House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP)

Chapter 11 - Consequential Amendments and Transitional Provisions

Outline of chapter

11.1 This Chapter provides an explanation of the Consequential Amendments and Transitional Provisions Bill which forms part of the package that gives effect to the transfer of the Council's functions to APRA.

11.2 Unless otherwise stated, all references in this Chapter relate to the Consequential Amendments and Transitional Provisions Bill.

Context of amendments

11.3 The Prudential Supervision Bill will confer prudential supervision functions relating to private health insurers, currently conferred on the Council under the PHI Act, on APRA. Consequential amendments are required in relation to a number of Acts to facilitate the transfer of functions to APRA and remove duplication of functions between the PHI Act and the Prudential Supervision Bill.

Summary of new law

11.4 The Consequential Amendment and Transitional Provisions Bill includes amendments to:

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the APRA Act to provide for matters relating to secrecy of information concerning private health insurers, and to provide for the administration of industry levies;

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the FISLC Act to cater for the collection of the private health insurance supervisory levy and the collection of the collapsed insurance levy;

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the FS(CoD) Act to facilitate the collection of data relating to private health insurers by APRA;

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the ITAA 1997 to update or replace references to the Prudential Supervision Bill;

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the Life Insurance Act to replace a reference to the PHI Act;

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the Medibank Private Sale Act to include references to the Prudential Supervision Bill in certain provisions that currently refer to the PHI Act;

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the Ombudsman Act to enable the sharing of information with APRA; and

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the PHI Act to remove the prudential supervision powers, remove references to the Council and to repeal the provisions creating the Council.

11.5 In addition, transitional provisions will ensure that legal actions taken prior to the transfer day, such as the registration of private health insurers, and other processes, such as legal proceedings, will continue under the Prudential Supervision Bill. Finally, the Consequential Amendments and Transitional Provisions Bill contains machinery transitional provisions for the transfer of the Council staff, assets, liabilities and records from the Council to APRA.

Comparison of key features of new law and current law

Detailed explanation of new law

Schedule 1 - Consequential amendments

Commencement

11.6 The Consequential Amendment and Transitional Provisions Bill has multiple commencement dates. Sections 1 to 3 commence on Royal Assent. Division 1 of Schedule 1 and Part 2 of Schedule 1 commence at the same time as the Prudential Supervision Bill. Items 178-180 of Schedule 1 commence immediately after the commencement certain items of the Private Health Insurance Amendment Act 2015 or at same time as the Prudential Supervision Bill, whichever is the later date. Item 181 of Schedule 1 (which amends the Prudential Supervision Bill) commences either after the commencement of the Norfolk Island Legislation Amendment Act 2015 or the commencement of the Prudential Supervision Bill, whichever is the later date. Item 182 of Schedule 1 (which also amends the Prudential Supervision Bill) commences either after the commencement of the Acts and Instruments (Framework Reform) Act 2015, or the commencement of the Prudential Supervision Bill, whichever is the later date. Schedule 2 commences the day after Royal Assent.

Division 1 - Main amendments

APRA Act

11.7 The APRA Act establishes APRA, sets out secrecy obligations and provisions concerning certain aspects of the administration of levies, makes provision for other matters relating to the operations of APRA as an organisation, and outlines the broad functions and powers that APRA has as Australia's prudential regulator. The amendments to the APRA Act will:

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ensure that information relating to private health insurers is subject to APRA's secrecy provision;

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ensure APRA can collect data in relation to private health insurers under the FS(CoD) Act; and

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contribute to bringing levies relating to private health insurers within APRA's levy framework.

11.8 The following definition has been inserted into the Dictionary in Schedule 1. [Schedule 1, Part 1, item 1]

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Collapsed Insurer Special Account : see subsection 54F(1) (which establishes that Special Account, and is discussed further below).

11.9 The definition of 'prudential regulation framework law' in definitions provision in subsection 3(1) of the APRA Act has been amended to include the Prudential Supervision Bill and the risk equalisation levy legislation (within the meaning of that Bill). The definition has also been amended to remove 'Acts'. [Schedule 1, Part 1, items 2 and 3]

11.10 The definition of 'body regulated by APRA' in subsection 3(2) of the APRA Act has also been amended to include a private health insurer, as defined within the Prudential Supervision Bill. This, together with the change noted in the previous paragraph, will ensure that information and documents relating to private health insurers are covered by the secrecy provision in section 56 of the APRA Act and that information and data relating to private health insurers can be collected by APRA under the FS(CoD) Act. [Schedule 1, Part 1, item 4]

11.11 There is a minor amendment to section 8 of the APRA Act, which sets out APRA's purposes, to recognise that the purposes listed in the section are not APRA's exclusive purposes, having regard to the fact that APRA will have functions in relation to the risk equalisation Special Account. [Schedule 1, Part 1, item 5]

11.12 The definition of a 'levy' in subsection 50(6) of the APRA Act has been amended to exclude levies imposed under the Collapsed Insurer Levy Act. This means that the Collapsed Insurer Levy will not be subject to the determination by the Minister, under section 50 of the APRA Act, which allocates the appropriate portion of supervisory levy to APRA. That determination is only intended to apply to APRA supervisory levies. The risk equalisation levy falls outside the definition of 'levy' in section 50(6) as it is not collected under the FISLC Act but rather under the PHI Act. [Schedule 1, Part 1, item 6]

11.13 The rules regarding debits from the APRA Special Account have been modified to ensure that the Special Account cannot be debited for collapsed insurer assistance payments within the meaning of section 54H (that is, for payments in line with the purposes of the Collapsed Insurer Special Account) or payments described in paragraph 318-10(1)(a) of the PHI Act (that is, payments in line with the purposes of the Risk Equalisation Special Account). [Schedule 1, Part 1, item 7]

11.14 New sections 54F, 54G, and 54H will be added to the APRA Act in order to establish and set out the functions and purposes of the Collapsed Insurer Special Account. Section 54F establishes the Collapsed Insurer Special Account and declares it to be a Special Account for the purposes of the Public Governance, Performance and Accountability Act 2013. [Schedule 1, Part 1, item 8]

11.15 The Collapsed Insurer Special Account does not exist under the current law. Under the current law, if an insurer collapsed and the Minister imposed the Collapsed Insurer Levy, the levy would be paid to the Council and banked by the Council pending the making of payment from that levy to the collapsed insurer or its external manager to help meet policy liabilities. The Council is legally separate to the Commonwealth and has had the capacity to hold money (including moneys related to the Collapsed Insurer Levy) on its own account. APRA holds money on behalf of the Commonwealth. For that reason, and to ensure that there is a clear separation between APRA's money for general administrative purposes (which is credited to the APRA Special Account) and the Collapsed Insurer Levy, the Consequential Amendments and Transitional Provisions Bill provides for the establishment of the Collapsed Insurer Special Account. [Schedule 1, Part 1, item 8]

11.16 A Special Account is a mechanism that provides for appropriations for payments made by the Commonwealth. Under section 80 of the Public Governance, Performance and Accountability Act 2013, if an Act (such as the APRA Act) establishes a Special Account, then the consolidated revenue fund is appropriated for expenditure of the purposes of the Special Account, up to the balance for the time being for the Special Account. In this case, any Collapsed Insurer Levy imposed (see Chapter 14) will be credited to the account, and amounts paid to policy holders of a collapsed insurer will be debited against the Special Account.

