Private Health Insurance Legislation Amendment Bill 2018 - Commentary on Ministerial Responses [2018] AUSStaCSBSD 165 (20 June 2018)

• Private Health Insurance Legislation Amendment Bill 2018
• Coercive powers96
• Reversal of evidential burden of proof101
• Broad delegation of administrative powers104

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Private Health Insurance Legislation Amendment
Bill 2018

Purpose	This bill seeks to amend various Acts in relation to private health insurance to: • increase maximum excess levels for products providing an exemption from the Medicare levy surcharge; • allow for age-based premium discounts for hospital cover; • amend the powers of the Private Health Insurance Ombudsman; • allow private health insurers to cover travel and accommodation costs as part of a hospital product for people attending health services; • establish a legislative framework for the minister to assess and determine whether or not to include a private hospital in a class of hospitals eligible for second-tier default benefits; • amend the information provision for consumers; • allow insurers to terminate products as well as close them to new policy-holders; and • remove the use of benefit limitation periods in private health insurance policies
Portfolio	Health
Introduced	House of Representatives on 28 March 2018
Bill status	Before the Senate

2.174 The committee dealt with this bill in Scrutiny Digest No. 5 of 2018. The minister responded to the committee's comments in a letter dated 21 May 2018. Set out below are extracts from the committee's initial scrutiny of the bill and the minister's response followed by the committee's comments on the response. A copy of the letter is available on the committee's website.^[95]

Coercive powers^[96]

Initial scrutiny – extract

2.175 The bill seeks to insert a new section 20SA in the Ombudsman Act 1976 (the Act), which would provide the Private Health Insurance Ombudsman (PHIO) with the power to enter, at any reasonable time of the day:

• a place occupied by a private health insurer or private health insurance broker;

• a place occupied by a person predominantly for the purpose of performing services for, or on behalf of, a private health insurer or private health insurance broker; or

• a place where documents or other records relating to a private health insurer, a private health insurance broker or the carrying on of health insurance business are kept.

2.176 New section 20SA also seeks to allow the PHIO, having entered a place referred to above, to inspect, take extracts from, or make copies of, documents or records to verify evidence provided in relation to a complaint. Proposed section 20TA seeks to provide the same powers to the PHIO when conducting an investigation commenced on his or her own initiative.^[97]

2.177 Proposed section 20ZHA would require the PHIO to show his or her identity card prior to entering premises and 20ZHB would make it at an offence subject to a maximum penalty of 30 penalty units for a person who is the occupier of, or in charge of, a place mentioned in proposed sections 20SA or 20TA, not to provide the PHIO with reasonable facilities and assistance for the effective exercise of the entry and inspection powers.

2.178 The committee notes that the Guide to Framing Commonwealth Offences states that legislation should only authorise entry to premises by consent or under a warrant and that '[a]ny departure from this general rule requires compelling justification.'^[98] The Guide also includes a list of the limited circumstances in which it may be appropriate to provide a power to enter premises without consent or a warrant.^[99] Where a bill seeks to allow entry without consent or a warrant, the committee would therefore expect a detailed justification to be provided in the explanatory memorandum.

2.179 In this case, the statement of compatibility states only that the requirement to show an identity card prior to entry 'provides for the transparent utilisation of the PHIO's inspection powers and mitigates arbitrariness and risk of abuse', and that the PHIO will be bound by the requirements of the Privacy Act 1988 when inspecting documents.^[100] The explanatory materials do not otherwise provide a justification for the proposed powers to enter premises and inspect documents without consent or a warrant.

2.180 The committee therefore seeks the minister's advice as to why it is considered necessary to allow the Private Health Insurance Ombudsman to enter premises and inspect documents without consent or a warrant.

