Explanatory Memorandum(Circulated by authority of the Minister for Health and Ageing, the Honourable Tony Abbott MP)
Australian Health Insurance Association (AHIA )
The AHIA is the peak group representing 26 "open" health funds throughout Australia, which collectively cover more than 94% of the total private health insurance industry.
Australian Medical Association (AMA )
The Australian Medical Association (AMA) is an independent organisation representing doctors.
Australian Private Hospitals Association (APHA )
The APHA is a peak national body representing private hospital interests in Australia.
Catholic Health Australia (CHA )
Catholic Health Australia is the largest non-government provider grouping of health, hospital, community and aged care services in Australia, nationally representing Catholic health care sponsors, systems, facilities and related organisations and services.
Consumers Health Forum (CHF )
The CHF was established in 1987 and is an independent, member-based, non-government organisation for health consumers.
Health Insurance Restricted Membership Association of Australia (HIRMAA
The Health Insurance Restricted Membership Association of Australia (HIRMAA) represents the interests of restricted membership private health funds. There are 14 member funds of HIRMAA. All member funds operate as not-for-profit organisations.
Private Health Insurance Administration Council (PHIAC)
The Private Health Insurance Administration Council is an independent Statutory Authority that regulates the private health insurance industry. It also collects and disseminates financial and statistical data regarding health funds, as well as information about private health insurance to enable consumers to make informed choices.
Private Health Insurance Ombudsman (PHIO)
The Private Health Insurance Ombudsman is an independent body established to resolve complaints about private health insurance and to be the umpire in dispute resolution at all levels within the private health insurance industry.
The Ombudsman's services are available to health funds, hospitals, medical practitioners and consumers.
Private Health Insurance Products
30%, 35% and 40% Government Rebates
Families and individuals that pay private health insurance premiums are eligible for the Federal Government's 30% Rebate on private health insurance. Medicare Australia administers both the payment to the health funds for reduced premiums and the alternative payments directly to contributors.
Registered Health Benefits Organisations (RHBOs) - i.e. - health funds
Health funds can be segmented into two membership types - i.e. - open membership funds or restricted membership funds. An open membership fund means that anybody can apply for health insurance, whilst a restricted membership fund only allows membership to people who belong to a particular organisation or community. Of the forty funds operating in Australia, thirty-six are not-for-profit organisations and fifteen have restricted memberships.
Community rating is a regulatory requirement and has long been a central tenet of Government policy for private health insurance. Community rating enables all Australians to have equal access and use of private health insurance no matter what their health, sexual, religious or other specified status may be.
Community rating differentiates private health insurance from most other types of insurance by not allowing risk rating to occur.
There are various types of private health insurance hospital cover. Some health fund policies give full cover against the costs of hospital and medical charges. Others, for lower premiums, will require consumers to meet part of the costs. Also, consumers can elect to pay a lower premium in return for agreeing not to be covered for some conditions, or to only receive limited benefits for a certain condition, or to pay a set amount towards the cost of hospital treatment. Options include:
Consumers are not covered for treatment as a private patient in a public or private hospital for particular conditions. For example, if a private health insurance policy excludes knee replacements, and the consumer goes into hospital as a private patient for one of this condition, the health fund will not pay any benefits towards hospital and medical costs.
Front-end deductible (FED) (also known as an excess)
An FED is an amount of money the consumer agrees to pay for a hospital stay before health fund benefits are payable.
With a co-payment, the consumer agrees to pay an agreed amount each time a service is provided. The total amount of co-payment paid in a year is often limited to a set maximum amount.
If a policy has restricted benefits for some conditions covered for treatment as a private patient, consumers may face considerable out-of-pocket costs if treated for these conditions.
Health insurance funds offer benefits for various goods and services such as for dental, optical and physiotherapy health services under their ancillary tables. Individual health funds have considerable scope to determine the nature of the goods and services that attract ancillary benefits and any limitations on such benefits. However, the Government does require that these tables be community rated.
There are two levels of default benefit which are payable when an alternative contractual arrangement is not in place between a health fund and a hospital provider: the basic default benefit and the second tier default benefit . The basic default benefit is payable by health funds to both public and private hospitals and private day hospital facilities for shared ward accommodation and same day accommodation. The second tier default benefit is payable to private hospitals and day hospital facilities when they meet certain administrative and quality criteria.
The medical 'gap' is the difference between fees charged by doctors for in-hospital medical services and the combined health insurance and Medicare benefits. For in-hospital medical services, Medicare provides a rebate of 75% of the Medicare Benefit Schedule (MBS) fee. Health funds are required to cover the remaining 25% of the MBS fee.