11.17 Section 54G provides that amounts collected under Part 3B of the FISLC Act can be credited to the Special Account. That is:

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amounts received by APRA by way of a Collapsed Insurer Levy and late payment penalty in respect of that levy. [Schedule 1, Part 1, item 8]

11.18 Subsection 54H(1) establishes the purpose of the Collapsed Insurer Special Account and the purposes for which it can be debited. Specifically, the purposes of the Collapsed Insurer Special Account are:

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for APRA to make payments (collapsed insurer assistance payments) to help meet a collapsed insurer's liabilities to the people insured under its complying health insurance policies (that it cannot meet itself); and

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to meet the costs of administering the Special Account and meeting any costs associated with the making of collapsed insurer assistance payments. [Schedule 1, Part 1, item 8]

11.19 These arrangements are similar to the arrangements in place where levy is collected, and amounts expended by APRA, in the event that the Financial Claims Scheme is activated. Money to pay claims is credited to and debited from the Financial Claims Scheme Special Account.

11.20 It is appropriate that collapsed insurer payments be funded by a separate levy (as has been the case under the Council) and accounted for in a separate Special Account because APRA is a cost recovery agency and only recovers through general supervisory levies what it expects to spend on each industry in each year. As a result, unexpected costs due to the activation of the Collapsed Insurer Levy (and likewise, in a banking or general insurance context, the Financial Claims Scheme) are not budgeted for, or collected from industry, in any year.

11.21 To ensure that costs related to one industry (for example, private health insurers in the activation of the Collapsed Insurer Levy) are not subsidised by another industry (for example, the supervisory levies paid by general insurers), it is appropriate that these amounts be recovered from the private health insurance sector through a separate Collapsed Insurer Levy (as has been the position under the Council).

11.22 Subsection 54H(2) notes that the Minister may, by written notice to the collapsed insurer (or an external manager or terminating manager of a collapsed insurer) specify conditions upon which any collapsed insurer assistance payments are made. This could include repayment conditions for the collapsed insurer. The purpose of this is to ensure that the Commonwealth has a right to require repayment of collapsed insurer assistance payments, or at least partial repayment (for example, via a dividend in the winding up of the private health insurer) in the event of the insolvency of the private health insurer. If amounts are repaid then they will be credited to the Risk Equalisation Special Account, as discussed further below, so that they can be returned to industry via adjustments to risk equalisation payments. The Minister's notice is not a legislative instrument because it is specific to the insurer, therefore the statement in subsection 54H(3) does not constitute a substantive exemption, but is a statement of the 'status quo'. [Schedule 1, Part 1, item 8]

11.23 In section 54H, 'collapsed insurer' and 'complying health insurance policy' have the same meanings as used in the Collapsed Insurer Levy Act and the PHI Act respectively. [Schedule 1, Part 1, item 8]

Financial Institutions Supervisory Levies Collection Act 1998

11.24 The Consequential Amendments and Transitional Provisions Bill provides for the collection of supervisory and other industry levies by APRA. Part 2 relates to the collection of supervisory levies and is amended to cover the collection of supervisory levies in relation to private health insurers. Parts 3 and 3A relate to levies which in general terms relate to failed superannuation funds, ADIs and general insurers. A new Part 3B will be inserted for the purpose of collecting the Collapsed Insurer Levy (which is currently collected under the PHI Act).

11.25 A definition of 'private health insurer' is inserted into section 6. It has the same meaning as in the Prudential Supervision Bill. [Schedule 1, Part 1, Item 9]

11.26 In section 7, the definition of 'leviable body' has been expanded to include private health insurers. The definition of a levy has also been expanded to include (in respect of a private health insurer) a levy imposed by the Supervisory Levy Imposition Bill. [Schedule 1, Part 1, Item 10 and 11]

11.27 Subsection 8(4A) has been amended to expand the list of bodies that APRA is liable to levy to include, for 2015-16, private health insurers that are liable to pay a levy in respect of each quarter in that financial year. [Schedule 1, Part 1, Item 12]

11.28 This, and the associated definitions in subsection (4B), have been inserted to ensure that in 2015-16, the Private Health Insurance Supervisory Levy is collected in the same way as the Private Health Insurance Council Administration Levy would have been collected had the Council continued to operate. [Schedule 1, Part 1, Item 12]

11.29 Subsection 8(4C) has been amended to expand the list of bodies that APRA is liable to levy to include (from 1 July 2016 onwards) entities that are a private health insurer at any time during that financial year or later financial years. This is to harmonise the treatment of private health insurers with other body corporates levied by APRA from 2016-17 onwards. [Schedule 1, Part 1, Item 12]

11.30 Subsection 9(1) has been amended to ensure that in 2015-16 private health insurers will not be required to pay the Private Health Insurance Supervisory Levy in the same way as other entities supervised by APRA pay their levy. As noted, the intention is that the supervisory levy for 2015-16 will be paid quarterly, as it would if the Council remained in existence and the related amendments were not made, and not annually in the same way as other APRA supervisory levies. [Schedule 1, Part 1, Item 13]

11.31 To this end, subsection 9(3) has been inserted to state that the levy payable by a private health insurer for a quarter under subsection 8(4A) is payable on the 14th day after the liability day. [Schedule 1, Part 1, Item 14]

11.32 From 2016-17 onwards, the Private Health Insurance Supervisory Levy will be imposed and payable in the same timeframe as other entities supervised by APRA (except superannuation entities) under section 9(1).

11.33 Section 10 has been amended to ensure that the late payment penalty rate for entities other than private health insurers will remain at 20 per cent, while for private health insurance entities it will be 15 per cent unless the Minister (a Treasury Minister) specifies a lower rate in a legislative instrument. This change aligns the late payment penalty regime for private health insurers with that imposed by the Council. [Schedule 1, Part 1, Item 15 and 16]

11.34 Subsection 14(3) has been added to ensure that nothing in a law passed before or (unless the law is explicit) after the commencement of the Supervisory Levy Imposition Bill will exempt a levy paying entity from liability to pay the levy. [Schedule 1, Part 1, Item 17]

Part 3B - private health insurance collapsed insurer levy

11.35 Part 3B has been inserted into the FISLC Act to empower APRA to collect and administer any levy payable under the Collapsed Insurer Levy Act. This levy was previously the responsibility of the Council and was collected under Division 307 of the PHI Act. [Schedule 1, Part 1, Item 18]

11.36 The following definitions have been inserted into Part 3B:

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collapsed insurer levy day has the same meaning as in the Collapsed Insurer Levy Act;

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late payment penalty means penalty payable under section 26M;

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levy means levy imposed by the Collapsed Insurer Levy Act; and

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levy determination, in relation to a collapsed insurer levy day, means the determination under section 7 of the Collapsed Insurer Levy Act that specifies the day that is a collapsed insurer levy day. [Schedule 1, Part 1, Item 18]

11.37 Part 3B also establishes that a private health insurer is liable to pay a levy imposed on the insurer on the collapsed insurer levy day. A collapsed insurer levy day is the day that levy is due and payable as specified in a legislative instrument (the levy determination) issued under the Collapsed Insurer Levy Act. [Schedule 1, Part 1, Item 18]

