EXPLANATORY STATEMENT

 

Select Legislative Instrument 2006 No. 275

 

Issued by the Authority of the Minister for Health and Ageing

 

Medical Indemnity Act 2002

 

Medical Indemnity (UMP support payment exemption) Regulations 2006

 

Section 79 of the Medical Indemnity Act 2002 provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

 

In 2002 United Medical Protection Ltd (UMP), a medical defense organisation (MDO) which then provided medical indemnity insurance to 60 per cent of Australian doctors, went into provisional liquidation. UMP’s financial difficulties were related to its high levels of “Incurred But Not Reported” (IBNR) liabilities. To preserve the indemnity arrangements of UMP’s doctors, the Australian Government established the IBNR scheme (set out in Division 1 of the Medical Indemnity Act 2002) to fund the IBNR liabilities of UMP (and any other MDO in similar circumstances).

 

In order to recoup some of the associated costs of the IBNR scheme, the Australian Government introduced the Medical Indemnity (UMP Support Payment) Act 2002, which introduced a levy on the members of MDOs (mostly doctors) who were benefiting from the scheme. This levy was originally known as the IBNR levy, but as UMP was the only MDO participating in the scheme, it was renamed the UMP support payment (UMP SP).

 

Medicare Australia has recently identified a number of current and former UMP members who are liable to pay the UMP SP for various past contribution years. Since this error has only recently come to light, these individuals have not been notified of their liability and were not provided with the same opportunity to pay as other members.

 

Regulation 26 of the Medical Indemnity Regulation 2003 currently sets a payment due date (which has now passed) for the 2003-04, 2004-05 and 2005-06 contribution years. Therefore, the affected members are technically considered to have defaulted on payment despite the fact that they were not notified of their correct liability, and may have accumulated late payment penalties which apply to any individual who has not paid the UMP SP by the due date.

 

The purpose of the Regulations is to exempt the affected members from paying the UMP SP for each of the years that they have not received an invoice, and to ensure that they are not liable for late payment penalties.

 

Some of the affected members have also received a subsidy to help with the cost of their medical indemnity insurance through the Premium Support Scheme (PSS) under subsection 43(1) of the Medical Indemnity Act 2002. However, a condition of receiving the subsidy is that the UMP SP contribution must be paid in full by a specified payment day. As the specified payment day has passed, these members are technically not eligible for past or future subsidies.

 

The effect of the Regulations is to ensure that the affected doctors have never been liable for the UMP SP for the specified years and were therefore never late with any payment. This also assures the eligibility of the affected members for the PSS.

 

Medicare Australia administers the UMP SP and it was extensively consulted on the development of these Regulations to ensure that they meet Medicare Australia’s needs and that the correct members are targeted by the Regulations. The Australian Medical Association was also consulted to address any concerns and to help communicate the Regulations to its members.

 

Details of the Regulations are set out in the Attachment.

 

The Act specifies no conditions that need to be satisfied before the power to make the Regulations may be exercised.

 

The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.

 

The Regulations are taken to have commenced on 1 May 2004. This was the imposition day (the day on which the UMP SP was imposed as a tax on the participating members of UMP) for the first contribution year (i.e. 2003-04). The Australian Government Solicitor has advised that the retrospective commencement would only advantage this class of doctors and would not disadvantage any other persons.

 

 

Authority: Section 79 of the Medical Indemnity Act 2002

 

 

ATTACHMENT

 

Details of the Medical Indemnity (UMP support payment exemption) Regulations 2006

 

Regulation 1 – Name of Regulations

 

This regulation provides that the title of the Regulations is the Medical Indemnity (UMP support payment exemption) Regulations 2006.

 

Regulation 2 – Commencement

 

This regulation provides that the Regulations are taken to have commenced on 1 May 2004.

 

Regulation 3 – Definition

 

This regulation provides that in these Regulations, Act is defined as the Medical Indemnity Act 2002.

 

Regulation 4 – UMP support payment exemption (persons not invoiced)

 

Subregulation 4(1)

 

This item exempts those members of UMP who have not been invoiced by 25 September 2006 for the 2003-04 contribution year, so that they are no longer liable to pay the UMP SP for that year.

 

Subregulation 4(2)

 

This item exempts those members of UMP who have not been invoiced by 25 September 2006 for the 2004-05 contribution year, so that they are no longer liable to pay the UMP SP for that year.

 

Subregulation 4(3)

 

This item exempts those members of UMP who have not been invoiced by 25 September 2006 for the 2005-06 contribution year, so that they are no longer liable to pay the UMP SP for that year.