When a doctor charges an amount in excess of the MBS fee, legislation allows health funds to pay benefits above the MBS thereby eliminating or reducing the out-of-pocket payment required from the patient, if:
- the doctor is participating in the health fund's gap cover scheme; or
- a negotiated agreement exists between the doctor who provides the service and the health fund; or
- a negotiated agreement exists between the doctor who provides the service and a hospital, and that hospital in turn has an agreement with the health fund.
Informed Financial Consent
Informed financial consent is the consent to treatment obtained by a medical practitioner from a patient, prior to that treatment whenever possible, where the practitioner has sufficiently explained his or her fees to the patient to enable the patient to make a fully informed decision about costs. Medical specialists who participate in health funds' gap cover arrangements are required to provide informed financial consent prior to treatment where possible.
Under portability arrangements, it is possible to transfer to a similar level of cover with another health fund without loss of original entitlements, provided that these entitlements are included in the new cover. However, normal waiting periods apply for higher benefit levels or benefits for additional services which were not available under the previous cover.
A pre-existing ailment is an ailment, illness or condition, the signs or symptoms of which, in the opinion of a medical practitioner appointed by the health fund, existed at any time during the 6 months prior to the member joining a hospital table or upgrading to a higher level of cover.
Private Patient in a Public Hospital
Private patients that elect to be treated in a public hospital have an option to choose their own doctor when possible. Such patients will be charged for hospital accommodation costs and doctors fees. Medicare pays 75% of the MBS fee. Funds will pay at least the remaining 25% of the MBS fee for doctor's charges and can pay more if the health fund has an agreement with the doctor. Health funds will also cover some or all hospital accommodation costs.
Private Patient in a Private Hospital
As a private patient in a private hospital consumers have the option to choose their own doctor when possible, and are responsible for all hospital and doctors' charges. Medicare pays 75% of the MBS fee for these doctors' charges. Health funds will pay at least the remaining 25% of the MBS fee for doctor's charges and can pay more if the doctor is participating in gap cover. Some or all hospital accommodation costs will be covered.
Persons joining a health fund or upgrading to a higher table of benefits are generally subject to waiting periods of 12 months for pre-existing ailments, 12 months for obstetric conditions and 2 months in other cases. These periods are the maximum, and are set by the Government. However funds are free to waive such requirements should they wish. For example, some health funds waive the two month waiting period during recruitment drives.
People transferring between funds must be given credit for any equivalent waiting period that they have served with their previous fund.
Health funds are able to determine their own waiting periods for ancillary tables. The rules relating to transfers provide that, if a person transfers to a table of comparable ancillary cover, any service towards a waiting period should be counted towards the membership of the new product. NOTE ON STRICT LIABILITY OFFENCE PROVISIONS
Strict liability offences are found in the following Divisions and generally relate to a failure to comply with an obligation to provide information:
|93||Failure to maintain up to date information about insurance products|
|93||Failure to provide information about insurance products or policies to insured persons or persons seeking to become insured|
|96||Failure to provide information about insurance products or policies to the Private Health Insurance Ombudsman, the Council or the Secretary of the Department|
|99||Failure to provide transfer certificates to persons ceasing insurance or transferring to a new insurer, or seek a transfer certificate from a former insurer|
|169||Failure to provide financial and statistical information to the Council|
|169||Failure to keep the Council and the Secretary of the Department informed of changes to the Chief Executive Officer of a registered private health insurer|
|194||Failure to provide information to assist in an investigation of an insurer's practices|
|241 and 244||Failure to report to the Ombudsman on action taken in response to a recommendation|
|250||Failure to produce information to the Ombudsman relating to a complaint|
|256||Failure to comply with a direction by the Ombudsman to publish or give to insured people information related to the Ombudsman's functions|
|282||Failure to provide information related to the private health insurance premiums reduction or incentives payment schemes to the Medicare Australia CEO|
|310||Failure to retain information about an obligation to pay a private health insurance levy and the amount of the levy|
|310||Failure to provide information related to obligation to pay a private health insurance levy to the Council or the Secretary of the Department|
|313||Failure to return an identity card to the Council after a person has ceased to be an authorised officer|
These have been cast as strict liability offences because proof of intent to fail to comply with the requirement would be very difficult to obtain. However, failure to comply would have a significant detrimental effect on the administration of the Act or consumer protection and it is important to have offences to create a deterrent to non-compliance.
The highest maximum penalty for the offences is 60 penalty units.