11.38 Section 26M has been inserted to establish that if any levy payable has not been paid by the due date, and remains unpaid after the penalty calculation day, then the insurer is liable to pay a late payment penalty at the applicable rate which will be either 15 per cent, or a lower rate if specified by the Minister in a legislative instrument. [Schedule 1, Part 1, Item 18]

11.39 The penalty calculation day under section 26M is:

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if the levy is paid on or after the first day of a month and before the sixth day of that month-the 20th day of the immediately preceding month; or

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if the levy is paid on or after the sixth day of a month and before the 20th day of that month-the sixth day of that month; or

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if the levy is paid on or after the 20th day of a month and on or before the last day of that month-the 20th day of that month. [Schedule 1, Part 1, Item 18]

11.40 The levy and late payment penalty are payable to APRA on behalf of the Commonwealth. However the Minister may waive (or delegate the power to APRA to waive) any levy or late payment penalty payable. If no waiver is given of any levy that is due and payable, and/or any late payment penalty that is due and payable, APRA may bring proceedings, on behalf of the Commonwealth, to recover those amounts. [Schedule 1, Part 1, Item 18]

11.41 Section 26R makes clear that no law made before or after the commencement of this section exempts an insurer from the liability to pay a levy, unless the exemption expressly refers to the Collapsed Insurer Levy. [Schedule 1, Part 1, Item 18]

11.42 Subsection 27(10) is amended to make clear that the decision maker in relation to a request for waiver of late payment penalty relating to the Collapsed Insurer Levy is the Minister and that a decision of the Minister in relation to the Collapsed Insurer Levy is a reviewable decision. [Schedule 1, Part 1, Items 19 and 20]

Financial Sector (Collection of Data) Act 2001

11.43 Under the FS(CoD) Act, APRA has power to make reporting standards requiring financial sector entities to provide information to APRA as specified in the standards.

11.44 The FS(CoD) Act covers financial sector entities (subsection 5(2)), which includes both regulated entities (that is, bodies regulated by APRA within the meaning of subsection 3(2) of the APRA Act) and registered entities (these are non-regulated entities that conduct certain forms of financial business, for example finance companies).

11.45 A private health insurer will be a regulated entity within the meaning of subsection 5(4) of the Act, consistent with the amendment to subsection 3(2) the APRA Act to include a private health insurer as a body regulated by APRA. Accordingly, APRA will have power to collect data from the insurer under the FS(CoD) Act.

11.46 The FS(CoD) Act applies to all other industries regulated by APRA.

11.47 A private health insurer will not be a registered entity under the FS(CoD) Act. Therefore, Part 2 of the FS(CoD) Act will not apply to private health insurers.

11.48 The purposes for which APRA may collect information is outlined in the object of the FS(CoD) Act (section 3). Currently, APRA can collect information for the purpose of:

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assisting the prudential regulation or monitoring of bodies in the financial sector;

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enabling APRA to publish information;

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assisting another financial sector agency to perform its functions or exercise its powers; and

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assisting the Minister (a Treasury Minister) to formulate financial policy.

11.49 To put it beyond doubt that APRA can collect information for the purposes of administering the Risk Equalisation Trust Fund, as well as for APRA's core prudential purposes (including supervision of private health insurers), the object of the Act has been amended to enable APRA to perform its functions or exercise its powers under other laws. [Schedule 1, Part 1, item 21]

11.50 There is also a minor consequential amendment to paragraph 7(2)(d) of the FS(CoD) Act to update the definition of 'private health insurer' to refer to an entity registered under the Prudential Supervision Bill. [Schedule 1, Part 1, item 22]

11.51 The power to make reporting standards will replace a range of existing powers used by the Council to impose obligations to report data into a single legislative power.

11.52 A reporting standard is a legislative instrument. Under the FS(CoD) Act, regulated institutions must comply with reporting standards.

11.53 Each reporting standard sets out or states:

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the purpose for which data is being collected;

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the legal authority under which it is collected;

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that specified data in an attached form is to be provided according to prescribed instructions;

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the method and timing for submission;

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the required approach to auditing and quality control; and

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who can authorise the submission of data on behalf of a private health insurer.

11.54 Each reporting standard specifies the information that must be provided, and attaches the related instructions specifying how the form is to be completed.

11.55 Data submitted to APRA under the FS(CoD) Act is protected information under section 56 of the APRA Act. However, APRA can ensure the continued release and publication of data in a number of ways, including:

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APRA can release protected information under subsection 56(4) of the APRA Act, when the person to whose affairs the information or document relates has agreed in writing to the disclosure or production of the information; or

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APRA can determine the data to be non-confidential, following consultation with industry, under the process outlined in section 57 of the APRA Act, to enable the continued release and publication of data; or

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APRA can disclose protected information or the production of a protected document if the publication is to another person and is approved by APRA by an instrument in writing under paragraph 56(5)(b) of the APRA Act.

11.56 Under subsection 56(4) of the APRA Act, APRA would require a one-off written consent from individual insurers. This is broadly consistent with section 323-25 of the PHI Act, which provides that the Council may disclose information to a person(s) who is expressly or impliedly authorised by the person whom the information relates to obtain it.

11.57 If the data is declared non-confidential under section 57 of the APRA Act, all such data would also become available for a third party to make a request under the Freedom of Information Act 1982 as the data will be non-confidential generally. APRA may then be obliged to release the data in accordance with that Act. Similar situations currently exist in other industries regulated by APRA where data is non-confidential but not published.

Income Tax Assessment Act 1997

11.58 Consistent with the broader changes, amendments to the ITAA 1997 update existing definitions of 'private health insurer' and 'policy holder' in the ITAA 1997 to refer to the Prudential Supervision Bill. [Schedule 1, Part 1, Items 23, 24, 25, 28, 30, 31, 32 and 33]

11.59 Recognising that APRA will now be approving the demutualisations of not for profit private health insurers additional changes are made to Division 315 'Demutualisation of private health insurers' of the ITAA 1997 to reflect these new processes. [Schedule 1, Part 1, Items 26, 27, and 29]

Life Insurance Act 1995

11.60 Section 16ZB of the Life Insurance Act, which relates to friendly societies carrying on health insurance business, has been amended to include a reference to the Prudential Supervision Bill. [Schedule 1, Part 1, Item 34]

Medibank Private Sale Act 2006

11.61 Consequential amendments are made to Schedule 2 to the Medibank Private Sale Act. Medibank Private and its Board, among others, may still be required to undertake activities which assist the sale.

11.62 Schedule 2 of the Medibank Private Sale Act contains provisions designed to facilitate the sale. A number of these provisions are expressed to operate despite the PHI Act and have been amended to add a reference to the Prudential Supervision Bill or to replace reference to a specific provision of the PHI Act with an updated reference to the replacement provision in the Prudential Supervision Bill.

11.63 Item 9 of Schedule 2 to the Medibank Private Sale Act is a provision often seen in 'privatisation' legislation and provides that Medibank Private, or a member of the Medibank Private Board, may give assistance to the Commonwealth in connection with the sale, either on their own initiative or when requested in writing by the Minister for Finance.

