Bills Digest no. 171 2008–09
Private Health Insurance Legislation Amendment Bill 2009
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Date introduced: 3 June 2009
House: House of Representatives
Portfolio: Health and Ageing
Commencement: Sections 1–3 on Royal Assent; Schedule 1 items 1–3 and item
13, on the later of 1 July 2009 or Royal Assent; Schedule 1 items 4–12 and item
14, at the same time as sections 3–9 of the Private Health Insurance
(National Joint Replacement Register Levy) Act 2009.
Links: The relevant links to the Bill, Explanatory Memorandum and second reading speech can be accessed via BillsNet, which
is at http://www.aph.gov.au/bills/. When Bills have been passed they can
be found at ComLaw, which is at http://www.comlaw.gov.au/.
The purpose of this Bill is twofold. First,
the Bill proposes to amend the Private Health Insurance Act 2007 (PHIA
2007) and the Age Discrimination Act 2004 (Age Discrimination Act), to
permanently allow private health insurers to offer ‘extended family policies’ that
cover single 18–24 year olds who are not studying full-time.
Second, the Bill proposes
consequential amendments to the PHIA 2007 to make it consistent with the Private
Health Insurance (National Joint Replacement Register Levy) Bill 2009, which seeks
to establish cost recovery arrangements for the maintenance of the National
Joint Replacement Register.
Currently, the PHIA 2007 requires that private health
insurers are only allowed to offer complying health insurance policies to
individuals or persons that are specified as belonging to a particular category
of insured groups.
These insured groups are not specified in the PHIA 2007, but
are specified in private health insurance rules which are legislative
instruments.[1] Categories of insured groups that are specified in the rules include singles,
couples and families with dependent children.
Since late 2007, the private health insurance rules have also
included a category known as a ‘dependent child non-student’, being a person
who is aged between 18 and 24, is single and not in full time education. This
has allowed health insurers to offer ‘extended family policies’ that include health
cover to these ‘dependent child non-students’. These policies were developed by
health insurers to encourage young adults to maintain their health cover into
adulthood.[2]
Health insurers can charge a higher premium for these ‘extended
family policies’ compared to the premiums they charge for other family policies
that cover younger children or older children who are students. However, the
premium of an extended family policy is usually less than that charged for a
separate health insurance policy for a single adult child combined with a
family policy. This makes this type of policy more attractive for families with
older single children not in full time education. The Minister’s second reading
speech notes the current lower participation rate of young adults in private
health insurance arrangements.[3]
The arrangements allowing health insurers to offer these
policies for dependent child non-students have been temporary, although they have
been extended on a number of occasions since their introduction in late 2007.
Most recently, the Private Health Insurance (Complying Product) Amendment Rules
2008 (no.3) specified the insurance category ‘dependent child non-student’ be extended
until December 2009.[4]
The Bill proposes amendments to insert the category of
‘dependent child non-student’ into the PHIA 2007. This will allow health
insurers to offer these extended family policies covering this specific
category of insured group on a permanent basis, rather than on the temporary
basis currently specified in the private health insurance rules. No other
category of insured group is similarly specified in the PHIA 2007. The Bill
also proposes amendments to the Age Discrimination Act that
will allow for an exemption from unlawful age discrimination where higher
premiums are charged for ‘dependent child non-students’.
Statistics from the industry regulator, the Private Health
Insurance Administration Council (PHIAC) show that the percentage of persons in
the 20–24 age cohort covered by private hospital insurance has declined in
recent years from 5.2 per cent in 2006 to 3.98 per cent in 2008.[5] The Government intends that the proposed provisions in this Bill will make
private health insurance for young adults more attractive.[6]
The Bill also proposes consequential amendments to PHIA 2007
to allow for the administration of the NJRR levy proposed in the Private Health
Insurance (National Joint Replacement Register Levy) Bill 2009. This latter
Bill proposes to impose a levy on sponsors of joint replacement prostheses in
order to recover costs associated with the maintenance of the NJRR.[7]
The 2009–10 Portfolio Budget Statement for Health and Ageing
flagged that legislation allowing extended family policies to continue to be
offered would be introduced in 2009.[8]
The introduction of cost recovery arrangements for the NJRR
was announced in the 2009–10 Budget as a cost saving measure.[9]
The main provisions of the Bill have been referred to the
Community Affairs Legislation Committee for inquiry and report by 16 June 2009,
in accordance with Senate resolutions of 14 May 2009 to refer certain
budget-related bills to Senate Committees.
