Collapsed Insurer Levy Act.
[Schedule 2, Part 2, item 16, subitem 2]
11.299 In the event that an insurer, that collapsed prior to the transition,
receives proceeds from the insurer levy, repayments from the insurer will
be credited to the Risk Equalisation Special Account. This will enable the
recovered amount to be returned to industry via an adjustment to the risk
equalisation payment relating to each insurer.
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11.300 For the Collapsed Insurer Special Account, the following
amounts of Council money are to be credited:
• any amount that consists of Collapsed Insurer Levy, or a
related late payment penalty, received by the Council before
the transition time;
• any amount that consists on proceeds from investments made
using Collapsed Insurer Levy, or related late payment
penalty. [Schedule 2, Part 2, item 16, subitem 3]
11.301 All other amounts of Council money will be credited to the
APRA Special Account after the transition time. [Schedule 2, Part 2, item 16,
subitem 4]
11.302 The purposes for which funds in APRA's Special Account can
be utilised are outlined in section 54 of the APRA Act.
Collection and recovery of Council administration levy and collapsed
insurer levy imposed before the transition time
11.303 If the imposition day for an amount of Council administration
levy or collapsed insurer levy is prior to transition time, and the levy has
not been paid, then Division 307 and section 328-5 (as it relates to
decisions made under Division 307) of the PHI Act will continue to apply
as if certain references to the Council were references to APRA (acting for
and on behalf of the Commonwealth). Division 307 of the PHI Act
contains the PHI Act levy collection provisions and section 328-5
provides for review by the AAT of various decisions, including a decision
on Division 307 relating to the waiver of levy or late payment penalty on
levy. [Schedule 2, Part 2, item 17]
11.304 Any amount paid or recovered (including related late payment
penalties) relating to the Council administration levy must be credited to
the APRA Special Account. [Schedule 2, Part 2, item 16, subitem 3]
11.305 Similarly, any amount paid or recovered (including related late
payment penalties) relating to the collapsed insurer levy must be credited
to the Collapsed Insurer Special Account. [Schedule 2, Part 2, item 16,
subitem 4]
11.306 The Private Health Insurance Supervisory Levy Imposition Bill
will, for the 2015-16 financial year, preserve the imposition dates and
rates determined by the Private Health Insurance (Council Administration
Levy) Rules as in force immediately before the transition time.
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Consequential Amendments and Transitional Provisions
Entitlements to be paid an amount out of the Risk Equalisation Trust Fund
11.307 If immediately before the transition time, a private health insurer
has an entitlement to be paid an amount from the Risk Equalisation Trust
Fund that has not been met, then APRA must pay that amount after the
transition time. The amount must be debited from the Risk Equalisation
Special Account. [Schedule 2, Part 2, item 18]
Division 6 - Other matters
Secrecy obligations
11.308 Sections 323-1 and 323-40 of the PHI Act prohibit certain
persons, including staff of the Council, from disclosing information
generally relating to private health insurers, unless the disclosure is an
'authorised disclosure' within the meaning of the PHI Act.
11.309 A disclosure of information, where that information was
obtained under the PHI Act before the transition time, will be considered
an authorised disclosure under sections 323-1 and 323-40 of the PHI Act
(and therefore permissible) if the disclosure is:
• made in the course of performing or exercising an APRA
private health insurance duty, function or power (within the
meaning of section 323-1 of the PHI Act); or
• one that the person would have been able to make under
section 56 of the APRA Act, had the information been
obtained in the course of performing such a duty, function or
power. [Schedule 2, Part 2, item 19]
11.310 This has the effect of preserving secrecy in relation to
information transferred to APRA, and/or known by employees of the
Council who have been transferred to APRA, while ensuring that, if the
information can be disclosed under a provision in APRA's secrecy
provision, it may be disclosed without having to also be an 'authorised
disclosure' under the PHI Act.
Report on operations of private health insurers before transition time
11.311 If by the transitional time, the Council has not given a report in
relation to a financial year ending at or before the transition time under
section 364-15 of the PHI Act as in force immediately before the
transition time, that section of the PHI Act is taken to continue in force as
if the reference to the Council were instead a reference to APRA.
[Schedule 2, Part 2, item 20]
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Part 3 - General transitional provisions
Division 1 - Transitional functions
11.312 To allow both the Council and APRA to prepare for the transfer,
the functions of both the Council and APRA have been extended to allow
such steps as may be necessary or convenient to prepare for or give effect
to the abolition of the Council, through the operation of this Schedule and
the enactment of the Consequential Amendments and Transitional
Provisions Bill and the Prudential Supervision Bill. [Schedule 2, Part 3,
item 21]
11.313 This will allow the Council and APRA to work together to
ensure the transition is carried out effectively.
11.314 The transition period is defined as the period commencing from
the day the Bill receives the Royal Assent and ends immediately before
the transition time. Transition time is defined in item 1 of Part 1 to
Schedule 2 to mean the commencement of section 3 of the Prudential
Supervision Bill (which is when the substantive provisions of that Act are
to come into effect). [Schedule 2, Part 3, subitem 21(3)]
Division 2 - Transfer of assets and liabilities
Vesting of assets and liabilities
11.315 Immediately before the Council is abolished, the assets and
liabilities of the Council will be transferred to APRA.
11.316 At the transition time, the assets will cease to be assets of the
Council and become assets of APRA. For example, this would include the
remaining cash reserves and equipment of the Council among other assets,
immediately before the transition. [Schedule 2, Part 3, item 22]
11.317 Similarly, at the transition time, all liabilities will cease to be
liabilities of the Council and will become liabilities of APRA. For
example, APRA will be responsible for the Council's liabilities including
employees' annual leave and any accounts payable, immediately before,
or after, the transition time. [Schedule 2, Part 3, item 23]
11.318 The APRA Minister may also make a determination, in writing,
that specified assets or liabilities will become assets of the
Commonwealth. [Schedule 2, Part 3, subitems 22(3)-(5) and 23(3)-(5)]
11.319 It is expected that all assets and liabilities held by the Council
immediately before the transition time will transfer to APRA and such a
determination would only be made should unforeseen circumstances arise.
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Consequential Amendments and Transitional Provisions
Transfers of land may be registered
11.320 If required, the transitional provisions also provide for the
transfer of land (including an interest in land under a lease) from the
Council to APRA or the Commonwealth. [Schedule 2, Part 3, item 24]
11.321 The provision provides that to facilitate the land transfer, a
certificate that is signed by the APRA Minister, identifies the land and
states that the land is now vested in APRA or the Commonwealth, should
be lodged with a land registration official. The certificate is not a
legislative instrument within the meaning of the Legislative Instruments
Act and there is a statement to this effect for information purposes.
[Schedule 2, Part 3, item 24]
11.322 When the land registration official registers the matter in a
manner that is the same as, or similar to, the way in which dealings in land
of that kind are registered, the deal will give effect to the certificate.
[Schedule 2, Part 3, item 24]
Certificates relating to vesting of assets other than land
11.323 If required, the transitional provisions also provide for the
registration of transfer of assets other than land from the Council to APRA
or the Commonwealth. This would be relevant if, for example, an
intellectual property interest, or a security interest associated with an
asset, required registration. [Schedule 2, Part 3, item 25]
11.324 The provision provides that to facilitate the asset transfer (other
than land), a certificate that is signed by the APRA Minister, identifies the
asset and states that the asset is now vested in APRA or the
Commonwealth, should be lodged with an assets official. The certificate is
not a legislative instrument within the meaning of the Legislative
Instruments Act and there is a statement to this effect for information
purposes. [Schedule 2, Part 3, item 25]
11.325 The assets official may deal with, and give effect to, the
certificate as if it were a proper and appropriate instrument for
transactions in relation to assets of that kind and make entries in the
register. [Schedule 2, Part 3, item 25]
Division 3 - Transfer of other matters
Things done by, or in relation to, the Council
11.326 Any action done by, or in relation to, the Council before the
transition time, will, following the transition time have effect as if it had
been done by, or in relation to, APRA. [Schedule 2, Part 3, item 26]
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11.327 The APRA Minister may also make a determination, in writing,
which specifies that a specified thing can be attributed to the
Commonwealth. Alternatively, the APRA Minister may also make a
determination, in writing, which states that this item does not apply to a
specified thing. A determination made under subitem 3 is not a legislative
instrument within the meaning of the Legislative Instruments Act and
there is a statement to this effect for information purposes. [Schedule 2,
Part 3, item 26]
11.328 It is expected that all actions of the Council will be imputed to
APRA and such a determination would only be used in unforeseen
circumstances where there are sound reasons for imputing the action of
thing to the Commonwealth rather than APRA.
References in certain instruments to the Council
11.329 Instruments that are in force immediately before the transition
time and contain a reference to the Council will be taken to refer to
APRA. [Schedule 2, Part 3, item 27]
11.330 This will include instruments that relate to:
• an asset or liability of the Council that will become an asset
or liability of APRA under item 22 or 23;
• a thing done by, or in relation to, the Council that is taken to
be done by, or in relation to, APRA under item 26. [Schedule 2,
Part 3, subitem 27(2)]
11.331 An instrument is defined to include:
• a contract, undertaking, deed or arrangement; and
• a notice, authority, order or instruction; and
• an instrument made under an Act or under a legislative
instrument. [Schedule 2, Part 3, subitem 27(8)]
11.332 This will only translate references to the Council in instruments
that continue in force after the transition time. It will not cover prudential
standards or solvency or capital standards made by the Council. Such
prudential standards will cease to have effect upon the repeal of the
PHI Act and APRA will make wholly new prudential standards under the
Prudential Supervision Bill.
11.333 An instrument does not include:
• an Act;
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Consequential Amendments and Transitional Provisions
• an instrument made under the Consequential Amendments
and Transitional Provisions Bill; or
• an instrument specified in rules made under item 43.
[Schedule 2, Part 3, subitem 27(8)]
11.334 Where under one of the above provisions the Minister
determines that an asset or liability should be transferred to the
Commonwealth or that a thing should be imputed to the Commonwealth
(for example, where a contract has been transferred to the
Commonwealth), the transitional provisions also provide for an associated
instrument (in the example, the contract) that refers to the Council to be
taken to refer to the Commonwealth. [Schedule 2, Part 3, subitem27(4)]
11.335 The APRA Minister may determine in writing that the reference
to the Council, at and after the transition time, should be a reference to
APRA or the Commonwealth. This power would be used to make it clear
that a reference in an instrument to the Council should be taken to be a
reference to the Commonwealth or APRA and would only be relevant if
the Minister had determined that an asset should be transferred to the
Commonwealth rather than APRA or that a thing or action should be
imputed to the Commonwealth rather than APRA. [Schedule 2, Part 3,
subitem27(4)]
11.336 The determination may be made before or after the transition
time. A determination is not a legislative instrument.
