Explanatory Memorandum
(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP)Chapter 10 - Miscellaneous
Outline of chapter
10.1 Part 9 of the Prudential Supervision Bill relates to:
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- relief from liability;
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- annual publication of information relating to health benefits funds;
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- the decisions of APRA that are internally reviewable and reviewable by the AAT;
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- approvals and determinations by APRA;
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- powers of the Federal Court;
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- approved forms;
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- delegation by the Minister; and
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- 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 certain part s of the act, a person who has acted honestly can apply to the Federal Court to seek whole or partial relief. | No right to apply for relief on this basis in relation to the corresponding liability. |
| APRA is required to publish information relating to health benefits funds. This will reflect the current 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 Council is required to produce an annual report on private health insurers to the Minister. |
| The AAT can review certain decisions. | The AAT can review certain decisions (section 328-5 of the PHI Act). |
| Affected parties are entitled to internal review of reviewable decisions. | The PHI Act does not provide for an internal review process. |
| 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 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:
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- premiums payable to the fund;
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- other amounts payable to the fund;
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- fund benefits payable out of the fund;
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- management expenses;
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- other amounts payable out to the fund;
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- the balance of the fund at the end to that financial year;
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- details of how the reserves of the fund have been invested; and
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- 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 private health insurer | section 15 |
| 2 | to grant an application, subject to terms and conditions, for registration as a private health insurer | section 15 |
| 3 | to refuse an application for approval for a private health insurer to convert to being registered as a for profit insurer | section 20 |
| 4 | to refuse to approve the crediting of an amount to a health benefits fund of a private health insurer | subparagraph 27(3)(b)(ii) |
| 5 | to refuse to approve a restructure of the health benefits funds of a private health insurer | section 32 |
| 6 | to refuse to approve a transfer of the health benefits funds of one or more private health insurers | section 33 |
| 7 | to refuse to approve a termination of the health benefits funds of a private health insurer | section 37 |
| 8 | to make, vary or revoke a prudential standard referred to in paragraph 92(3)(c) | section 92 |
| 9 | to give a direction under section 96 on a ground specified in paragraphs 96(1)(a), (b) or (c) | section 96 |
| 10 | to vary, or to refuse to vary or revoke, a direction that was given under section 96 on a ground specified in paragraphs 96(1)(a), (b) or (c) | section 99 |
| 11 | to give a direction to end the appointment of a person as appointed actuary | section 115 |
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)]
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:
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- it is in the form approved in writing by APRA;
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- contains information that the form requires (including being accompanied by other documentation that the form requires);
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- is signed by a person in accordance with any applicable requirements specified in the form or APRA rules; and
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- the giving of the form is in accordance with any applicable requirements specified in the form or APRA rules. [Part 9, subsection 172(1)]
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)]
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)]