Minister's response

2.181 The minister advised:

These powers are designed to strengthen the PHIO's powers and functions to assist people who have made a complaint to the PHIO.
As part of resolving a complaint, the PHIO typically attempts to access records relevant to the complaint from the respondent. In almost all cases, respondents voluntarily provide full records to the PHIO in order to investigate complaints. However, there are some instances where upon further investigation, additional records such as phone calls, letters and emails have been overlooked by respondents when providing responses to the PHIO.
The PHIO has an existing power under section 20ZE to issue a notice compelling a respondent to give the PHIO information relevant to investigating a complaint. Notwithstanding this power, the Government considers that the ability of PHIO to resolve consumer complaints would be strengthened by the power to enter places occupied by private health insurers and private health insurance brokers and inspect documents or other records.
By having the power to access the respondent's records directly within their premises, the PHIO's investigating officers are able to verify evidence that the respondent has provided to the PHIO. The Government considers that this power could be used by the PHIO to provide assurance to complainants that they have verified the accuracy of information provided by the respondent. The PHIO can also use this power when conducting an investigation on his or her own initiative.
Respondents have consistently provided access to the PHIO investigating officers to verify the accuracy of information and this is expected to continue. It is expected that the PHIO would provide respondents with at least 48 hours' notice of exercising the power of entry.
This new power is not expected to be used, but addresses the theoretical possibility that a respondent may not voluntarily consent to the PHIO entering their premises.
Given that the PHIO is not a regulator and the Government considers that it is not appropriate to apply the Regulatory Powers (Standard Provisions) Act 2014 the powers will only be used by the PHIO in an instance when consent is not forthcoming, noting that this has not occurred.
The purpose of entry in these circumstances is not to obtain evidence to support a criminal or civil prosecution; the intention is to confirm information provided by a consumer and to enable the PHIO to make non-binding recommendations, having received comprehensive information from both parties.
These are exceptional circumstances as the private health insurers have a disproportionate amount of power in the relationship with consumers. These measures will potentially increase consumer confidence in the actions of the insurer.
It is important to note that as part of the annual reporting arrangements, the PHIO is currently required to provide the Attorney-General with a report to table in Parliament. This report is prepared under section 46 of the Public Governance, Performance and Accountability Act 2013 and section 63 of the Public Service Act 1999. The content of these reports provides Parliament with visibility of the use of the PHIO's inspection powers.
I propose to provide further explanation of these powers in an Addendum to the Explanatory Memorandum.

Committee comment

2.182 The committee thanks the minister for this response. The committee notes the minister's advice that granting the PHIO the power to enter places occupied by private health insurers and private health insurance brokers and inspect documents will strengthen the ability of the PHIO to resolve complaints and conduct own-motion investigations by enabling the verification of evidence provided by respondents. The committee also notes the minister's advice that it is expected that the PHIO would provide respondents with at least 48 hours' notice when exercising the power of entry and that, although the power is not expected to be used, it addresses the theoretical possibility that a respondent may not voluntarily consent to the PHIO entering their premises.

2.183 The committee also notes the minister's advice that it is not considered appropriate to apply the Regulatory Powers (Standard Provisions) Act 2014 in this instance as the PHIO is not a regulator, the powers will only be used where consent is not forthcoming, and the purpose of entry is not to obtain evidence to support a criminal or civil prosecution, but to confirm information provided by a consumer to enable the PHIO to make non-binding recommendations based on comprehensive information from both parties.

2.184 The committee finally notes the minister's advice that the PHIO's annual reporting obligations provide the Parliament with information on the use of the PHIO's inspection powers, and that the minister intends to provide further explanation of the proposed powers of entry and inspection in an addendum to the explanatory memorandum.

2.185 The committee notes that the minister's response does not address its specific question as to why it is considered necessary to allow the PHIO to enter premises and inspect documents without consent or a warrant. If it is considered inappropriate to apply the Regulatory Powers (Standard Provisions) Act 2014 in this instance, the committee considers that it would nevertheless be possible to amend the bill to include a requirement that a warrant be obtained prior to entering premises and inspecting documents. The minister's response indicates that at least 48 hours' notice will be provided when exercising these powers and it therefore appears that obtaining a warrant would not be impractical for reasons of urgency.