Legal proceedings of the Council
11.337 Any legal proceedings to which the Council was a party and are
pending in any court of tribunal immediately before the transition time
will continue with APRA as a party to those proceedings, in place of the
Council, from the transition time. [Schedule 2, Part 3, item 28]
11.338 Alternatively, the APRA Minster may determine, in writing, that
the Commonwealth is substituted for the Council as a party to those
proceedings. [Schedule 2, Part 3, item 28]
11.339 The APRA Minister can make a determination before or after
the transition time and it is not a legislative instrument within the meaning
of the Legislative Instruments Act and there is a statement to this effect
for information purposes. [Schedule 2, Part 3, item 28]
Transfer of Council's records and documents
11.340 Any records or documents that were in the possession of the
Council immediately before the transition time will transfer to APRA after
the transition time. [Schedule 2, Part 3, item 29]
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Transitional Provision) Bill 2015
11.341 Alternatively, the APRA Minster may determine, in writing, that
a record or document should be transferred to the Commonwealth after
the transition time. [Schedule 2, Part 3, item 29]
11.342 The determination may be made before or after the transition
time. A determination is not a legislative instrument. [Schedule 2, Part 3,
item 29]
11.343 For the purposes of the Public Governance, Performance and
Accountability Act 2013, sections 37 and 41 will apply to any records or
documents transferred to an entity within the meaning of that Act (for
example, APRA, and if relevant another Commonwealth agency to which
records might be transferred) as if the records or document related to that
entity. Section 37 provides for the accountable entity of a Commonwealth
authority to keep records that properly record and explain the entity's
performance in achieving its purposes and section 41 provides in similar
terms in relation to accounts that explain the entity's transactions.
[Schedule 2, Part 3, subitem 29(7)]
Transfer of the Ombudsman investigations
11.344 If, before the transition time, a complaint was made to the
Commonwealth Ombudsman under the Ombudsman Act 1976 in relation
to something done by the Council, or the Ombudsman has been
conducting an investigation in relation to such a matter and it has not been
finally disposed of, the Ombudsman Act is to apply in relation to the
matter as if APRA had done the thing that is subject to the complaint or
investigation. This will ensure that the Ombudsman's processes can
continue despite the transfer of functions and staff to APRA. [Schedule 2,
Part 3, item 30]
Division 4 - Staff and officers of the Council
Transferring employees - transfer to APRA
11.345 In transferring the Council's functions to APRA, it is expected
that all Council employees at the transition time will transfer to APRA to
ensure regulatory continuity and transfer of knowledge of the industry.
11.346 At the transition time, staff employed by the Council under
subsection 273-15(1) of the PHI Act immediately before the transition
time (a transferring employee):
• cease to be employed by the Council; and
• are taken to have been appointed as an employee under
section 45 of the APRA Act. [Schedule 2, Part 3, item 30]
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Consequential Amendments and Transitional Provisions
11.347 Section 45 of the APRA Act allows APRA to appoint
permanent, temporary or casual staff as it considers necessary for the
performance of its functions.
11.348 A transferring employee is not entitled to receive any payment
or other benefit as a result of the fact that he or she ceased being an
employee of the Council. [Schedule 2, Part 3, subitem 31(3)]
Transferring employees - terms and conditions of employment with APRA
11.349 It is expected that the terms and conditions of employment of
transferring staff will be set under an enterprise agreement, under the Fair
Work Act 2009, or in the case of certain senior staff by a separate
agreement, and in all cases supplemented by terms and conditions
determined under subsection 45(2) of the APRA Act. The Chair of APRA
has the ability to determine terms and conditions of appointment
(including remuneration) for APRA employees. [Schedule 2, Part 3, item 32]
11.350 A transferring employee's terms and conditions of appointment
must be no less favourable, considered on an overall basis, than the terms
and conditions of employment to which the employee was entitled,
immediately before the transition time, as an employee of the Council.
[Schedule 2, Part 3, subitem 32(1)]
11.351 However, where an enterprise agreement (within the meaning of
the Fair Work Act 2009), made on or after the transition time, applies to
employees of APRA as appointed under subsection 45(1) of the APRA
Act, subitem 1 ceases to have effect. [Schedule 2, Part 3, subitem 32(2)
11.352 This will ensure that an employee that is compulsorily
transferred is no worse off, looking at their conditions on an overall basis,
as a result of the implementation of this Government decision.
11.353 A determination made under subsection 45(2) of the APRA Act
for the transferring employee is able to be made before or after the
transition time and may take effect from the transition time or a later time.
[Schedule 2, Part 3, subitem 32(3)]
11.354 However, to avoid doubt:
• the Chair of APRA may determine different terms and
conditions of appointment under subsection 45(2) of the
APRA Act for different transferring employees; or
• a transferring employee may be covered by either of the
following instruments (whether made before or after the
transition time):
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- a fair work instrument (within the meaning of the Fair
Work Act 2009);
- a determination made under subsection 45(2) of the
APRA Act. [Schedule 2, Part 3, subitem 32(4)]
Transferring employees - accrued leave and prior service
11.355 All leave accrued by a transferring employee immediately
before the transition time, in relation to a transferring employee's
employment by the Council, will be considered as leave in relation to
periods of service as an employee of APRA appointed under section 45 of
the APRA Act. [Schedule 2, Part 3, item 33]
11.356 Furthermore, the service of a transferring employee as an
employee of the Council will be taken to have been continuous with his or
her service as an employee of APRA appointed under section 45 of the
APRA Act. [Schedule 2, Part 3, item 33]
Transferring employees - processes begun before transition time
11.357 Rules made under item 34 may provide for 'staffing
procedures' of the Council and APRA to apply, or to continue to apply, in
relation to:
• processes begun before, but not completed by, the transition
time; or
• things done by, for or in relation to the Council or a
transferring employee before that time. [Schedule 2, Part 3,
item 34]
11.358 Staffing procedures includes procedures and policies related to:
• recruitment, promotion or performance management; or
• inefficiency, misconduct, forfeiture of position, fitness for
duty or loss of essential qualifications; or
• disciplinary action, grievance processes or reviews of or
appeals against staffing decisions; or
• transfers, resignations or termination of employment; or
• leave. [Schedule 2, Part 3, subitem 34(2)]
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Consequential Amendments and Transitional Provisions
Safety, Rehabilitation and Compensation Act 1998 - rehabilitation
provisions
11.359 Item 35 provides that the Safety, Rehabilitation and
Compensation Act 1988 (the SRC Act) applies to an employee of the
Council, who suffered an injury before the transition time, as if the
employee had been an employee of APRA. [Schedule 2, Part 3, item 35]
11.360 An employee of the Council under subsection 273-15(1) of the
PHI Act at any time, regardless of whether or not the person is a
transferring employee, or an employee of the Council within the meaning
of the SRC Act are covered. [Schedule 2, Part 3, item 35]
11.361 The item ensures that APRA is the relevant employer of
employees of the Council (including employees who ceased employment
with the Council before the commencement time) in respect of an injury
within the meaning of the SRC Act sustained before the commencement
time.
No transfer of Council officers or consultants
11.362 A Council officer includes:
• the Commissioner of Private Health Insurance
Administration;
• any other member of the Council;
• the Chief Executive Officer of the Council. [Schedule 2, Part 3,
subitem 36(2)]
11.363 Nothing in this Part provides that the appointment of a Council
officer immediately before the transition time has effect at or after the
transition time as if it were an appointment of the person in relation to
APRA or the Commonwealth. [Schedule 2, Part 3, item 36]
11.364 Similarly, nothing in this Part provides that a person engaged as
a consultant to the Council under subsection 273-15(3) of the PHI Act
immediately before the transition time becomes engaged at or after the
transition time as a consultant under subsection 47(1) of the APRA Act.
[Schedule 2, Part 3, item 36]
Division 5 - Annual reporting obligation
Final annual report for the Council
11.365 APRA will assume the residual annual reporting obligation of
the Council. In doing so, the Chair of APRA must prepare and give a
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report (the final report) on the activities of the Council during the final
reporting period to the APRA Minister for presentation to the Parliament.
[Schedule 2, Part 3, item 37]
11.366 The final reporting period is defined as the period:
• beginning:
- if, by the transition time, no annual report for the Council
has been given to the Health Minister for the most recent
reporting period for the Council that ended before the
transition time - at the start of that reporting period; or
- otherwise - at the start of the reporting period for the
Council that includes the transition time; and
• ending immediately before the transition time. [Schedule 2, Part
3, subitem 37(6)]
11.367 In practice this means that if the transition day is 1 July 2015,
APRA will fulfil the requirement to publish an annual report in respect of
the 2014-15 financial year on behalf of the Council. If the transition time
is later but before the Council has given its 2015-15 annual report to the
Health Minister (for example, a transition day of 1 September 2015) then
APRA will prepare a final report on behalf of the Council covering the
period from 1 July 2014 to the transition day (in the example, 1 July 2014
to 31 August 2015). If the transition time is after the Council has provided
its 2014-15 annual report to the Health Minister, APRA will prepare a
final report for the period 1 July 2015 to the end of the day that is
immediately before the transition time.
11.368 Sections 39, 40, 42, 43 and 46 of the Public Governance,
Performance and Accountability Act 2013, and associated rules made for
the purposes of those sections, apply in relation to the Council and the
final reporting as if references in those sections and rules:
• to an annual report for a Commonwealth entity were
references to the final report; and
• to a reporting period for a Commonwealth entity were
references to the final reporting period; and
• to a Commonwealth entity were references to the Council;
and
• to the accountable authority for a Commonwealth entity were
references to the Chair of APRA; and
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Consequential Amendments and Transitional Provisions
• to the responsible Minister for a Commonwealth entity were
references to the APRA Minister. [Schedule 2, Part 3,
subitem 37(2)]
11.369 A reporting period for the Council means the reporting period
for the Council under the Public Governance, Performance and
Accountability Act 2013. [Schedule 2, Part 3, subitem 37(6)]
11.370 The annual report is a report under section 46 of the Public
Governance, Performance and Accountability Act 2013. [Schedule 2, Part 3,
subitem 37(6)]
11.371 These provisions will ensure that both the financial reporting
and report on operations are dealt with in the final annual report in the
normal way.
11.372 The Chair of APRA must give the final report to the APRA
Minister by the 15th day of the fourth month after the end of the final
reporting period. As explained above, the end of the reporting period will
be the end of the day that falls immediately before the transition time.
The APRA Minister may grant an extension of time in special
circumstances. [Schedule 2, Part 3, subitem 37(3)]
11.373 As soon as possible after receiving the report, the APRA
Minister must table the final report in each House of the Parliament.