11.64 Subitem 9(7) provides that, to avoid doubt, the giving of that assistance, and certain actions by the Minister under item 9, will not result in liability or remedy under particular Acts, including the PHI Act. The subitem has been amended to add a reference to the Prudential Supervision Bill so that there will be no liability under that Bill in relation to matters covered by the subitem. This gives the sale company and its board (among others) confidence that acts undertaken in pursuance of the sale do not cause them to breach a law or duty. [Schedule 1, Part 1, item 35]

11.65 Item 10 of Schedule 2 to the Medibank Private Sale Act contains ancillary provisions in support of item 9. Subitem 10(7) provides that Medibank Private may make a payment from the Medibank Private fund (which is a health benefits fund) for the purpose of paying expenses incurred by it in relation to giving assistance under item 9 or paying expenses incurred by a member of a Medibank Private Board in relation to giving such assistance.

11.66 Subitem 10(8) provides that this will not breach section 137-10 of the PHI Act, which limits the payment of expenses from a health benefits fund to certain purposes. Given section 137-10 of the PHI Act is being repealed and replaced with section 28 of the Prudential Supervision Bill, the reference has been amended to refer to section 28 of the Prudential Supervision Bill. [Schedule 1, Part 1, item 36]

11.67 Assistance provided under item 9 of Schedule 2 to the Medibank Private Sale Act may take the form of the provision of information. Item 14 provides that the fact that particular information was requested or required under item 9 is not a ground on which Medibank (or the holding company) can be required to disclose or notify that or other information under a provision of an Act listed in item 14, which includes the PHI Act.

11.68 The purpose of item 14 is to ensure that disclosure of information under item 9 does not result in the company losing any right, that might otherwise have had, to resist a purported requirement, under one of the listed Acts, to disclose the information (for example, to resist on the basis that the information is subject to legal professional privilege). Item 14 is amended to list the Prudential Supervision Bill and the FS(CoD) Act, which both contain provisions for the submission of information to APRA. [Schedule 1, Part 1, item 37] The Prudential Supervision Bill provides APRA with investigatory powers, including a power to require a private health insurer to provide information (section 127) and to produce documents (section 128).

11.69 Item 15 of Schedule 2 to the Medibank Private Sale Act provides that the Minister for Finance may prepare a written statement about the privatisation and give the statement to Medibank, together with a direction to the company to take steps to provide the statement to contributors to the Medibank Private fund and make a copy available on the company's website. Subitem 15(3) provides, for the avoidance of doubt, that complying with such a direction does not result in a contravention of, or liability or a remedy under, various Acts including the PHI Act. This item has been amended to include a reference to the Prudential Supervision Bill. [Schedule 1, Part 1, item 38]

11.70 Item 16 of Schedule 2 to the Medibank Private Sale Act provides that Medibank Private may make a payment from the Medibank Private fund (the health benefits fund) for the purpose of applying expenses incurred by complying with a direction under item 15. Subitem 16(2) provides that such a payment does not contravene section 137-10 of the PHI Act which, as noted above, limits the kinds of expenses to that can be paid out of a health benefits fund. This subitem has been amended to refer to section 28 of the Prudential Supervision Bill, which, as noted, replicates and replaces section 137-10. [Schedule 1, Part 1, item 39]

11.71 A similar amendment is made to subitem 21(2), which allows the company to make a payment from the Medibank Private fund for the purpose of paying an expense incurred by modifying its constitution or rules, and providing information to contributors in relation to that, in accordance with a requirement under item 20. [Schedule 1, Part 1, item 39]

11.72 Although the Commonwealth will no longer be directing Medibank Private in regards to information statements, subitems 16(2) and 21(2) may both be relevant if a direction has been provided in the past. This is relevant as the Department of Finance is still working with Medibank Private on the reimbursement of Medibank Private's sale costs.

11.73 A similar amendment has also been made to subitem 22(3), which relates to the recovery of expenses of preparing an information statement of the kind referred to in item 22, relating to modifications to rules and the constitution. [Schedule 1, Part 1, item 40]

11.74 Subitems 23(2) and 58(8) have been similarly updated to refer to section 28 of the Prudential Supervision Bill. [Schedule 1, Part 1, item 41]

11.75 Subitems 58(5) and 58(6) require Medibank Private to pay compensation where the operation of item 20 (change of profit status - modifying Medibank Private's constitution and rules) or item 57 (which provides that an amount shown in the company's account as retained earnings is taken to be profits) results in an acquisition of property from the person on other than just terms. Subitem 58(7) provides that the company may make the compensation payment from the Medibank Private fund. Subitem 58(8) provides that this will not contravene section 137-10 of the PHI Act and, as noted, this will be updated to refer to section 28 of the Prudential Supervision Bill.

Private Health Insurance Act 2007

Chapter 1 - Introduction

11.76 The prudential regulation of the private health insurance industry will be the responsibility of APRA under the Prudential Supervision Bill.

11.77 The whole of the PHI Act will continue to be administered, by the Administrative Arrangements Orders, by the Department of Health (despite APRA's role under some provisions relating to levies). An inter-departmental agreement will be used to deal with APRA's role under the PHI Act.

11.78 The PHI Act has been amended to abolish the Council and repeal provisions relating to the Council and its functions and responsibilities. As a result, a number of amendments have been made to the introductory provisions of the PHI Act to reflect its revised scope.

11.79 Item 1 of the table to subsection 1-10(6) of the PHI Act, which dealt with how references to the Council throughout the PHI Act were identified, has been repealed as they are redundant. [Schedule 1, Part 1, item 42]

11.80 Paragraph 3-1(c) has been repealed to reflect that the PHI Act no longer imposes requirements about how insurers conduct health insurance business. These will now be imposed under the Prudential Supervision Bill. A minor technical amendment has been made to paragraph 3-1(b) as a consequence of the repeal of paragraph 31(c). [Schedule 1, Part 1, items 43 and 44]

11.81 A note is inserted at the end of section 3-1 to signpost to readers that the Prudential Supervision Bill sets out the registration process for private health insurers, imposes requirements about how insurers conduct health insurance business and deals with other matters in relation to the prudential supervision of insurers. [Schedule 1, Part 1, item 45]

11.82 A new section 3-15, which gives an overview of Chapter 4 of the PHI Act, is substituted to reflect the revised contents of Chapter 4 following the removal of the functions that were previously performed by the Council. Chapter 4 now defines the concepts of health insurance business and health benefits funds and deals with some related matters. It also imposes a number of miscellaneous obligations on private health insurers. [Schedule 1, Part 1, item 46]

Chapter 2 - Incentives

11.83 Chapter 2 establishes the premiums reduction scheme (the Australian Government Rebate on private health insurance) and the lifetime health cover scheme. No amendments have been made to Chapter 2.

Chapter 3 - Complying Health Insurance Products

11.84 Chapter 3 of the PHI Act sets out requirements for complying health insurance products, establishes the principle of community rating, and also includes a number of requirements for insurers to keep consumers and relevant Commonwealth government agencies informed about the health insurance they offer.