2.186 The committee welcomes the minister's undertaking to provide further explanation of the Private Health Insurance Ombudsman's proposed powers of entry and inspection in an addendum to the explanatory memorandum.

2.187 The committee otherwise draws its scrutiny concerns to the attention of senators and leaves to the Senate as a whole the appropriateness of allowing the Private Health Insurance Ombudsman to enter premises and inspect documents without consent or a warrant.

Reversal of evidential burden of proof^[101]

Initial scrutiny – extract

2.188 Proposed section 20ZIA would require the PHIO to issue an identity card to each person who exercises powers of entry and inspection under proposed sections 20SA and 20TA (discussed above at paragraphs 2.175 to 2.180). Proposed subsection 20ZIA(4) seeks to make it an offence of strict liability for a person who ceases to be a member of staff, or a person to whom the PHIO has delegated powers under proposed section 20SA or 20TA, to fail to return their identity card to the PHIO within 14 days of so ceasing. Proposed subsection 20ZIA(5) provides an exception (offence specific defence) to this offence, stating that the offence does not apply if the identity card was lost or destroyed. The offence carries a maximum penalty of 1 penalty unit.

2.189 Subsection 13.3(3) of the Criminal Code Act 1995 provides that a defendant who wishes to rely on any exception, exemption, excuse, qualification or justification bears an evidential burden in relation to that matter.

2.190 At common law, it is ordinarily the duty of the prosecution to prove all elements of an offence. This is an important aspect of the right to be presumed innocent until proven guilty. Provisions that reverse the burden of proof and require a defendant to disprove, or raise evidence to disprove, one or more elements of an offence, interferes with this common law right.

2.191 While in this instance the defendant bears an evidential burden (requiring the defendant to raise evidence about the matter), rather than a legal burden (requiring the defendant to positively prove the matter), the committee expects any such reversal of the evidential burden of proof to be justified. However, the reversal of the evidential burden of proof in proposed section 20ZIA has not been addressed in the explanatory materials.^[102]

2.192 As the explanatory materials do not address this issue, the committee considers that it may be appropriate for the explanatory memorandum to be amended to include a justification for the reversal of the evidential burden of proof in proposed section 20ZIA that explicitly addresses relevant principles as set out in the Guide to Framing Commonwealth Offences.^[103]

Minister's response

2.193 The minister advised:

The Guide to Framing Commonwealth Offences acknowledges that it is appropriate to reverse the onus of proof and place a burden on the defendant in certain circumstances. This includes where a matter is peculiarly within the knowledge of the defendant and where it would be significantly more difficult and costly for the prosecution to disprove the matter than for the defendant to establish the matter.
The offence provision provided by subsection 20ZIA(4) is a common provision in relation to identity cards. Subsection 20ZIA(4) provides that a person commits an offence of strict liability if the person ceases to be a member of staff mentioned in section 31 or ceases to be a person to whom the PHIO has delegated its powers under section 34 in relation to section 20SA or 20TA, and the person does not return their identity card to the PHIO within 14 days of so ceasing. Subsection (5) provides that subsection (4) does not apply if the identity card was lost or destroyed.
Under proposed section 20ZIA, it is up to the defendant in a prosecution to provide evidence that the identify card was lost or destroyed (and that the exception under subsection (5) applies), as she or he will be the only person with knowledge of those circumstances. It is unreasonable for the prosecution to prove that the card was not lost or destroyed.
The prosecution will still be required to prove each element of the offence beyond a reasonable doubt before a defence can be raised by the defendant. Further, if the defendant discharges an evidential burden, the prosecution will also be required to disprove these matters beyond reasonable doubt, consistent with section 13.1 of the Criminal Code.