[Schedule 2, Part 3, subitem 37(4)]
11.374 Also, APRA must publish the final report on its website as soon
as possible after the report has been tabled in the House of
Representatives. [Schedule 2, Part 3, subitem 37(5)]
Part 4 - Miscellaneous
Relationship between Part 3 and other provisions
11.375 The general transitional provisions in Part 3 of Schedule 2 have
effect subject to the more specific transitional provisions in Part 2 and any
rules made under item 43. Part 2 outlines the transitional provisions which
preserve, among other things, legal actions (including injunction
applications and proceedings for a pecuniary penalty) undertaken under
the PHI Act immediately before the transition time. These will be taken
over by APRA under equivalent provisions in the Prudential Supervision
Bill, or modified provisions of the PHI Act, but this will be achieved by
the specific provisions in Part 2 and not by the general provisions relating
to court proceedings in Part 3. [Schedule 2, Part 4, item 38]
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Transitional Provision) Bill 2015
Exemption from stamp duty and other State or Territory taxes
11.376 Item 39 provides that no stamp duty or other tax is payable
under a law of a State or a Territory in respect of an exempt matter, or
anything connected with an exempt matter. [Schedule 2, Part 4, item 39]
11.377 For this purpose, an exempt matter is:
• the vesting of an asset or liability under this Schedule; or
• the operation of this Schedule in any other respect. [Schedule 2,
Part 4, subitem 39(2)]
11.378 The APRA Minister may certify in writing:
• that a specified matter is an exempt matter; or
• that a specified thing was connected with a specified exempt
matter. [Schedule 2, Part 4, subitem 39(3)]
11.379 A certificate under subitem 3 is not a legislative instrument
within the meaning of the Legislative Instruments Act and there is a
statement to this effect for information purposes. A certificate will be
prima facie evidence of the matters stated in the certificate in all courts,
for all purposes (other than for the purposes of criminal proceedings). The
certificate is merely for evidentiary purposes and the making of a
certificate is not a precondition for the application of the exemption from
stamp duty and other tax as the exemption applies because of
subitem 39(1).
Certificates taken to be authentic
11.380 A document that appears to be a certificate made or issued under
a particular provision of this Schedule is taken to be such a certificate and
is taken to be properly given unless the contrary is established. [Schedule 2,
Part 4, item 40]
Delegation by APRA Minister
11.381 If required, the APRA Minister may delegate all or any of his or
her powers and functions to:
• the Secretary of the Department responsible for
administering the APRA Act; or
• an SES employee, or acting SES employee, in that
Department. [Schedule 2, Part 4, subitem 41(1)]
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11.382 'SES employee' and 'acting SES employee' are defined in the
Acts Interpretation Act 1901.
11.383 Any delegate of the APRA Minister must comply with any
directions. [Schedule 2, Part 4, subitem 41(2)]
11.384 The delegation power of the APRA Minister does not apply to a
power to make, vary or revoke a legislative instrument (such as
transitional rules under 43). [Schedule 2, Part 4, subitem 41(3)]
Compensation for acquisition of property
11.385 If the operation of the Consequential Amendments and
Transitional Provisions Bill were to result in an acquisition of property
(within the meaning of paragraph 51(xxxi) of the Constitution) from a
person otherwise than on just terms (within the meaning of that
paragraph), the Commonwealth is liable to pay a reasonable amount of
compensation to the person. [Schedule 2, Part 4, item 42]
11.386 The person may institute proceedings in a court if the
Commonwealth and the person cannot agree on the amount of the
compensation. The court would determine a reasonable amount of
compensation and would recover the amount for the Commonwealth.
[Schedule 2, Part 4, item 42]
Transitional rules
11.387 The APRA Minister may, by legislative instrument, make rules
regarding transitional matters relating to:
• the amendments or repeals made by the Consequential
Amendments and Transitional Provisions Bill; or
• the enactment of the Consequential Amendments and
Transitional Provisions Bill or the Prudential Supervision
Bill. [Schedule 2, Part 4, item 43]
11.388 The rules are intended to be used where the transition provisions
do not cover a situation that may arise during the transition but cannot be
predicted with any certainty or catered for in detail prior to it occurring
(for example, to enable the making of rules, for the purposes of item 34,
catering for the continuation of a process commenced by the Council, in
relation to transferring staff). A number of the general transitional
provisions expressly refer to particular situations being catered for in
transitional rules, if necessary.
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Transitional Provision) Bill 2015
11.389 The rules may not:
• create an offence or civil penalty provision;
• provide:
- powers of arrest or detention; or
- powers relating to entry, search or seizure;
• impose a tax;
• set an amount to be appropriated from the Consolidated
Revenue Fund under an appropriate in the Consequential
Amendments and Transitional Provisions Bill;
• directly amend the text of the Consequential Amendments
and Transitional Provisions Bill. [Schedule 2, Part 4,
subitem 43(3)]
11.390 The Consequential Amendments and Transitional Provisions
Bill (other than subitem (3)) does not limit the rules that may be made.
192
Chapter 12
Private Health Insurance Supervisory Levy
Outline of chapter
12.1 Chapter 12 relates to the new Private Health Insurance
Supervisory Levy Imposition Bill 2015 (Supervisory Levy Imposition
Bill).
12.2 Unless otherwise stated, all references in this Chapter relate to
the Supervisory Levy Imposition Bill.
Summary of new law
12.3 The Private Health Insurance Supervisory Levy Imposition Bill
effectively replaces the Private Health Insurance (Council Administration
Levy) Act 2003, which is being repealed by item 183 of the Consequential
Amendments and Transitional Provisions Bill.
12.4 The Supervisory Levy Imposition Bill establishes the legislative
framework for the calculation, and collection, of a supervisory levy to
recover APRA's costs incurred in regulating the private health insurance
industry. It will be administered by APRA.
12.5 In 2015-16, the levy will be collected on a quarterly basis in line
with the existing Private Health Insurance (Council Administration Levy)
Rules 2007.
12.6 From the 2016-17 financial year, the new levy will be collected
annually from private health insurers and will be calculated for each
insurer with reference to the number of single equivalent units that they
provide health insurance products to.
Comparison of key features of new law and current law
New law Current law
The Private Health Insurance The Private Health Insurance
Supervisory levy will be collected (Council Administration) Levy is
annually by APRA (other than in collected up to four times a year (with
relation to 2015-16 where it will be up to two supplementary levy days)
collected on a quarterly basis). by the Council.
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Private Health Insurance Supervisory Levy Imposition Bill 2015
Detailed explanation of new law
12.7 The Supervisory Levy Imposition Bill is a Bill to impose a levy
on bodies registered as private health insurers under the Prudential
Supervision Bill.
12.8 The supervisory levy will be collected to recover APRA's costs
of regulating private health insurers and be deposited in APRA's Special
Account. APRA collects similar levies for the other industries that it
prudentially regulates, including life and general insurers. Consistent with
the collection of APRA's other supervisory levies, the levies will be set by
a determination from the Minister.
12.9 In line with the Government's Cost Recovery Guidelines, the
amount to be collected is based on what APRA expects to expend in the
regulation of the private health insurance industry in the coming year.
This amount, and the method of allocating it within the private health
insurance industry (that is, the rate per single equivalent units), will be
outlined in an annual discussion paper released after the Commonwealth
Budget. The Government welcomes submissions on this paper.
12.10 At the end of each financial year, APRA also publish a Cost
Recovery Impact Statement to demonstrate how the costs of their
activities have been allocated to each industry.
12.11 Where APRA collects more to supervise an industry than is
required, APRA endeavours to return these funds to industry (through an
adjustment to levies applying in subsequent years) as soon as possible.
12.12 Sections 1 and 2 (the short title and commencement provisions)
are taken to commence when the Supervisory Levy Imposition Bill
receives Royal Assent. Sections 3-8 (the substantive provisions) are taken
to take affect at the same time as section 3 of the Prudential Supervision
Bill commences [Part 1,section 2].
12.13 Section 3 notes that the Supervisory Levy Imposition Bill binds
the Crown in each of its capacities [Part 1, section 3].
12.14 Section 4 extends the application of the Supervisory Levy
Imposition Bill to Norfolk Island on and after the commencement of
Part 1 of Schedule 2 to the Norfolk Island Legislation Amendment Act
2015 [Part 1, section 4].
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Private Health Insurance Supervisory Levy
12.15 Section 5 inserts the following definitions [Part 1, Section 5]:
• census day for a financial year means the day that specified
as the census day for the financial year in the levy
determination;
• complying health insurance policy has the same meaning as
in the PHI Act;
• levy determination means the legislative instrument referred
to in subsection 7(4) determining the levy amount that is
payable in respect of a complying health insurance policy;
• levy imposition day, in relation to a private health insurer for
a financial year, means:
(a) if the private health insurer is a private health insurer
on 1 July of the financial year--that day; or
(b) in any other case--the day, during the financial year,
on which the private health insurer becomes a private health
insurer.
• private health insurer has the same meaning as in the
Prudential Supervision Bill.
• supervisory levy means a levy payable in accordance with
subsection 8(4A) or (4C) of the FISLC Act.
12.16 Section 6 imposes a levy payable in accordance with
subsection 8(4A) or (4C) of the FISLC Act, as amended by the
Consequential Amendments and Transitional Provisions Bill. Subsection
8(4A) relates to the 2015-16 financial year and subsection 8(4C) relates to
subsequent financial years. [Part 1, section 6].
12.17 Section 7 establishes the amount of supervisory levy payable for
quarters in the financial year starting on 1 July 2015 (ending
30 June 2016). For these quarters, the amount of levy payable is the
amount of the Council Administration Levy that would have been payable
in the relevant quarter under the Private Health Insurance (Council
Administration Levy) Rules 2007, as if that instrument and other relevant
legislation had continued to be in effect. [Part 1,section 7, Subsections (1)
and (2)]
12.18 This is in order to align the levy payable by private health
insurance entities in 2015-16 with the levy that they would have paid to
the Council if it had continued to operate.
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Private Health Insurance Supervisory Levy Imposition Bill 2015
12.19 Section 8 establishes how the amount of the supervisory levy
payable by a private health insurer will be determined for the 2016-17
(and later) financial years. It applies to any levy amounts payable in
accordance with subsection 8(4C) of the FISLC Act, as amended by the
Consequential Amendments and Transitional Provisions Bill. [Part 1,
section 8, Subsection (1)]
12.20 Subsection 8(2) states that the amount of supervisory levy
payable will be the sum of the levy amounts (that is, the amounts for both
complying single and joint health insurance policies) calculated using the
levy determination for the relevant year. The number of complying single
and joint health insurance policies will be calculated on either:
• the census day for the financial year; or
• if the levy imposition day for an insurer for the levy year is
later than that census day, the levy imposition day. [Part 1,
section 8, Subsection (2)]
12.21 Subsection 8(3) provides the mechanism to calculate the levy
payable if the levy imposition day for the private health insurer is later
than 1 July in the financial year. This will be relevant where an insurer is
registered as a private health insurer after 1 July in a particular year.
12.22 This formula prorates the levy that would have been payable by
the insurer if their levy had been calculated on 1 July on the basis of the
number of days remaining in the year (including the levy imposition day).