11.85 A limited number of amendments have been made to Chapter 3.

11.86 The PHI Act prohibits an insurer from offering health insurance business in any form other than a complying health insurance policy and also from offering or advertising policies including health insurance business that are not in the form of complying health insurance policies. Section 84-10 of the PHI Act deals with the granting of and injunction against an insurer who is contravening, or is proposing to contravene, these prohibitions. Paragraph 84-10(3)(b) has been repealed to remove reference to the Council's power to apply for such an injunction. The Health Minister and other persons retain the capacity to apply for an injunction under section 84-10. [Schedule 1, Part 1, item 47]

11.87 Section 90-1, which introduces Part 3-4, has been amended to reflect that insurers no longer have obligations under this Part to provide information to the Council about their health insurance business. [Schedule 1, Part 1, item 48]

11.88 Subsection 93-20(4) of the PHI Act sets out an insurer's obligation to notify policy-holders when the health benefits fund to which their policy is referable is changed. One of the reasons a policy may become referable to a new fund is a restructure, merger or acquisition of the fund to which it was originally referable. Division 146 of the PHI Act, which dealt with these matters, has been repealed. The restructure, merger and acquisition of health benefits funds are now dealt with under Division 4 of Part 3 of the Prudential Supervision Bill. The note to subsection 93-20(4) has been amended to refer to Division 4 of Part 3 of the Prudential Supervision Bill. [Schedule 1, Part 1, item 49].

11.89 Division 96 of the PHI Act sets out various obligations on insurers to provide information about their complying health insurance products and policies to a number of Commonwealth Government agencies. A number of amendments to Division 96 have been made:

•

Paragraphs 96-1(b), 96-5(b) and 96-10(b) required insurers to give Standard Information Statements (SISs) to the Council on request, when a new complying health insurance product was made available or when a product changed. Insurers will not be required to provide SISs to APRA under the PHI Act and these provisions have been repealed. [Schedule 1, Part 1, item 51]

•

Paragraph 96-15(1)(b) has been repealed to remove the requirement for insurers to give additional information to the Council regarding complying health insurance products or policies on request. Insurers will not be required to give information to APRA about complying health insurance products or policies under the PHI Act. [Schedule 1, Part 1, item 51]

•

As a result of the amendments to sections 96-1, 96-5, 96-10 and 96-15, the offence under section 96-20 for failing to give information to a person when required by those provisions will have no application in relation to the Council. The heading to section 96-20 has therefore been amended to remove reference to the Council. [Schedule 1, Part 1, item 52]

•

Paragraph 96-25(b) provides that the Private Health Insurance (Complying Product) Rules may set out persons to whom information specified in the rules must be given. Reference to the Council has been repealed. [Schedule 1, Part 1, item 53]

11.90 No amendments have been made to the requirements for complying health insurance products and policies, including the requirement that policies meet the community rating requirement and the requirement to offer minimum benefits. The Health Minister will also continue to approve increases to insurance premiums.

11.91 An amendment to the heading of Division 96 to reflect that insurers no longer have obligations to provide information to the Council under the Division has also been made. [Schedule 1, Part 1, item 50]

Chapter 4 - Private health insurers

11.92 Chapter 4 of the PHI Act defined the concepts of health insurance business, health-related business and a health benefits fund. It is also prohibited for anyone other than a registered private health insurer from carrying on health insurance business and regulated the operation of health benefits funds by insurers, which was overseen by the Council.

Part 4-1 - Introduction

11.93 Chapter 4 still defines the key concepts of health insurance business and a health benefits fund, and imposes miscellaneous obligations on insurers. The heading and introduction to the Chapter in Part 4-1 have been amended to reflect its revised content. [Schedule 1, Part 1, items 54 and 55]

Part 4-2 - Health insurance business

11.94 The most significant change to Part 4-2 is the repeal of Division 118, which prohibited insurers from carrying on health insurance business without registration and enabled an injunction to be sought restraining a person from carrying on health insurance business while not registered. [Schedule 1, Part 1, item 59]

11.95 Corresponding provisions are now found in Division 2 of Part 2 of the Prudential Supervision Bill.

11.96 Consequential amendments have been made to the heading to Part 4-2 and to sections 115-1 and 115-5 to reflect that Part 4-2 no longer deals with the carrying on of health insurance business. [Schedule 1, Part 1, items 56 and 57]

11.97 The definitions of health insurance business, general treatment and hospital treatment in Part 4-2 have not been amended and continue to be found in sections 121-1 to 121-30. There have also been no amendments to requirements for the making of hospital declarations under section 121-5.

11.98 The Health Minister will continue to make Private Health Insurance (Health Insurance Business) Rules for the purposes of Part 4-2. However section 115-5, which deals with the rules, has been repealed and replaced to reflect that the rules will no longer include matters relating to the carrying on of health insurance business such as the operation of health benefits funds. [Schedule 1, Part 1, item 58]

11.99 As APRA, the new prudential regulator of private health insurers and health insurance business, sits within a different portfolio, new subsection 115-5(2) provides that before making Private Health Insurance (Health Insurance Business) Rules the Health Minister is to consult with APRA. A failure to consult does not affect the validity of the rules. [Schedule 1, Part 1, item 58]

Part 4-3 - Registration

11.100 Part 4-3, which provided for the registration of bodies as insurers has been repealed. Registration of insurers will be managed by APRA under Division 3 of Part 2 of the Prudential Supervision Bill. [Schedule 1, Part 1, item 60]

Part 4-4 - Health benefits funds

11.101 Part 4-4 of the PHI Act will contain a single Division 131, which will have the same heading as the Part. This is the same structure as is currently used for Part 4-3 of the PHI Act. Division 131 will also contain an equivalent to current section 137-30 of the PHI Act, which then allows for the whole of Division 137 to be repealed. [Schedule 1, Part 1, items 61-64]

11.102 Divisions 134, 137, 146, 149 and 152, which required private health insurers to have health benefits funds, regulated the operation of health benefits funds and their restructure, merger and acquisition and termination, and established special duties and liabilities of directors of insurers in relation to contraventions of the Act in relation to funds. These Divisions have been repealed and these matters will be supervised by APRA under Divisions 2 to 5, 8 and 9 of Part 3 of the Prudential Supervision Bill. [Schedule 1, Part 1, item 65]

11.103 Divisions 140, 143 and 163, which enabled the Council to establish solvency, capital adequacy and prudential standards and issue binding directions to insurers on these matters, have also been repealed. APRA's general prudential standard and direction making powers are contained in Part 4 of the Prudential Supervision Bill. [Schedule 1, Part 1, items 65 and 71]

11.104 Section 131-5 of the PHI Act will include a requirement for the Health Minister to consult with APRA before making rules for the purposes of section 131-15 of the PHI Act. The only other purposes, in Part 4-4, for which these rules will be able to be made after these amendments commence is to the new subsections 131-20(1) and (2), and new section 131-25 (which is a relocated version of current section 137-30 of the PHI Act). The consultation requirement in subsection (2) above will not apply to rules made for those provisions.

11.105 Sections 131-10 and 131-15 of the PHI Act continue to define a health benefits fund and health-related business, respectively. No amendments have been made to these definitions.

11.106 The Health Minister will continue to make Private Health Insurance (Health Benefits Fund Policy) Rules for the purposes of Part 4-4. However, section 131-5 has been amended to provide that prior to making Private Health Insurance (Health Benefits Fund Policy) Rules relating to the definition of health-related business, the Minister must consult with APRA. However, a failure to consult will not invalidate the rules. [Schedule 1, Part 1, item 63]

11.107 A new section 131-20 has been inserted into Part 4-4. Subsection 131-20(1) provides that the Private Health Insurance (Health Benefits Fund Policy) Rules, made by the Health Minister, may specify risk equalisation jurisdictions. [Schedule 1, Part 1, item 64]

11.108 The Private Health Insurance (Health Benefits Fund Policy) Rules do not currently specify any circumstances in which a private health insurer may have more than one health benefits fund. The 'necessary or convenient' rule making power for the matters dealt with in the above subsections will be provided by the current paragraph 333 20(1)(b) of the PHI Act.