Committee comment

2.194 The committee thanks the minister for providing this additional information. The committee notes the minister's advice that it is appropriate to reverse the evidential burden of proof in relation to whether an identity card was lost or destroyed as the defendant will be the only person with knowledge of those circumstances and that it would therefore be unreasonable for the prosecution to prove that the card was not lost or destroyed.

2.195 The committee requests that the key information provided by the minister be included in the explanatory memorandum, noting the importance of this document as a point of access to understanding the law and, if needed, as extrinsic material to assist with interpretation (see section 15AB of the Acts Interpretation Act 1901).

2.196 In light of the information provided, the committee makes no further comment on this matter.

Broad delegation of administrative powers^[104]

Initial scrutiny – extract

2.197 Item 6 of Schedule 3 seeks to amend subsection 34(2C) of the Act, which sets out the powers of the PHIO to delegate his or her powers and functions. The Act currently provides that the PHIO may delegate any or all of his or her powers or functions, other than those related to reporting to the minister on the outcome of investigations,^[105] to members of staff mentioned under section 31. Section 31 states that staff required for the purposes of the Act will be engaged under the Public Service Act 1999. The proposed amendment would therefore allow the PHIO to delegate any or all of his or her powers to 'a person', rather than to an Australian Public Service (APS) employee at any level.

2.198 The committee has consistently drawn attention to legislation that allows the delegation of administrative powers to a relatively large class of persons, with little or no specificity as to their qualifications or attributes. Generally, the committee prefers to see a limit set either on the scope of powers that might be delegated, or on the categories of people to whom those powers might be delegated. The committee's preference is that delegates be confined to the holders of nominated offices or to members of the Senior Executive Service. Where broad delegations are provided for, including delegations beyond the APS, the committee considers that an explanation of why these are considered necessary should be included in the explanatory memorandum.

2.199 In this case, the explanatory memorandum states that the proposed expansion of the range of persons to whom the PHIO may delegate his or her powers is intended to provide the PHIO with the 'flexibility to delegate powers to suitable qualified officers' in cases where they do not come within the scope of persons described at section 31 of the Act—that is, APS employees at any level. The explanatory memorandum also states that this amendment would ensure 'consistency with the other subject matter specific roles held by the Commonwealth Ombudsman'.^[106]

2.200 The committee has generally not accepted a desire for administrative flexibility as a sufficient justification for allowing a broad delegation of administrative powers to 'a person'. The committee also notes that the explanatory memorandum contains no guidance as to the specific circumstances in which it is envisaged it may be necessary to delegate powers or functions to persons outside the APS, nor any guidance as to what accountability mechanisms will be put in place with respect to such persons.

2.201 The committee also notes that, given the proposed amendment to the PHIO's delegation powers, the proposed new powers of entry and inspection, discussed above at paragraph 2.175 to 2.180, would be delegable to any person, including persons outside the APS. The committee notes that the Guide to Framing Commonwealth Offences states that 'Legislation conferring coercive powers should require that these powers only be exercised by an appropriately qualified pers[107]or class of persons'.¹⁰⁷

2.202 The committee would therefore also expect a detailed justification to be provided in the explanatory memorandum where it is proposed to allow the delegation of entry and inspection powers to 'a person', including information on the attributes or qualifications persons exercising such powers will be required to possess. However, the explanatory materials do not address these issues.

2.203 The committee therefore requests the minister's advice as to:

• why it is considered necessary to allow for the delegation of the PHIO's functions or powers, including powers of entry and inspection, to any person, including persons outside the APS; and

• the appropriateness of amending the bill to require that the PHIO be satisfied that persons performing delegated functions and exercising delegated powers have the expertise appropriate to the function or power delegated.