12.23 That is, if the levy payable for an insurer would have been $365
for a financial year if the imposition day was 1 July, but instead it is to be
calculated on a separate 'levy imposition day' (for example, on July 30),
the levy payable will equal to: $365/655 x (1+334). That is, $335. [Part 1,
section 8, Subsection (3)]
12.24 Subsections 8(4) to 8(7) outline that from 1 July 2016 [Part 1,
the Minister must make a levy determination to
item 8, Subsection (4)]
determine the levy amount payable or a method for calculating the levy
amount payable. [Part 1, section 8, Subsection (6)] This determination must:
• specify a day in the financial year as the census day [Part 1,
section 8, Subsection (5)]; and
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Private Health Insurance Supervisory Levy
• provide for the levy amount to be calculated with regard to
the number of complying health insurance policies on issue
on the census day, to be calculated by applying different levy
amounts depending on the number of people insured (for
example to single and joint health insurance policies), and
may determine a levy amount of zero [Part 1,section 8,
Subsection (7)(a),(b), and (c)]; and
• ensure that the levy amount per single health insurance
policy cannot exceed $2 and the levy amount for all other
health insurance policies cannot exceed $4 [Part 1, section 8,
Subsection (7)(d)].
197
Private Health Insurance Risk Equalisation
Levy
Outline of chapter
13.0 Chapter 12 relates to amendments to the
Risk Equalisation Levy Act.
13.1 Unless otherwise stated, all references in this Chapter relate to
the Risk Equalisation Levy Amendment Bill.
Summary of new law
13.2 The Risk Equalisation Levy Amendment Bill amends the Risk
Equalisation Levy Act to give APRA the functions of the Council under
the Risk Equalisation Levy Act.
Comparison of key features of new law and current law
New law Current law
Reflects current legislation The Risk Equalisation Levy is
imposed to allow for
cross-subsidisation of high-cost
policy holders between insurers,
to assist insurers offset the costs
of complying with the community
rating principle.
Reflects current legislation Risk Equalisation Levy
imposition days are set by the
Health Minister in the Private
Health Insurance (Risk
Equalisation Levy) Rules. A
maximum of four days per
financial year may be set, plus a
maximum of two supplementary
imposition days.
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Private Health Insurance (Risk Equalisation Levy) Amendment Bill 2015
New law Current law
The rate of the Risk Equalisation The rate of the Risk Equalisation
Levy is determined in writing by Levy is determined in writing by
APRA. APRA must comply with the Council. The Council must
the Private Health Insurance (Risk comply with the Private Health
Equalisation Levy) Rules when Insurance (Risk Equalisation
setting the rate of levy. Levy) Rules when setting the rate
of levy.
Reflects current legislation. A maximum of two
supplementary risk equalisation
levy days and the rate of
supplementary levy may be set
through determinations made by
the Health Minister. The Minister
must comply with the Private
Health Insurance (Risk
Equalisation Levy) Rules when
setting the rate of supplementary
levy.
Before setting supplementary risk Before setting supplementary risk
equalisation levy days and the rate equalisation levy days and the rate
of any supplementary levy, the of any supplementary levy, the
Minister must obtain and take into Minister must obtain and take into
account advice from APRA. account advice from the Council.
Reflects current legislation Health Minister may make Private
Health Insurance (Risk
Equalisation Levy) Rules required
or permitted or necessary or
convenient for operation of Act.
Reflects current legislation Governor-General may make
regulations required or permitted
or necessary or convenient for
operation of Act. Before the
Governor-General makes
regulations, the Minister must
take into account any relevant
recommendation by APRA.
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Private Health Insurance Risk Equalisation Levy
New law Current law
No equivalent provisions in Act as Amounts purportedly determined
amended. by the Council before 1 July 2004
that registered health benefits
organisations had to pay into the
Reinsurance Trust Fund taken to
have been validly levied on
organisation. Any associated late
payment penalty taken to have
been validly imposed on
organisation.
Detailed explanation of new law
13.3 The Risk Equalisation Levy Act provides for the imposition of
the Risk Equalisation Levy on private health insurers.
13.4 The Risk Equalisation Levy supports funding for the Private
Health Insurance Risk Equalisation Special Account (formerly known as
the Risk Equalisation Trust Fund). The purpose of the Risk Equalisation
Special Account is to ensure that no insurer is unduly impacted by costly
claims because of the risk profile of its members. It does this by allowing
for internal cross-subsidisation for aged, chronic and long-term acute care
patients and other high-cost policy-holders within the private health
insurance industry. This assists insurers to offset the effects of complying
with the principle of community rating established under the PHI Act.
13.5 The Health Minister will retain overall policy responsibility for
the Risk Equalisation Levy, with APRA having a similar role
administering the Account as the Council had administrating the Risk
Equalisation Trust Fund. APRA will not assume any of the Council's
existing powers under Division 313 of the PHI Act. APRA will have the
power to investigate in relation to the Risk Equalisation Levy under Part 6
of the Prudential Supervision Bill.
Definitions
13.6 APRA has been defined in the Risk Equalisation Levy
Amendment Bill as the Australian Prudential Regulation Authority
[Schedule 1, Part 1, Item 1].
13.7 The definition of Council, registered health benefits organisation
and Risk Equalisation Trust Fund have been repealed as they are no
longer needed. [Schedule 1, Part 1, Items 2 and 3]
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Private Health Insurance (Risk Equalisation Levy) Amendment Bill 2015
Rate of risk equalisation to be imposed on a risk equalisation
levy day
13.8 As was previously the case, the Risk Equalisation Levy is
imposed on an insurer on each day (to a maximum of four) as specified in
Private Health Insurance (Risk Equalisation Policy) Rules made by the
Health Minister (see section 6 of the Risk Equalisation Levy Act).
13.9 Subsections 7(1) and (2) of the Risk Equalisation Levy Act has
been amended to give APRA the Council's former function of
determining in writing the rate of risk equalisation levy to be imposed on
a risk equalisation levy day. [Schedule 1, Part 1, Item 5]
13.10 In determining the rate of risk equalisation levy APRA must
comply with the Private Health Insurance (Risk Equalisation Policy)
Rules, as did the Council. [Schedule 1, Part 1, item 5]
Imposition of risk equalisation on a supplementary risk
equalisation levy day
13.11 As well as the maximum of four risk equalisation levy days for a
financial year, the Risk Equalisation Levy may also be imposed on
insurers on up to two additional supplementary risk equalisation levy days
determined by the Health Minister (see section 6 of the Risk Equalisation
Levy Act). The rate of levy to be imposed on supplementary risk
equalisation levy days is determined by the Health Minister (see section 7
of the Risk Equalisation Levy Act).
13.12 Section 8 of the Risk Equalisation Levy Act has been amended
to require the Health Minister, before exercising his or her powers, to
determine supplementary risk equalisation levy days and the rate of risk
equalisation levy to be imposed on those days, to obtain and take into
account, advice from APRA on:
• whether to determine a supplementary risk equalisation levy
day and the day or days that are to be supplementary risk
equalisation levy days; and
• the rate of risk equalisation levy to be imposed on the
supplementary risk equalisation levy day or days. [Schedule 1,
Part 1, items 6 and 7]
13.13 The Minister formerly obtained this advice from the Council.
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Private Health Insurance Risk Equalisation Levy
Repeal of redundant validation provisions
13.14 Sections 9 and 10 of the Risk Equalisation Levy Act validated
amounts that the Council purported to require registered health benefits
organisations (as insurers were known under the National Health
Act 1953) to pay to the Reinsurance Trust Fund before 1 July 2004. There
were concerns that these amounts had not been validly levied on
registered health benefits organisations due to a technical defect in the
method of imposition.
13.15 Sections 9 and 10 have had effect to validate relevant amounts
and the opportunity has been taken to repeal them. The repeal of the
sections does not affect their previous operation or liabilities incurred
under them (see section 7 of the Acts Interpretation Act 1901). [Schedule 1,
Part 1, item 8]
Regulation making power
13.16 Under section 11 of the Risk Equalisation Levy Act the
Governor-General may make regulations prescribing matters required or
permitted to be prescribed by the Act, or necessary or convenient to be
prescribed for carrying out or giving effect to the Act.
13.17 Subsection 11(2) has been amended so that prior to the
Governor-General making regulations the Health Minister must take into
consideration any relevant recommendations made to the Minister by
APRA. The subsection previously referred to recommendations made to
the Minister by the Council. [Schedule 1, Part 1, Item 9]
Application and transitional provisions
13.18 Any determinations made by the Council under section 7 of the
Risk Equalisation Levy Act setting the rate of Risk Equalisation Levy, or
by the Health Minister under sections 6 and 7 setting supplementary risk
equalisation levy days and the rate of the supplementary levy, and which
are in force immediately before the commencement of the Risk
Equalisation Levy Amendment Bill, will continue to have effect as if
made in accordance with the Risk Equalisation Levy Act as amended by
the Risk Equalisation Levy Amendment Bill. [Schedule 1, Part 1, Item 10]
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Private Health Insurance Collapsed
Insurer Levy
Outline of chapter
14.0 Chapter 14 relates to amendments to the Collapsed Insurer Levy
Act.
14.1 Unless otherwise stated, all references in this Chapter relate to
the Collapsed Insurer Amendment Bill.
Summary of new law
14.2 The Collapsed Insurer Amendment Bill makes amendments
consequential on the transfer of responsibility for the Collapsed Insurer
Levy from the Council and the Health Minister to APRA and a Treasury
Minister. There are related amendments to the FISLC Act that will give
APRA responsibility for the collection of the levy.
14.3 The Collapsed Insurer Amendment Bill amends the legislative
framework for the imposition and calculation, of a levy, and the setting of
levy days. The purpose of the levy will not change. It will continue to be
used, if required, to recover the cost of meeting a collapsed insurer's
liabilities to the people insured under its complying health insurance
policies, that it is unable to meet itself.
14.4 For private health insurers, the Collapsed Insurer Levy, if
activated, will operate as it would have prior to the cessation of the
Council.
Comparison of key features of new law and current law
New law Current law
The Collapsed Insurer Levy will be The Collapsed Insurer Levy is
imposed in the case of a private imposed in the case of a collapsed
health insurers' collapse by a private health insurers' by the Health
Treasury Minister. Minister.
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Private Health Insurance (Collapsed Insurer Levy) Amendment Bill 2015
New law Current law
Before making a determination Before making a determination the
imposing the levy a Treasury Minister for Health must obtain and
Minister must obtain and take into take into account, advice from the
account, advice from APRA in Council in relation to:
relation to: • whether to make a levy
• whether to make a levy determination;
determination; • whether to exempt any insurers;
• whether to exempt any insurers; • the day or days to be specified as
• the day or days to be specified as the levy day(s);
the levy day(s); • the rate to be specified on the levy
• the rate to be specified on the levy day;
day; • the day or days to be specified as
• the day or days to be specified as the census day(s);
the census day(s); • the total value of the collapsed
• the day to be specified as the insurer's liabilities to people
payment day in relation to a insured under its complying
collapsed insurer levy day; and policies.
• the total value of the collapsed Any advice received by the Minister
insurer's liabilities to people from the Council must be laid before
insured under its complying each House of Parliament with the
policies. determination to which the advice
Any advice received by the Minister relates.
from APRA must be laid before each
House of Parliament with the
determination to which the advice
relates.