The proposed provisions in this
Bill relating to extended family policies have not attracted significant
commentary, which contrasts with recent debate over changes to the private
health insurance rebate. This is probably because, unlike the proposed changes
to the private health insurance rebate, the effects of this Bill are not expected
to reduce private health insurance membership; on the contrary, the stated aim is
to bolster private health insurance uptake for young adults—where declines have
been observed.
The proposed consequential amendments to the PHIA 2007
contained in this Bill along with the proposed provisions in the Private Health
Insurance (National Joint Replacement Register Levy) Bill 2009, introducing a
levy, are estimated to realise savings of $5 million over four years.[10]
The Explanatory Memorandum to this Bill does not predict any
financial implications for the proposed provisions to allow health insurers to
offer permanently extended family policies covering the ‘dependent child
non-student’. However, as the proposed provisions are intended to support the
maintenance of private health insurance there may be financial implications if
higher than expected Government expenditure on the private health insurance
rebate occurs as a result.
The private health insurance rebate
is a discount on private health insurance premiums paid by the Government.
Those under 65 with private health cover currently receive a 30 per cent rebate
on their health insurance premiums.[11] If the proposed provisions in this Bill result in increasing numbers of extended
family policies being purchased (at a higher premium cost than a normal family
policy), then it could be expected that Government expenditure on the rebate may
also increase.
Item 1 proposes to replace a reference to ‘Part 2–3’
in Schedule 2 with a reference to ‘Part 2–3 and subsection 63-5(4)’. This will
allow the provisions of proposed subsection 63-5(4) of the PHIA 2007 to
be lawful under the Age Discrimination Act.
Item 2 proposes to insert new words ‘or subsection
63-5(4)’ after ‘lifetime health cover’ into existing paragraph 55-5(2)(c). This
will exclude premiums charged for the purchase of extended family policies from
being discriminatory under the PHIA 2007.
Item 3 proposes to insert two new subsections.
Proposed subsection 63-5(4) allows for a higher premium to be charged
for a health insurance policy that includes a ‘dependent child non-student’
than the premium charged for the same policy that includes dependent children.
Proposed subsection 63-5(5) defines the meaning of ‘dependent
child non-student’ as being a dependent child who is aged between 18 to
24 (inclusive) and who is not in full time education. A ‘dependent child’ is already defined in the PHIA 2007 as one who is single, so marital status is
not required to be specified in this proposed section.
Items 4 and 6 propose to insert definitions of the proposed
national joint replacement levy. Item 4 inserts the definition at the
end of section 304-10, which lists private health insurance levies; item
6 inserts the definition at the end of paragraph 307-1(1)(a) which deals
with collection and recovery of levies.
Items 7 and 8 propose to substitute references
to private health insurers at subsection 307-5(1) with a reference to a
‘person’ so as to include sponsors of joint replacement prostheses.
Item 9 proposes to insert the national joint
replacement levy and late payment penalty for the levy, into a list of levies
payable to the Commonwealth at subsection 307-10(1).
Item 10 proposes to add the national joint
replacement levy into a list of levies for which the Minister may choose to
waive liability.
Items 11 and 12 propose changes to the headings of divisions
310 and 313 so as to include private health insurers.
Item 13 proposes to
insert a definition of ‘dependent child non-student’ into the
dictionary at Schedule 1. Item 14 proposes to insert a definition
of ‘national joint replacement register levy’ into the Dictionary
at Schedule 1.
Concluding
comments
This Bill proposes amendments that will insert a ‘dependent
child non-student’ as a recognised category of insured person into the PHIA
2007. This will allow health insurers to continue to offer extended family
policies covering young adults and to charge higher premiums for this category
without being subject to unlawful discrimination provisions. These amendments
are intended to bolster private health insurance membership among young adults.
The Bill also proposes consequential amendments to the PHIA 2007 relating to
the proposed establishment of the National Joint Replacement Register levy.
Members, Senators and
Parliamentary staff can obtain further information from the Parliamentary
Library on (02) 6277 2514.
Amanda Biggs
15 June 2009
Bills Digest Service
Parliamentary Library
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