11.109 The risk equalisation jurisdictions were previously specified in the Private Health Insurance (Health Benefits Fund Administration) Rules made by the Council. With the transfer of the Council's functions to APRA, those rules are no longer made and the matters dealt with in those rules will generally be covered in APRA Rules. However, as the Health Minister retains overall policy responsibility for risk equalisation, the specification of risk equalisation jurisdictions has not been transferred to APRA.

11.110 Subsection 131-20(2) provides that the Health Insurance (Health Benefits Fund Policy) Rules may also set out circumstances in which an insurer may have more than one health benefits fund in respect of a risk equalisation jurisdiction, despite subsection 23(4) of the Prudential Supervision Bill. [Schedule 1, Part 1, item 64]

11.111 The power for the rules to allow insurers to have multiple funds per risk equalisation jurisdiction in certain circumstances was previously provided for in subsection 134-1(4) of the PHI Act, which has been repealed. [Schedule 1, Part 1, item 65]

11.112 A new section 131-25 has also been added to Part 4-4. Where an insurer has a health benefits fund in respect of both health insurance business and some or all of its health-related business, the insurer must comply with any requirements in the Private Health Insurance (Health Benefits Fund Policy) Rules about the conduct of the health-benefits business. New section 131-25 replaces section 137-30, which was repealed as part of the repeal of Division 137 and was identical in terms to section 131-25. [Schedule 1, Part 1, item 65]

11.113 A number of minor technical amendments to the heading to and introduction for Division 131 have also been made to reflect its revised scope. [Schedule 1, Part 1, items 61 and 62]

Part 4-5 - Miscellaneous obligations of private health insurers

11.114 Part 4-5 of the PHI Act sets out a number of miscellaneous obligations of insurers.

11.115 The following Divisions have been repealed from the PHI Act:

•

Division 160, which dealt with appointed actuaries of private health insurers. Appointed actuaries are now dealt with under Division 2 of Part 5 of the Prudential Supervision Bill. [Schedule 1, Part 1, item 71]

•

Division 163, which enabled the Council to establish prudential standards and issue binding prudential directions. APRA's general prudential standard and direction making powers are contained in Part 4 of the Prudential Supervision Bill. [Schedule 1, Part 1, item 71]

•

Division 166, which prohibited insurers from allowing disqualified persons from acting as directors or in senior management positions. This is now dealt with under Division 3 of Part 5 of the Prudential Supervision Bill. [Schedule 1, Part 1, item 71]

•

Sections 169-1, 169-5 and 169-15, which required insurers to provide the Council with copies of any reports to policy holders and annual financial accounts and statements, and also to keep the Council and the Secretary of the Department of Health informed about the identity of the chief executive officer of the insurer, have all been repealed. [Schedule 1, Part 1, items 73 and 75]

11.116 However insurers will still be required to notify the Secretary of the Department of Health about any proposed changes to their rules under section 169-10. If the Health Minister directs an insurer not to make the proposed change the Minister must give a copy of the direction to APRA (rather than the Council). [Schedule 1, Part 1, item 74]

11.117 Division 172 sets out a number of miscellaneous obligations on insurers. Rules relating to agreements between insurers and medical practitioners in section 172-5 are unchanged, as is the requirement under section 172-10 for insurers to give the Secretary of the Department of Health certain information specified in the Private Health Insurance (Data Provision) Rules.

11.118 The prohibition in section 172-15 on an insurer using its money to pay a penalty imposed on a director or officer because of an offence under the PHI Act, or an amount that a director or officer is liable to pay as a result of an order made under Division 203 of the PHI Act, or to reimburse a director or officer in respect of such penalties or liabilities, remains. However, redundant references in the section to provisions of the PHI Act repealed as part of these amendments have been removed. [Schedule 1, Part 1, item 78]

11.119 A number of minor consequential amendments to Part 4-5 of the PHI Act have been made to reflect the revised contents of the Chapter resultant on the abolition of the Council and the transfer of its functions to APRA. [Schedule 1, Part 1, items 66 to 70, 72 and 76]

11.120 With the abolition of the Council and APRA's assumption of the prudential supervision of private health insurers under the Prudential Supervision Bill, the majority of Chapter 4 of the PHI Act became redundant and have been repealed.

Chapter 5 - Enforcement

11.121 Chapter 5 of the PHI Act previously provided for the main enforcement powers of both the Health Minister and the Council. APRA's enforcement powers in relation to prudential supervision of the private health insurance industry are located in the Prudential Supervision Bill. References to the Council's enforcement powers have been repealed from Chapter 5.

11.122 The nature of the Health Minister's current enforcement powers under Chapter 5 is largely unchanged. However some minor amendments to clarify the limits of the enforcement responsibilities of the Minister under the PHI Act have been made, given that APRA will have exclusive responsibility for enforcing the prudential regulation of insurer under the Prudential Supervision Bill.

Parts 5-1 and 5-2 - Introduction and general enforcement methods

11.123 Minor technical amendments have been made to sections 180-1 and 185-1, which provide introductions to the enforcement mechanisms in Chapter 5 and Division 185 of the PHI Act, respectively, to reflect the removal of any enforcement role for the Council. [Schedule 1, Part 1, items 79 and 80]

11.124 Section 185-5 defines the 'enforceable obligations' of insurers and other persons under the PHI Act.

11.125 There will be overlap between definitions of enforceable obligation in the Prudential Supervision Bill and the PHI Act.

11.126 The definition of enforceable obligation in the Prudential Supervision Bill will cover 'a provision of the risk equalisation fund legislation' which is defined in section 4 to include the provisions of the PHI Act as they apply in relation to the Risk Equalisation Levy and the Risk Equalisation Trust Fund.

11.127 The same provisions of the PHI Act, as applying in relation to Risk Equalisation Levy and the Risk Equalisation Trust Fund, will also be covered by the PHI Act under subsection 185(5).

11.128 Restricted access insurer's will be required to comply with their constitution or rules under subsection 15(3), and will be covered by both definitions.

11.129 A Memorandum of Understanding between the Department of Health and APRA will determine the responsible agency for enforcement action in relation to a breach in an area of overlap.

11.130 Paragraph 185-5(b) has been amended to remove reference to provisions of rules made by the Council under section 333-25 of the PHI Act as being enforceable obligations under the PHI Act. [Schedule 1, Part 1, item 81]

11.131 Although APRA will take over responsibility for making one of the sets of rules formerly made by the Council, the Private Health (Risk Equalisation Administration) Rules, enforcement powers in relation to those rules will sit exclusively with APRA under the Prudential Supervision Bill.

11.132 The enforceable obligations include, at paragraph 185-5(e), a provision in a restricted access insurer's constitution or rules included to meet requirements for its restricted access status (for example that it will not offer insurance to anyone outside its restricted access group). Paragraph 185-5(e) has been amended to remove the reference to subsection 126-20(6) of the PHI Act and substitute a reference to subsection 15(3) of the Prudential Supervision Bill, which now details relevant requirements for a restricted access insurer's rules or constitution. [Schedule 1, Part 1, item 82]

11.133 Whether a restricted access insurer complies with restrictions on the groups to which it offers insurance remains relevant for the community rating provisions in Chapter 3 of the PHI Act.