Detailed explanation of new law
14.5 In Section 5, the definition of 'collapsed insurer' has been
replaced to reflect APRA's role and the transfer of provisions on the
external management and terminating management of health benefits
funds from the PHI Act to the Prudential Supervision Bill. This is not
intended to alter the substantial effect of the definition. It will ensure that
a private health insurer is a 'collapsed insurer' if at least one of the
following applies to at least one of the insurer's health benefits funds:
• APRA has approved the termination of the health benefits
fund under section 37 of the Prudential Supervision Bill
[Schedule 1, Part 1, Item 2(a)];
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Private Health Insurance Collapsed Insurer Levy
• APRA has appointed an external manager of the health
benefits fund under section 51 of the Prudential Supervision
Bill [Schedule 1, Part 1, Item 2(b)];
• the Federal Court of Australia has ordered the appointment of
a terminating manager of the health benefits fund under
section 67 of the Prudential Supervision Bill. [Schedule 1,
Part 1, Item 2(c)]
14.6 In Section 5, the definition of 'health benefits fund' has also
been inserted and it will have the same meaning as in the PHI Act, as the
term is referred to in the definition of 'collapsed insurer'. [Schedule 1, Part 1,
Item 4]
14.7 Finally, in Section 5, 'private health insurer' now has the same
meaning as in the Prudential Supervision Bill, rather than that contained in
the PHI Act. [Schedule 1, Part 1, Item 5]
14.8 Subsection 7(3) is inserted to clarify that any determination
specifying a collapsed insurer levy day must also specify the payment day
for that levy. [Schedule 1, Part 1, Item 6]
14.9 Subsection 8(2), paragraphs (a) and (b) are being replaced to
align with the new prudential standards outlined in the Prudential
Supervision Bill. That is:
• a prudential standard (within the meaning of the Prudential
Supervision Bill) relating to capital adequacy or solvency
that applies in relation to the insurer; or
• a direction given to the insurer under section 96 of the
Prudential Supervision Bill. [Schedule 1, Part 1, Item 7]
14.10 Section 10 is to be renamed 'Minister to obtain advice from
APRA'. Subsection 10(1) and 10(2) are to be amended to replace
'Council' with 'APRA'. [Schedule 1, Part 1, Items 8,9, and 11]
14.11 Paragraph 10(1)(ca) will be inserted to clarify that the Minister
must also obtain advice from APRA in relation to the 'payment day' to be
specified in relation to the Collapsed Insurer Levy. [Schedule 1, Part 1,
Item 10]
14.12 Section 11 is to be repealed [Schedule 1, Part 1, Item 12] and
Subsection 12(2) is to be amended to replace 'Council' with 'APRA'.
[Schedule 1, Part 1, Item 13]
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Private Health Insurance (Collapsed Insurer Levy) Amendment Bill 2015
Transitional provisions
14.13 Section 14 is to be inserted to ensure that any determination in
force immediately before the commencement of this item under
sections 7, 8 or 9 of the Collapsed Insurer Levy Act will continue to have
effect. [Schedule 1, Part 1, Item 14]
Part 2 - Other Amendments
14.14 The Collapsed Insurer Amendment Bill is extended to Norfolk
Island on and after the commencement of Part 1 of Schedule 2 to the
Norfolk Island Legislation Amendment Act 2015. [Schedule 1, Part 12 Item 15]
208
Statement of Compatibility with Human
Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary
Scrutiny) Act 2011
PRIVATE HEALTH INSURANCE (PRUDENTIAL SUPERVISION)
BILL 2015, PRIVATE HEALTH INSURANCE (PRUDENTIAL
SUPERVISION) (CONSEQUENTIAL AMENDMENTS AND
TRANSITIONAL PROVISIONS) BILL 2015, PRIVATE HEALTH
INSURANCE SUPERVISORY LEVY IMPOSITION BILL 2015,
PRIVATE HEALTH INSURANCE (RISK EQUALISATION LEVY)
AMENDMENT BILL 2015 AND PRIVATE HEALTH INSURANCE
(COLLAPSED INSURER LEVY) AMENDMENT BILL 2015
15.0 The package of Bills 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
15.1 As part of the 2014-15 Budget: Smaller Government - additional
reductions in the number of Australian Government bodies it was
announced that the Council would cease to function as a separate body
and the Council's prudential and regulatory functions would transfer to
the APRA from 1 July 2015. The Prudential Supervision Bill implements
this measure by creating a regime for the prudential regulation of private
health insurers by APRA.
15.2 The Consequential Amendments and Transitional Provisions
Bill makes consequential amendments to relevant legislation including the
repeal of the provisions relating to the in the PHI Act. It also provides for
necessary transitional arrangements to facilitate the transfer. The
Supervisory Levy Imposition Bill, the Risk Equalisation Levy
Amendment Bill and the Collapsed Insurer Levy Amendment Bill provide
for the continued imposition of levies upon the private health insurance
industry to fund regulatory activities.
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Private Health Insurance (Prudential Supervision) Bill 2015 and supporting Bills
15.3 Given the Bills are interdependent this is single statement of
capability with human rights for the package of Bills.
Human rights implications
The Right to Health
15.4 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.
15.5 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.
15.6 The package of Bills promotes the right to health and continues
a regulatory regime which operates to protect the interests of individuals
who take out private health insurance in order to manage their health care
costs.
Fair trial and fair hearing rights
15.7 Fair trial and fair hearing rights are contained in article 14 of the
International Covenant on Civil and Political Rights (ICCPR) to which
Australia is a signatory. Article 40 of the Convention on the Rights of the
Child (CRC) and article 13 of the Convention on the Rights of Persons
with Disabilities (CRPD) also apply.
15.8 The right to a fair and public criminal trial or a fair and public
hearing in civil proceedings is one of the guarantees in relation to legal
proceedings. Fair trial and fair hearing rights include:
• that all persons are equal before courts and tribunals, and
• the right to a fair and public hearing before a competent,
independent and impartial court or tribunal established by
law.
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Statement of Compatibility with Human Rights
15.9 The other guarantees are the presumption of innocence, and
minimum guarantees in criminal proceedings, such as the right to counsel
and not to be compelled to self-incriminate.
15.10 The Prudential Supervision Bill engages the right to not to be
compelled to self-incriminate, by providing that in certain circumstances a
person cannot refuse to answer a question or comply with a request where
the answer or information may incriminate them. However, the Prudential
Supervision Bill ensures that individuals' rights are protected by
preventing this information being used to prosecute an individual (this is
known as 'use immunity').
15.11 Whilst the civil penalty orders in Part 8 of the Prudential
Supervision Bill may appear large, civil penalties must be sufficiently
large to act as a deterrent as they do not carry the stigma attached to a
criminal offence.
15.12 The Prudential Supervision Bill protects the rights of individuals
from arbitrariness or abuses of power by providing that only a court can
make a declaration of contravention leading to a civil penalty order.
Right against arbitrary interference
15.13 Article 17 of the ICCPR prohibits arbitrary or unlawful
interference with an individual's privacy, family, home or
correspondence, and protects a person's honour and reputation from
unlawful attacks. This right may be subject to permissible limitations
where those limitations are provided by law and non-arbitrary. In order for
limitations not to be arbitrary, they must be aimed at a legitimate objective
and are reasonable, necessary and proportionate to that objective.
15.14 The Prudential Supervision Bill protects against arbitrary abuses
of power as the entry, monitoring, search, seizure and information
gathering powers provided in it are conditional upon consent being given
by the occupier of the premises or prior judicial authorisation. Where
entry is based on the consent of the occupier, consent must be informed
and voluntary and the occupier of premises can restrict entry by
authorised persons to a particular period. Additional safeguards are
provided through provisions requiring authorised persons and any persons
assisting them to leave the premises if the occupier withdraws their
consent.
15.15 The Prudential Supervision Bill specifies that an issuing officer
of a warrant to enter premises for the purpose of monitoring or
investigation must be a judicial officer. The Prudential Supervision Bill
also provides limits on the issuing of a monitoring or investigation
warrant. In the case of an investigation warrant, for example, an issuing
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Private Health Insurance (Prudential Supervision) Bill 2015 and supporting Bills
officer may issue an investigation warrant only when satisfied, by oath or
affirmation, that there are reasonable grounds for suspecting that there is,
or may be within the 72 hours, evidential material on the premises. An
issuing officer must not issue a warrant unless the issuing officer has been
provided, either orally or by affidavit, with such further information as
they require concerning the grounds on which the issue of the warrant is
being sought. Such constraints on this power ensure adequate safeguards
against arbitrary limitations on the right to privacy in the issuing of
warrants.
15.16 An authorised person cannot enter premises unless their identity
card or a copy of the warrant under which they are entering is shown to
the occupier of the premises. This provides for the transparent utilisation
of the Prudential Supervision Bill's powers and mitigates arbitrariness and
risk of abuse.
15.17 The Prudential Supervision Bill also engages the right to
reputation by allowing a court to disqualify certain persons from being
actuaries and officers of private health insurers and then requiring APRA
to publish the disqualification. However, it protects from arbitrary attacks
on reputation by only allowing a court to disqualify someone, and only if
certain conditions are met.
15.18 These powers are reasonable, necessary and proportionate to
achieve a legitimate objective. Adequate safeguards and limitations on the
use of regulatory powers in the package of Bills ensures that such lawful
interferences are not arbitrary or at risk of abuse.
Conclusion
15.19 The package of Bills is compatible with human rights. To the
extent that they may limit human rights, those limitations are reasonable,
necessary and proportionate.