Minister's response

2.204 The minister advised:

I note the Committee's concern in relation to the delegation of administrative powers to a relatively large class of persons. Currently, under sub-section 34(2C), the Commonwealth Ombudsman can delegate all powers or functions under the Ombudsman Act 1976, except those contained in section 20R and 20V, to any member of staff.
With respect to specific circumstances in which it is envisaged it may be necessary to delegate powers or functions to persons outside the Australian Public Service, it is expected that in practice the Ombudsman would only authorise people with appropriate attributes, qualifications, qualities and relevant experience. Some complaints that are brought to the PHIO can be complex in nature and may require a subject matter expert to assist with investigations.
As the inspection and audit function is new, it is not entirely clear what the necessary staffing level will be. The proposed amendment will enable the PHIO to ensure the function is staffed at the appropriate level, and provides flexibility to reduce staffing levels if there is limited need to use the inspections power. This is prudent business practice and supports the effective and efficient use of agency resources to meet operational requirements.
Prior to the commencement of the new functions, the PHIO will have in place procedures that will ensure that only those people with appropriate qualifications and experience, and relevant training, are delegated key functions associated with the PHIO.

The Committee has asked whether Government would amend the Bill to require that the PHIO be satisfied that persons performing delegated functions and exercising powers have the expertise appropriate to the function or power delegated. As this is not an entirely new power for the Ombudsman, I am satisfied that, in light of the above safeguards, the power will be used within the parameters of the Bill.

Committee comment

2.205 The committee thanks the minister for this response. The committee notes the minister's advice that the Commonwealth Ombudsman can currently delegate all powers or functions (except those contained in section 20R or 20V) to any member of staff, and that it is expected that the PHIO would only delegate powers or functions to persons outside the APS who have appropriate attributes, qualifications, qualities and experience. The committee also notes the minister's advice that the delegation of powers and functions to persons outside the APS may be necessary as some complaints to the PHIO can be complex and subject matter experts may be required to assist with investigations.

2.206 The committee further notes the minister's advice that the proposed amendment will enable the PHIO to ensure that the new inspection and audit function is staffed at an appropriate level and that procedures will be implemented to ensure that only people with appropriate qualifications and experience are delegated key functions associated with the PHIO. The committee finally notes the minister's advice that, in light of these safeguards, he does not consider it necessary to amend the bill.

2.207 The committee reiterates its preference that delegations of administrative power be confined to the holders of nominated offices or members of the Senior Executive Service or, alternatively, that a limit is set on the scope and type of powers that may be delegated. While the committee notes the minister's advice as to how it is intended this power will be exercised, there is nothing on the face of the bill to limit it in the way set out in the minister's response. The committee also reiterates its particular concern that it is proposed to allow the delegation of powers of entry and inspection to any person, including persons outside of the public service.

2.208 The committee considers it may be appropriate to amend the bill to require that the Private Health Insurance Ombudsman's (PHIO) be satisfied that persons performing delegated functions and exercising delegated powers have the expertise appropriate to the function or power delegated.

2.209 The committee otherwise draws its scrutiny concerns to the attention of senators and leaves to the Senate as a whole the appropriateness of allowing the delegation of the PHIO's powers and functions, including powers of entry and inspection, to 'any' person.

2.1

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[95] See correspondence relating to Scrutiny Digest No. 6 of 2018 available at: www.aph.gov.au/senate_scrutiny_digest

[96] Schedule 3, item 1, proposed section 20SA and item 2, proposed section 20TA. The committee draws senators' attention to these provisions pursuant to Senate Standing Order 24(1)(a)(i).

[97] Explanatory memorandum, p. 44.

[98] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, p. 76.

[99] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, pp. 85-86.

[100] Explanatory memorandum, p. 37.

[101] Schedule 3, item 5. The committee draws Senators’ attention to this provision pursuant to Senate Standing Order 24(1)(a)(i).

[102] Explanatory memorandum, p. 45.

[103] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, pp. 50-52.

[104] Schedule 3, item 6. The committee draws Senators’ attention to this provision pursuant to Senate Standing Order 24(1)(a)(ii).

[105] See sections 20R and 20V of the Act.

[106] Explanatory memorandum, p. 45.

[107] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, pp. 73-74.