11.134 Section 185-10 has been repealed, as there will no longer be a concept of 'Council-supervised obligations' under the PHI Act. [Schedule 1, Part 1, item 83]

Division 188 - performance indicators

11.135 No changes have been made to the Health Minister's capacity to set performance indicators for insurers in relation to community rating under Division 188.

Division 191 - explanations from insurers

11.136 Division 191 deals with seeking explanations from insurers about their operations. Section 191-1 has been amended to remove all references to the Council's power to seek explanations from insurers. [Schedule 1, Part 1, item 84]

11.137 The Health Minister will retain current powers to ask an insurer for an explanation of its operations if the Minister believes that, having regard to information available to the Minister or performance indicators specified in the Private Health Insurance (Complying Product) Rules, as an insurer might have contravened an enforceable obligation under the PHI Act. The Minister will have no power under Division 191 to ask insurers for an explanation of their operations in respect of their obligations under the Prudential Supervision Bill.

11.138 A number of technical drafting amendments to Division 191 have been made as a result of the removal of references to the Council. [Schedule 1, Part 1, items 85-87]

Division 194 - investigations

11.139 Division 194 of the PHI Act enables investigations into the operations of private health insurers. An investigation may involve giving officers, employees or agents of an insurer a notice to produce documents, give information or evidence. It may also involve examination of the books of an insurer.

11.140 Section 194-1A has been inserted to establish the circumstances in which the powers under Division 194 may be exercised. It provides that the powers may only be exercised for the purposes of the PHI Act but may not be exercised for the purpose of the PHI Act as it relates to Risk Equalisation Levy or the Risk Equalisation Special Account. APRA will have investigative powers in relation to these matters under the Prudential Supervision Bill. Section 194-1 has been repealed as it is redundant. [Schedule 1, Part 1, items 88 and 91]

11.141 Subsection 194-30, which expressly enabled the Health Minister to consult the Council and ask it to take over part of an investigation where the Minister believed issues concerning Council-supervised obligations had been raised, has also been repealed. The Health Minister and APRA will consult more generally under a Memorandum of Understanding. [Schedule 1, Part 1, item 97]

11.142 A number of consequential amendments have been made to Division 194 to reflect that the Health Minister is the only person who may now exercise powers to conduct investigations under the Division. [Schedule 1, Part 1, items 89 and 90, 92 to 96 and 98 to 100]

11.143 There has been no other change to the powers of the Health Minister under Division 194.

Division 197 - enforceable undertakings

11.144 Division 197 of the PHI Act deals with enforceable undertaking that may be sought from private health insurers. All references to the Council's power to seek and accept an undertaking from an insurer have been repealed. [Schedule 1, Part 1, items 101-104]

11.145 The Health Minister will retain the powers to seek and accept undertakings under the PHI Act and to apply to the Federal Court to enforce an undertaking if the Minister considers an insurer has contravened the terms of an undertaking (see sections 197-1 and 197-5). An insurer also retains the capacity to withdraw or vary an undertaking at any time, with the consent of the Minister (see subsection 197-1(3)).

11.146 APRA will have the power to accept undertakings from insurers under Part 7 of the Prudential Supervision Bill in connection with matters in relation to which APRA has powers or functions under the Prudential Supervision Bill or the legislation governing the Risk Equalisation Special Account or Risk Equalisation Levy.

Division 200 - directions

11.147 Division 200 of the PHI Act previously enabled the Health Minister or the Council to give a direction to an insurer requiring the insurer to modify its day to day operations or its rules in a particular respect and, for a restricted access insurer, to modify its rules or constitution in order to comply with requirements relating to its restricted access status.

11.148 All reference to the Council's power to give directions to insurers has been removed by the substitution of new subsections 200-1(1) and (2) and the amendment of subsection 200-1(3). New subsections 200-1(1) and (2) also contain an updated reference to subsection 15(3) of the Prudential Supervision Bill, under which the requirements with which the rules or constitution of a restricted access insurers must comply are set. [Schedule 1, Part 1, item 107]

11.149 A number of technical drafting changes to reflect that the Minister now has exclusive power to issue directions under Division 200 have also been made .[Schedule 1, Part 1, items 105, 106 and 108 to 111]

11.150 The Health Minister will not be required to provide a copy of any direction to APRA. This is because the Health Minister and APRA will consult more generally under a Memorandum of Understanding.

11.151 APRA's main prudential direction making power, including in relation to enforceable obligations under the Prudential Supervision Bill, is in Division 3 of Part 4 of that Bill.

11.152 There has been no alteration to the grounds on which the Health Minister may issue a direction to an insurer, namely if the Minister considers it will assist in preventing improper discrimination or considers there appears to be a contravention of an enforceable obligation under the PHI Act involving improper discrimination. There has also been no alteration to the nature of the directions that the Minister may give.

Division 203 - remedies

11.153 Division 203 sets out the remedies available in the Federal Court where an insurer has contravened its enforceable obligations under the PHI Act. These remedies were previously available on application to the Federal Court by the Health Minister or the Council.

11.154 The Division has been amended to repeal all references to the Council, including references to the Council's former powers to apply to the Federal Court for declarations and orders and to require a person to give assistance in relation to an application by the Council. [Schedule 1, Part 1, items 112 to 122]

11.155 The Health Minister remains able to seek a number of remedies from the Federal Court, specifically a declaration of contravention and one or more of a pecuniary penalty order, a compensation order, an adverse publicity order or any other order the Minister considers appropriate (see section 203-1). There also has been no change to the grounds on which the Minister may seek a remedy, namely where the Minister is satisfied an insurer has contravened an enforceable obligation.

11.156 Under Part 8 of the Prudential Supervision Bill, APRA is able to seek remedies in the Federal Court for breaches of enforceable obligations under that Bill.

Part 5-3 - health benefits fund enforcement

11.157 Part 5-3 of the PHI Act, dealt with the enforcement of health benefits fund requirements, including investigations into the affairs of private health insurers by appointed inspectors and the external management of health benefits funds. Powers under Part 5-3 of the PHI Act were exclusively exercised by the Council and the Part has been repealed in its entirety. [Schedule 1, Part 1, item 123]

11.158 APRA has similar powers under Divisions 3 and 4 of Part 6 and Division 6 of Part 3 of the Prudential Supervision Bill to investigate the affairs of insurers and to place health benefits funds into external management where this is in the best interests of policy holders.

Chapter 6 - Administration

Parts 6-1 and 6-3 - Introduction and the Council

11.159 Part 6-1 of the PHI Act sets out the contents of Chapter 6. Paragraphs 203-1(b) and (d), which referred to former functions of the Council have been repealed. [Schedule 1, Part 1, item 124]

11.160 A consequential amendment has also been made to change reference in paragraph 203-1(f) to the Risk Equalisation Trust Fund to a reference to the Risk Equalisation Special Account. [Schedule 1, Part 1, item 125]

11.161 Part 6-3 of the PHI Act established the Council, provided for its general purposes, functions and powers and set out governance arrangements for the Council and its staff. Part 6-3 has been repealed in its entirety, with the effect of abolishing the Council. [Schedule 1, Part 1, item 126]

Part 6-4 - administration of premiums reduction scheme

11.162 No amendments have been made to Part 6-4 and the administration of the premiums reduction scheme by the Department of Human Services will not be affected by the transfer of the Council's functions to APRA.