212
Index
Private Health Insurance (Prudential Supervision) Bill 2015
Bill reference Paragraph number
Part 1, Division 1, section 1 2.3
Part 1, Division 1, section 2 2.4
Part 1, Division 1, section 3 2.6, 2.8, 2.9
Part 1, Division 1, section 3 2.7
Part 1, Division 1, section 4 2.10
Part 1, Division 1, section 5 2.11
Part 1, Division 2, section 6 2.13
Part 1, Division 2, section 7 2.14
Part 1, Division 2, section 8 2.15
Part 2, Division 1, section 9 3.4, 3.5
Part 2, Division 2, subsection 10(1) 3.6, 3.8
Part 2, Division 2, subsection 10(2) 3.9
Part 2, Division 2, subsection 11(1) 3.11
Part 2, Division 2, subsections 11(2) and (3) 3.12
Part 2, Division 2, subsection 11(4) 3.13
Part 2, Division 2, subsection 11(5) 3.14
Part 2, Division 2, subsection 11(6) 3.15
Part 2, Division 3, subsection 12(1) 3.16
Part 2, Division 3, subsection 12(2) 3.17
Part 2, Division 3, section 13 3.19
Part 2, Division 3, section 14 3.20
Part 2, Division 3, subsection 15(1) 3.22
Part 2, Division 3, subsection 15(2) 3.24
Part 2, Division 3, subsection 15(3) 3.26
Part 2, Division 3, subsection 15(4) 3.32
Part 2, Division 3, subsections 15(4) and (5) 3.31
Part 2, Division 3, subsection 16(1) 3.34
Part 2, Division 3, subsection 16(2) 3.35
Part 2, Division 3, section 17 3.36
Part 2, Division 3, section 18 3.37
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Private Health Insurance (Prudential Supervision) Bill 2015 and supporting Bills
Part 2, Division 3, subsections 19(1) and (2) 3.38
Part 2, Division 3, subsections 19(3) and (6) 3.40
Part 2, Division 3, subsections 19(4) and (5) 3.39
Part 2, Division 3, subsections 20(1) and (2) 3.41
Part 2, Division 3, subsection 20(3) 3.42
Part 2, Division 3, paragraph 20(4)(a) 3.45
Part 2, Division 3, paragraph 20(4)(b) 3.46
Part 2, Division 3, subsection 20(5) 3.47
Part 2, Division 3, subsection 20(6) 3.44
Part 2, Division 3, subsection 20(7) 3.48
Part 2, Division 3, subsection 20(8) 3.49
Part 2, Division 3, subsection 21(1) 3.51
Part 2, Division 3, subsection 21(2) 3.52
Part 3, Division 2, section 22 4.5, 4.6, 4.7
Part 3, Division 2, subsection 23(1) 4.8
Part 3, Division 2, subsection 23(2) 4.10
Part 3, Division 2, subsection 23(3) 4.12
Part 3, Division 2, subsection 23(4) 4.13
Part 3, Division 2, section 24 4.14
Part 3, Division 2, subsection 25(1) 4.15
Part 3, Division 2, subsection 25(2) 4.16
Part 3, Division 2, subsections 25(3) and (4) 4.17
Part 3, Division 2, subsection 25(5) 4.18
Part 3, Division 3, subsections 26(1) and (2) 4.19
Part 3, Division 3, subsection 26(3) 4.20
Part 3, Division 3, subsection 26(4) 4.21
Part 3, Division 3, subsection 26(5) 4.22
Part 3, Division 3, subsection 26(6) 4.23
Part 3, Division 3, subsection 26(7) 4.24
Part 3, Division 3, subsection 27(1) 4.25
Part 3, Division 3, subsections 27(2), (3) and (4) 4.26
Part 3, Division 3, subsections 28(1) and 2) 4.27
Part 3, Division 3, subsection 28(3) 4.28
Part 3, Division 3, subsection 28(4) 4.29
Part 3, Division 3, subsection 28(5) 4.30
Part 3, Division 3, subsection 28(6) 4.31
Part 3, Division 3, subsection 29(1) 4.32
214
Index
Part 3, Division 3, subsections 29(2) and (3) 4.33
Part 3, Division 3, subsections 29(4) and (5) 4.34
Part 3, Division 3, subsection 29(6) 4.35
Part 3, Division 3, subsection 29(7) 4.36
Part 3, Division 3, subsections 30(1) and (2) 4.37
Part 3, Division 3, subsection 30(3) 4.38
Part 3, Division 3, subsection 31(1) 4.39
Part 3, Division 4, subsection 32(1) 4.40
Part 3, Division 4, subsection 32(2) 4.41
Part 3, Division 4, subsection 32(3) 4.42
Part 3, Division 4, subsections 32(4) and (6) 4.43
Part 3, Division 4, subsection 32(5) 4.44
Part 3, Division 4, subsection 32(7) 4.45
Part 3, Division 4, subsection 33(1) 4.46
Part 3, Division 4, subsection 33(2) 4.47
Part 3, Division 4, subsection 33(3) 4.48
Part 3, Division 4, subsection 33(4) 4.50
Part 3, Division 4, subsection 33(5) 4.51
Part 3, Division 4, subsection 33(6) 4.52
Part 3, Division 4, subsection 33(7) 4.53
Part 3, Division 4, section 34 4.54
Part 3, Division 5, Subdivision A, section 35 4.55
Part 3, Division 5, Subdivision A, section 36 4.56
Part 3, Division 5, Subdivision A, subsection 37(1) 4.57
Part 3, Division 5, Subdivision A, subsections 37(2) and (4) 4.58
Part 3, Division 5, Subdivision A, subsection 37(3) 4.59
Part 3, Division 5, Subdivision A, section 38 4.61
Part 3, Division 5, Subdivision B, section 39 4.62
Part 3, Division 5, Subdivision B, subsection 40(1) 4.63
Part 3, Division 5, Subdivision B, subsection 40(2) 4.65
Part 3, Division 5, Subdivision B, subsection 40(3) 4.66
Part 3, Division 5, Subdivision B, subsection 40(4) 4.67
Part 3, Division 5, Subdivision B, section 41 4.68
Part 3, Division 5, Subdivision B, section 42 4.69
Part 3, Division 5, Subdivision C, subsections 43(1) and (2) 4.70
Part 3, Division 5, Subdivision C, subsection 43(3) 4.71
Part 3, Division 5, Subdivision C, subsection 43(4) 4.72
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Private Health Insurance (Prudential Supervision) Bill 2015 and supporting Bills
Part 3, Division 5, Subdivision D, section 44 4.73
Part 3, Division 5, Subdivision D, section 45 4.74
Part 3, Division 5, Subdivision D, subsection 46(1) 4.75
Part 3, Division, Subdivision D, subsection 46(2) 4.76
Part 3, Division 5, Subdivision D, subsection 46(3) 4.77
Part 3, Division 5, Subdivision D, subsection 47(1) 4.78
Part 3, Division 5, Subdivision D, subsection 47(2) 4.79
Part 3, Division 5, Subdivision D, subsections 48(1) and (2) 4.80
Part 3, Division 5, Subdivision D, subsection 48(3) 4.81
Part 3, Division 5, Subdivision D, subsection 48(4) 4.82
Part 3, Division 6, Subdivision A, section 49 4.83
Part 3, Division 6, Subdivision A, subsections 50(1), (4) and (5) 4.87
Part 3, Division 6, Subdivision A, subsections 50(2) and (3) 4.89
Part 3, Division 6, Subdivision A, subsection 50(4) 4.90
Part 3, Division 6, Subdivision B, subsection 51(1) 4.91
Part 3, Division 6, Subdivision B, subsections 51(2) and (3) 4.92
Part 3, Division 6, Subdivision B, subsection 52(1) 4.93
Part 3, Division 6, Subdivision B, subsection 52(2) 4.94
Part 3, Division 6, Subdivision B, section 53 4.95
Part 3, Division 6, Subdivision C, subsection 54(1) 4.96
Part 3, Division 6, Subdivision C, subsection 54(2) 4.97
Part 3, Division 6, Subdivision C, subsection 55(1) 4.98
Part 3, Division 6, Subdivision C, subsection 55(2) 4.99
Part 3, Division 6, Subdivision C, subsection 56(1) 4.100
Part 3, Division 6, Subdivision C, subsection 56(1) 4.101
Part 3, Division 6, Subdivision C, subsection 56(2) 4.102
Part 3, Division 6, Subdivision C, subsection 57(1) 4.103, 4.104
Part 3, Division 6, Subdivision C, subsection 57(2) 4.105
Part 3, Division 6, Subdivision D, subsection 58(1) 4.106
Part 3, Division 6, Subdivision D, subsection 58(2) 4.108
Part 3, Division 6, Subdivision E, subsections 59(1) and (2) 4.109
Part 3, Division 6, Subdivision E, subsection 59(3) 4.110
Part 3, Division 6, Subdivision E, subsection 59(4) 4.111
Part 3, Division 6, Subdivision E, subsection 59(5) 4.112
Part 3, Division 6, Subdivision E, subsection 59(6) 4.113
Part 3, Division 6, Subdivision E, subsection 60(1) 4.114
Part 3, Division 6, Subdivision E, subsection 60(2) 4.115
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Index
Part 3, Division 6, Subdivision E, subsections 60(3) and (4) 4.116
Part 3, Division 6, Subdivision E, subsection 60(5) 4.117
Part 3, Division 6, Subdivision E, subsections 60(6) and (7) 4.118
Part 3, Division 6, Subdivision E, subsection 61(1) 4.119
Part 3, Division 6, Subdivision E, subsection 61(2) 4.120
Part 3, Division 6, Subdivision F, section 62 4.121
Part 3, Division 6, Subdivision E, section 63 4.122
Part 3, Division 6, Subdivision F, subsection 64(1) 4.123
Part 3, Division 6, Subdivision F, subsection 64(2) 4.124
Part 3, Division 6, Subdivision F, subsections 65(1), (2) and (3) 4.125
Part 3, Division 6, Subdivision F, subsection 65(4) 4.126
Part 3, Division 6, Subdivision F, subsection 65(5) 4.127
Part 3, Division 6, Subdivision F, subsection 65(6) 4.128
Part 3, Division 6, Subdivision F, subsection 65(7) 4.129
Part 3, Division 7, subsection 66(1) 4.130
Part 3, Division 7, subsection 66(2) 4.131
Part 3, Division 7, section 67 4.132
Part 3, Division 7, sections 68 and 69 4.133
Part 3, Division 8, Subdivision A, subsection 70(1) 4.134
Part 3, Division 8, Subdivision A, subsection 70(2) 4.135
Part 3, Division 8, Subdivision A, subsection 70(3) 4.136
Part 3, Division 8, Subdivision A, section 71 4.137
Part 3, Division 8, Subdivision A, section 72 4.138
Part 3, Division 8, Subdivision B, subsection 73(1) 4.139
Part 3, Division 8, Subdivision B, subsections 73(2) and (3) 4.141
Part 3, Division 8, Subdivision B, subsection 73(4) 4.142
Part 3, Division 8, Subdivision B, subsection 73(5) 4.143
Part 3, Division 8, Subdivision B, subsection 73(6) 4.140
Part 3, Division 8, Subdivision B, subsections 74(1) and (2) 4.144
Part 3, Division 8, Subdivision B, subsections 74(3 ) and (4) 4.145
Part 3, Division 8, Subdivision B, subsections 74(5) and (6) 4.146
Part 3, Division 8, Subdivision B, subsections 75(1) and (3) 4.147
Part 3, Division 8, Subdivision B, subsection 75(2) 4.148
Part 3, Division 8, Subdivision B, subsection 75(4) 4.149
Part 3, Division 8, Subdivision B, subsections 76(1) and (2) 4.150
Part 3, Division 8, Subdivision C, section 77 4.151
Part 3, Division 8, Subdivision C, subsections 78(1), (2), (3) and (4) 4.152
217
Private Health Insurance (Prudential Supervision) Bill 2015 and supporting Bills
Part 3, Division 8, Subdivision C, section 78(5) 4.153
Part 3, Division 8, Subdivision C, subsection 79(1) 4.155
Part 3, Division 8, Subdivision C, subsections 79(2) and (4) 4.156
Part 3, Division 8, Subdivision C, subsections 79(3) and (4) 4.157
Part 3, Division 8, Subdivision C, subsection 80(1) 4.158
Part 3, Division 8, Subdivision C, subsection 80(2) 4.159
Part 3, Division 8, Subdivision C, subsection 80(3) 4.160
Part 3, Division 8, Subdivision C, section 81 4.161
Part 3, Division 8, Subdivision C, section 82 4.162
Part 3, Division 8, Subdivision D, section 83 4.163
Part 3, Division 8, Subdivision D, section 84 4.164
Part 3, Division 8, Subdivision D, subsections 85(1), (2), (3) and (5) 4.165
Part 3, Division 8, Subdivision D, subsection 85(4) 4.167
Part 3, Division 8, Subdivision D, section 86 4.168
Part 3, Division 8, Subdivision D, section 87 4.169
Part 3, Division 9, subsection 88(1) 4.170
Part 3, Division 9, subsection 88(2) 4.171
Part 3, Division 9, subsection 88(3) 4.172
Part 3, Division 9, subsection 89(1) 4.173
Part 3, Division 9, subsection 89(2) 4.174
Part 3, Division 9, subsections 89(3), (4) and (5) 4.175
Part 3, Division 9, section 90 4.176
Part 4, Division 1, section 90 5.6
Part 4, Division 2, subsection 92(1) 5.7
Part 4, Division 2, subsection 92(2) 5.9
Part 4, Division 2, subsection 92(3) 5.10
Part 4, Division 2, subsection 92(4) 5.11
Part 4, Division 2, subsection 92(5) 5.12
Part 4, Division 2, subsection 92(6) 5.13
Part 4, Division 2, subsection 92(7) 5.14
Part 4, Division 2, subsection 92(8) 5.16
Part 4, Division 2, subsection 92(9) 5.17
Part 4, Division 2, subsection 93(1) 5.19
Part 4, Division 2, subsection 93(2) 5.20
Part 4, Division 2, section 94 5.21
Part 4, Division 2, subsection 95(1) 5.22
Part 4, Division 2, subsection 95(2) 5.23
218
Index
Part 4, Division 3, paragraphs 96(1)(a), (b) and (c) 5.24
Part 4, Division 3, paragraphs 96(1)(d) to (i) 5.26
Part 4, Division 3, subsections 96(2) and (3) 5.28
Part 4, Division 3, subsection 97(1) 5.29, 5.30
Part 4, Division 3, subsection 97(2) 5.32
Part 4, Division 3, subsection 97(3) 5.31
Part 4, Division 3, section 98 5.34
Part 4, Division 3, section 99 5.35
Part 4, Division 3, section 100 5.36
Part 4, Division 3, subsections 101(1) and (2) 5.37
Part 4, Division 3, subsection 101(3) 5.38
Part 4, Division 3, subsection 101(4) 5.39
Part 4, Division 3, subsection 102(1) 5.40
Part 4, Division 3, subsection 102(2) 5.41
Part 4, Division 3, subsection 102(3) 5.42
Part 4, Division 3, subsection 102(4) 5.43
Part 4, Division 3, subsection 102(5) 5.44
Part 4, Division 3, subsection 102(6) 5.45
Part 4, Division 3, section 103 5.46
Part 4, Division 3, subsection 104(1) 5.47
Part 4, Division 3, subsection 104(2) 5.48
Part 4, Division 3, subsection 104(3) 5.49
Part 5 Division 2, section 105 6.5
Part 5, Division 2, subsections 106(1) and (2) 6.6
Part 5, Division 2, subsection 106(3) 6.7
Part 5, Division 2, subsection 106(4) 6.8
Part 5, Division 2, subsection 106(5) 6.9
Part 5, Division 2, subsection 107(1) 6.10
Part 5, Division 2, subsection 107(2) 6.12
Part 5, Division 2, subsection 107(3) 6.13
Part 5, Division 2, subsections 108(1) and (2) 6.14
Part 5, Division 2, subsection 108(3) and (4) 6.15
Part 5, Division 2, subsection 109(1) 6.16
Part 5, Division 2, subsection 109(2) 6.17
Part 5, Division 2, paragraph 110(1)(a) 6.18
Part 5, Division 2, paragraph 110(1)(b) 6.19
Part 5, Division 2, paragraphs 110(2)(a) and (b) 6.20
219
Private Health Insurance (Prudential Supervision) Bill 2015 and supporting Bills
Part 5, Division 2, paragraphs 110(2)(c) and (d) 6.21
Part 5, Division 2, subsection 110(3) 6.22
Part 5, Division 2, subsection 110(4) 6.23
Part 5, Division 2, subsection 110(5) 6.24
Part 5, Division 2, subsection 110(6) 6.25
Part 5, Division 2, section 111 6.26
Part 5, Division 2, subsection 112(1) and (2) 6.27
Part 5, Division 2, subsections 112 (3) and (4) 6.28
Part 5, Division 2, subsections 112(2), (3) and (4) 6.29, 6.30
Part 5, Division 2, sections 113 6.31
Part 5, Division 2, subsection 114(1) 6.32
Part 5, Division 2, subsection 114(2) 6.33
Part 5, Division 2, subsection 115(1) and (2) 6.34
Part 5, Division 2, subsections 115(3) and (4) 6.35
Part 5, Division 2, subsection 115(5) 6.36
Part 5, Division 2, subsections 114(6) and (7) 6.37
Part 5, Division 2, subsection 115(8) 6.38
Part 5, Division 3, subsection 116(1) 6.40
Part 5, Division 3, subsection 116(2) 6.41
Part 5, Division 3, section 117 6.42
Part 5, Division 3, section 118 6.43
Part 5, Division 3, subsection 119(1) 6.44
Part 5, Division 3, subsection 119(2) 6.46
Part 5, Division 3, subsection 119(3) 6.47
Part 5, Division 3, subsection 120(1) 6.48
Part 5, Division 3, subsection 120(3) 6.50
Part 5, Division 3, subsection 120(4) 6.51
Part 5, Division 3, subsection 120(5) 6.52
Part 5, Division 3, section 121 6.53
Part 5, Division 3, subsections 122 6.54
Part 5, Division 4, section 123 6.55
Part 5, Division 4, section 124 6.56
Part 5, Division 4, section 125 6.57
Part 6, Division 1, section 126 7.8, 7.9
Part 6, Division 2, subsection 127(1) 7.10
Part 6, Division 2, subsection 127(2) 7.11
Part 6, Division 2, section 128 7.13
220
Index
Part 6, Division 2, subsections 129(1), (2) and (4) 7.15
Part 6, Division 2, subsection 129(3) 7.16
Part 6, Division 3, subsection 130(1) 7.18
Part 6, Division 3, subsection 130(2) and (3) 7.20
Part 6, Division 3, subsection 130(4) 7.21
Part 6, Division 3, subsections 131(1) and (2) 7.22
Part 6, Division 3, subsection 131(3) and (4) 7.23
Part 6, Division 3, subsection 131(5) 7.22
Part 6, Division 3, subsection 132(1) 7.24
Part 6, Division 3, subsections 132(1) and (2) 7.25
Part 6, Division 3, subsection 132(3) 7.26
Part 6, Division 3, subsection 132(4) 7.27
Part 6, Division 3, section 133 7.28
Part 6, Division 3, subsections 134(1) and (2) 7.29
Part 6, Division 3, subsection 134(3) 7.30
Part 6, Division 3, subsection 134(4) 7.31
Part 6, Division 3, subsection 135(1) 7.32
Part 6, Division 3, subsections 135(2), (3) and (4) 7.33
Part 6, Division 3, subsection 135(5) 7.34
Part 6, Division 3, subsection 135(6) 7.35
Part 6, Division 3, subsections 136(1) and (2) 7.36
Part 6, Division 3, subsection 136(3) 7.37
Part 6, Division 3, subsection 136(4) 7.38
Part 6, Division 3, subsection 137(1) 7.39
Part 6, Division 3, subsections 137(2) 7.40
Part 6, Division 3, subsection 137(3) 7.41
Part 6, Division 3, section 138 7.42
Part 6, Division 3, section 139 7.43
Part 6, Division 3, subsections 140(1) and (2) 7.44
Part 6, Division 3, subsection 140(3) 7.45
Part 6, Division 3, section 141 7.46
Part 6, Division 3, subsection 142(1) 7.47
Part 6, Division 3, subsection 142(2) 7.48
Part 6, Division 3, subsection 143(1) 7.49
Part 6, Division 3, subsections 143(2), (3)and (4) 7.50
Part 6, Division 3, subsections 144(1) and (2) 7.51
Part 6, Division 3, subsection 144(3) 7.52
221
Private Health Insurance (Prudential Supervision) Bill 2015 and supporting Bills
Part 6, Division 3, subsection 144(4) 7.53
Part 6, Division 3, section 145 7.54
Part 6, Division 3, section 146 7.57
Part 6, Division 3, subsection 147(1) 7.58
Part 6, Division 3, subsection 147(2) 7.59
Part 6, Division 4, section 148 7.60
Part 6, Division 4, subsection 149(1) 7.61
Part 6, Division 4, subsection 149(2) 7.62
Part 6, Division 4, section 150 7.64
Part 7, Division 1, section 151 8.4
Part 7, subsection 152(1) 8.5
Part 7, subsection 152(2) 8.6
Part 7, subsection 152(3) 8.7
Part 7, subsection 152(4) and (5) 8.8
Part 8, Division 1, section 153 9.5
Part 8, subsection 154(1) 9.6
Part 8, subsection 154(2) 9.7
Part 8, subsection 155(2) 9.9
Part 8, subsection 155(3) 9.10
Part 8, subsection 156(1) 9.11
Part 8, subsection 156(2) 9.12
Part 8, subsection 156(3) 9.13
Part 8, subsection 156(4) 9.14
Part 8, subsection 156(5) 9.15
Part 8, subsection 157(1) 9.17
Part 8, subsections 157(2) and (3) 9.18
Part 8, section 158 9.19
Part 8, section 159 9.20
Part 8, section 160 9.22
Part 8, subsection 161(1) 9.23
Part 8, subsection 161(2) 9.24
Part 8, section 162 9.25
Part 8, section 163 9.26, 9.27
Part 8, subsection 164(1) 9.28, 9.29
Part 8, subsection 164(3) 9.30
Part 8, subsection 164(4) 9.31
Part 8, subsection 164(5) 9.32
222
Index
Part 8, subsection 164(6) 9.33
Part 9, section 165 10.3
Part 9, section 166 10.4
Part 9, subsections 166(1) (2) and (3) 10.5
Part 9, subsection 167(1) 10.7
Part 9, subsection 167(2) 10.8
Part 9, section 168 10.14
Part 9, subsection 168(2) 10.15
Part 9, subsection 168(7) 10.16
Part 9, Division 1, subsections 168(8) and (9) 10.17
Part 9, subsection 169(1) 10.18
Part 9, subsection 169(2) and (3) 10.19
Part 9, section 170 10.20
Part 9, section 171 10.21
Part 9, subsection 172(1) 10.22
Part 9, subsection 172(2) 10.23
Part 9, subsection 172(4) 10.24
Part 9, Division 1, section 173 10.25
Part 9, subsection 174(1) 10.28
Part 9, subsection 174(2) 10.29
Part 9, subsection 174(3) 10.30
Part 9, subsection 174(4) 10.31
Private Health Insurance (Prudential Supervision)
(Consequential Amendments and Transitional Provisions) Bill
2015
Schedule 1: Consequential amendments
Bill reference Paragraph number
Part 1, item 1 11.8
Part 1, items 2 and 3 11.9
Part 1, item 4 1.10
Part 1, item 5 11.11
Part 1, item 6 11.12
Part 1, item 7 11.13
223
Private Health Insurance (Prudential Supervision) Bill 2015 and supporting Bills
Part 1, item 8 11.14, 11.15, 11.17,
11.18, 11.22, 11.23
Part 1, Item 9 11.25
Part 1, Item 10 and 11 11.26
Part 1, Item 12 11.27, 11.28, 11.29
Part 1, Item 13 11.30
Part 1, Item 14 11.31
Part 1, Item 15 and 16 11.33
Part 1, Item 17 11.34
Part 1, Item 18 11.35, 11.36, 11.37,
11.38, 11.39, 11.40,
11.41
Part 1, Items 19 and 20 11.42
Part 1, item 21 11.49
Part 1, item 22 11.50
Part 1, Items 23, 24, 25, 28, 30, 31, 32 and 33 11.58
Part 1, Items 26, 27, and 29 11.59
Part 1, Item 34 11.60
Part 1, item 35 11.64
Part 1, item 36 11.66
Part 1, item 37 11.68
Part 1, item 38 11.69
Part 1, item 39 11.70, 11.71
Part 1, item 40 11.73
Part 1, item 41 11.74
Part 1, item 42 11.79
Part 1, items 43 and 44 11.80
Part 1, item 45 11.81
Part 1, item 46 11.82
Part 1, item 47 11.86
Part 1, item 48 11.87
Part 1, item 49 11.88
Part 1, item 50 11.91
Part 1, item 51 11.89
Part 1, item 52 11.89
Part 1, item 53 11.89
Part 1, items 54 and 55 11.93
Part 1, items 56 and 57 11.96
224
Index
Part 1, item 58 11.98, 11.99
Part 1, item 59 11.94
Part 1, item 60 11.100
Part 1, items 61 and 62 11.113
Part 1, items 61-64 11.101
Part 1, item 63 11.106
Part 1, item 64 11.107, 11.110
Part 1, item 65 11.102, 11.111,
11.112
Part 1, items 65 and 71 11.103
Part 1, items 66 to 70, 72 and 76 11.119
Part 1, item 71 11.115
Part 1, items 73 and 75 11.115
Part 1, item 74 11.116
Part 1, item 78 11.118
Part 1, items 79 and 80 11.123
Part 1, item 81 11.130
Part 1, item 82 11.132
Part 1, item 83 11.134
Part 1, item 84 11.136
Part 1, items 85-87 11.138
Part 1, items 88 and 91 11.140
Part 1, items 89 and 90, 92 to 96 and 98 to 100 11.142
Part 1, item 97 11.141
Part 1, items 101-104 11.144
Part 1, items 105, 106 and 108 to 111 11.149
Part 1, item 107 11.148
Part 1, items 112 to 122 11.154
Part 1, item 123 11.157
Part 1, item 124 11.159
Part 1, item 125 11.160
Part 1, item 126 11.161, 11.164
Part 1, items 127, 129 to 132 and 134 to 136 11.170
Part 1, item 128 11.171
Part 1, item 132 11.172
Part 1, item 133 11.172
Part 1, items 134 and 135 11.172
225
Private Health Insurance (Prudential Supervision) Bill 2015 and supporting Bills
Part 1, items 137 to 139 11.174
Part 1, item 140 11.176
Part 1, item 141 and 142 11.177
Part 1, item 143 11.184
Part 1, item 144 11.182
Part 1, item 145 11.183
Part 1, item 146 11.185
Part 1, item 147 11.189, 11.191,
11.194, 11.195
Part 1, item 148 11.201
Part 1, item 149 11.202
Part 1, item 150 11.201
Part 1, item 151 11.210
Part 1, item 153 11.206
Part 1, item 154 11.207
Part 1, item 155 11.211
Part 1, items 155 and 156 11.208
Part 1, item 157 11.209
Part 1, items 158 and 160 11.214
Part 1, item 159 11.217
Part 1, items 161 and 162 11.221
Part 1, item 163 11.222
Part 1, item 164 11.223
Part 1, item 165 11.224
Part 1, item 166 11.225
Part 1, items 167, 169, 171, 173, and 177 11.227
Part 1, items 168 and 176 11.230
Part 1, item 170 11.231
Part 1, item 172 11.234
Part 1, item 174 11.232
Part 1, item 175 11.235
Part 1, item 178 11.239,
Part 1, item 179 11.242, 11.243
Part 1, item 180 11.244
Part 1, item 181 11.245
Part 1, item 182 11.246
Part 1, item 183 11.247
226
Index
Schedule 2: Transitional provisions
Bill reference Paragraph number
Part 2, item 2, subitems 1 and 2 11.252
Part 2, item 2, subitem 3 11.253
Part 2, item 3, subitem 1(a) and (b) 11.254
Part 2, item 3, subitem 1(c) 11.255
Part 2, item 3, subitem 3(a) and (b) 11.256
Part 2, item 3, subitem 4 11.258
Part 2, item 4, subitem 1 11.260
Part 2, item 4, subitem 2 11.261
Part 2, item 4, subitem 3 11.262
Part 2, item 5, subitem 1 11.264
Part 2, item 5, subitem 2 11.268
Part 2, item 5, subitem 2(a) 11.265
Part 2, item 5, subitems 2(b) and 2(c) 11.266
Part 2, item 6, subitem 1 11.267
Part 2, item 7, subitem 1 11.269
Part 2, item 7, subitem 2 11.270
Part 2, item 8, subitem 1 11.271
Part 2, item 8, subitem 2 11.272
Part 2, item 8, subitems 3 and 4 11.275
Part 2, item 8, subitem 5 11.276
Part 2, item 8, subitem 6 11.277
Part 2, item 8, subitem 7 11.278
Part 2, item 9, subitem 1 11.279
Part 2, item 9, subitem 2 11.280
Part 2, item 9, subitem 3 11.281
Part 2, item 10 11.282
Part 2, item 11 11.283, 11.284,
11.285
Part 2, item 12, subitems 1 and 2 11.287, 11.288
Part 2, item 12, subitem 3 11.289
Part 2, item 12, subitem 4 11.290
Part 2, item 12, subitem 5 11.291
Part 2, item 13 11.292
227
Private Health Insurance (Prudential Supervision) Bill 2015 and supporting Bills
Part 2, item 14 11.293, 11.294,
11.295
Part 2, item 15 11.296
Part 2, item 16, subitem 1 11.297
Part 2, item 16, subitem 2 11.298
Part 2, item 16, subitem 3 11.300, 11.304
Part 2, item 16, subitem 4 11.301, 11.305
Part 2, item 17 11.303
Part 2, item 18 11.307
Part 2, item 19 11.309
Part 2, item 20 11.311
Part 3, item 21 11.312
Part 3, subitem 21(3) 11.314
Part 3, item 22 11.316
Part 3, subitems 22(3)-(5) and 23(3)-(5) 11.318
Part 3, item 23 11.317
Part 3, item 24 11.320, 11.321,
11.322
Part 3, item 25 11.323, 11.324,
11.325
Part 3, item 26 11.326, 11.327
Part 3, item 27 11.329
Part 3, subitem 27(2) 11.330
Part 3, subitem27(4) 11.334, 11.335
Part 3, subitem27(8) 11.331, 11.333
Part 3, item 28 11.337, 11.338,
11.339
Part 3, item 29 11.340, 11.341,
11.342
Part 3, item 30 11.344, 11.346
Part 3, subitem 31(3) 11.348
Part 3, item 32 11.349
Part 3, subitem 32(2) 11.351
Part 3, subitem 32(4) 11.354
Part 3, item 33 11.355, 11.356
Part 3, item 34 11.357
Part 3, subitem 34(2) 11.358
228
Index
Part 3, item 35 11.359, 11.360
Part 3, item 36 11.363, 11.364
Part 3, subitem 36(2) 11.362
Part 3, item 37 11.365
Part 3, subitem 37(2) 11.368
Part 3, subitem 37(3) 11.372
Part 3, subitem 37(4) 11.373
Part 3, subitem 37(5) 11.374
Part 3, subitem 37(6) 11.366, 11.369,
11.370
Part 4, item 38 11.375
Part 4, item 39 11.376
Part 4, subitem 39(2) 11.377
Part 4, subitem 39(3) 11.378
Part 4, item 40 11.380
Part 4, subitem 41(1) 11.381
Part 4, subitem 41(2) 11.383
Part 4, subitem 41(3) 11.384
Part 4, item 42 11.385, 11.386
Part 4, item 43 11.387
Part 4, subitem 43(3) 11.389
Private Health Insurance Supervisory Levy Imposition Bill
2015
Bill reference Paragraph number
Part 1,section 2 12.12
Part 1, section 3 12.13
Part 1, section 4 12.14
Part 1, Section 5 12.15
Part 1, section 6 12.16
Part 1,section 7, Subsections (1) and (2) 12.17
Part 1, section 8, Subsection (1) 12.19
Part 1, section 8, Subsection (2) 12.20
Part 1, section 8, Subsection (3) 12.23
Part 1, section 8, Subsection (6) 12.24
Part 1, section 8, Subsection (5) 12.24
229
Private Health Insurance (Prudential Supervision) Bill 2015 and supporting Bills
Part 1,section 8, Subsection (7)(a),(b), and (c) 12.24
Part 1, section 8, Subsection (7)(d) 12.24
Part 1, item 8, Subsection (4) 12.24
Private Health Insurance (Risk Equalisation Levy) Amendment
Bill 2015
Schedule 1: Amendments
Bill reference Paragraph number
Part 1, Item 1 13.7
Part 1, Items 2 and 3 13.8
Part 1, Item 5 13.10, 13.11
Part 1, items 6 and 7 13.13
Part 1, item 8 13.16
Part 1, Item 9 13.18
Part 1, Item 10 13.19
Private Health Insurance (Collapsed Insurer Levy)
Amendment Bill 2015
Schedule 1: Amendments
Bill reference Paragraph number
Part 1, Item 2(a) 14.6
Part 1, Item 2(b) 14.6
Part 1, Item 2(c) 14.6
Part 1, Item 4 14.7
Part 1, Item 5 14.8
Part 1, Item 6 14.9
Part 1, Item 7 14.10
Part 1, Items 8,9, and 11 14.11
Part 1, Item 10 14.12
Part 1, Item 12 14.13
Part 1, Item 13 14.13
Part 1, Item 14 14.14
230
231