Part 6-5 - matters incidental to external and terminating management

11.163 Part 6-5 of the PHI Act sets out a number of matters relating to the external management and terminating management of health benefits funds. These included the powers of external and terminating managers, obligations on directors and officers of insurers to deliver certain records to mangers and dealing with the property of a fund under management.

11.164 The external management and terminating management of health benefits funds is now regulated under Part 3 of the Prudential Supervision Bill and Part 6-5 of the PHI Act has therefore been repealed in its entirety. [Schedule 1, Part 1, item 126]

Part 6-6 - private health insurance levies

11.165 Part 6-6 of the PHI Act deals with matters relating to the collection and administration of private health insurance levies.

11.166 APRA has taken full responsibility for the Collapsed Insurer Levy and the Prudential Supervisory Levy, which replaces the Council Administration Levy. The collection and administration of these two levies by APRA will be in accordance with the relevant levy imposition Acts, including the Supervisory Levy Imposition Bill, and with the FISLC Act.

11.167 While the Health Minister retains overall policy responsibility for the Risk Equalisation Levy, APRA will take over from the Council responsibility for the collection of the levy. APRA will administer the Risk Equalisation Levy in accordance with the Risk Equalisation Levy Amendment Bill and Part 6-6 of the PHI Act.

11.168 The remaining private health insurance levies under the PHI Act, the National Joint Replacement Register Levy and the Complaints Levy, which funds the operation of the Private Health Insurance Ombudsman, will remain under the PHI Act and no amendments have been made to their operation.

Divisions 304 and 307 - Collection and recovery of private health insurance levies

11.169 Divisions 304 and 307 of the PHI Act contain a general introduction to Part 6-6 and set out when private health insurance levies are payable, penalties for late payment of levies and waiver of levies and late payment penalties.

11.170 All references to the Collapsed Insurer Levy and Council Administration Levy and the Council's administration of those levies have been repealed from Divisions 304 and 307 [Schedule 1, Part 1, items 127, 129 to 132 and 134 to 136].

11.171 A note has been added at the end of section 304-10 informing readers that insurers are liable to pay the Collapsed Insurer and Supervisory Levies, that Part 6-6 of the PHI Act does not apply in relation to those levies and that the collection of those levies is dealt with in the FISLC Act. [Schedule 1, Part 1, item 128]

11.172 Amendments to Division 307 in relation to the Risk Equalisation Levy are:

•

Risk Equalisation Levy, as well as any late payment penalty in respect of the Levy, is to be paid to APRA, on behalf of the Commonwealth, in accordance with subsection 307-10(2), for the purpose of the Private Health Insurance Risk Equalisation Special Account (formerly the Risk Equalisation Trust Fund); [Schedule 1, Part 1, item 132]

•

subsection 307-15(3) has been amended to allow APRA (as agent of the Commonwealth) to recover a debt to the Commonwealth that is Risk Equalisation Levy that is due and payable or any late payment penalty in respect of the levy; and [Schedule 1, Part 1, item 133]

•

subsection 307-20(2) has been amended to provide that APRA (rather than the Council) may waive the whole or part of an amount of late payment penalty in respect of an unpaid amount of risk equalisation levy if APRA considers that there are good reasons for doing so. [Schedule 1, Part 1, items 134 and 135]

Division 310 - requirements of private health insurers

11.173 Division 310 imposes requirements on private health insurers to lodge returns with the Commonwealth for the purposes of certain private health insurance levies, retain records relating to levies and provide documents relevant to whether the insurer is liable to pay a private health insurance levy or the amount of levy payable.

11.174 Section 310-1 of the PHI Act previously required private health insurers to lodge returns with the Council in respect of the Collapsed Insurer and Council Administration Levies and with the Secretary of the Department of Health in respect of the Complaints Levy. All references to the Council and the Collapsed Insurer and Council Administration Levies have been repealed from Division 310, with consequential technical changes made to reflect that the section now only applies to the Complaints Levy. [Schedule 1, Part 1, items 137 to 139]

11.175 Section 310-5 of the PHI Act imposes requirements on insurers to retain records relevant to whether the insurer is liable to pay a private health insurance levy or the amount of levy payable. Insurers will still be required under section 310-5 to keep records relevant to the remaining private health insurance levies remaining under the PHI Act.

11.176 Subsection 310-5(2) of the PHI Act has been amended to allow the Secretary of the Department of Health, rather than the Council, to approve a form of records, other than an electronic form, in which documents relevant to the Complaints Levy may be kept and to allow APRA to do the same in relation to documents relevant to the Risk Equalisation Levy. [Schedule 1, Part 1, item 140]

11.177 Subsection 310-10(1) of the PHI Act previously provided for the Council to request information or records from an insurer if it believed that the insurer was capable of giving information relevant to whether the insurer was liable to pay any private health insurance levy (other than the Complaints Levy) or the amount of levy payable. Subsection 310-10(1) of the PHI Act has been amended to give APRA the power to ask insurers for information or records relevant to whether the insurer is liable to pay the Risk Equalisation Levy or the amount of that levy the insurer is liable to pay. [Schedule 1, Part 1, item 141 and 142]

11.178 As was the case for the Council, APRA's belief must be on reasonable grounds. The Secretary of the Department of Health has similar powers in relation to the Complaints Levy and these remain unchanged.

11.179 APRA does not have power under section 310-10 to ask insurers for documents or records relating to the Collapsed Insurer or Prudential Supervisory Levies.

Division 313 - Power to enter premises and search for documents

11.180 Division 313 of the PHI Act provides powers to enter premises, either with the consent of the occupier or under a warrant issued by a magistrate, to search for documents containing information relevant to whether an insurer is liable to pay a private health insurance levy or the amount of levy that the insurer is liable to pay. Formerly, either a member of the staff of the Council or a person authorised in writing by the Health Minister could exercise powers under the Division.

11.181 The only levy-related documents that may be searched for now under Division 313 are documents relevant to liability to pay the Complaints Levy or the amount of Complaints levy for which an insurer may be liable.

11.182 All references to the Council have been repealed from Division 313 and APRA will not exercise powers under Division 313. Subsection 313-1(1) has been amended to reflect that only persons authorised in writing by the Health Minister may now enter premises for the purposes of the Division, either with consent or a pursuant to a warrant. [Schedule 1, Part 1, item 144]

11.183 Additionally, subsection 313-1(2) has been amended with the effect that the only documents that may be searched for under Division 313 are documents relevant to liability to pay the Complaints Levy or the amount of Complaints Levy for which an insurer may be liable. [Schedule 1, Part 1, item 145]

11.184 A consequential amendment to the heading to the section reflecting this has been made. [Schedule 1, Part 1, item 143]

11.185 The Secretary of the Department of Health has taken over responsibility for issuing identity cards to authorised officers under section 313-20, formerly the responsibility of the Council. [Schedule 1, Part 1, item 146]

Part 6-7 - Private Health Insurance Risk Equalisation Special Account

11.186 Part 6-7 of the PHI Act deals with the Private Health Insurance Risk Equalisation Special Account, the replacement for the Private Health Insurance Risk Equalisation Trust Fund. The Health Minister will retain overall policy responsibility for the Special Account, with APRA having a similar role administering the Account as the Council had administrating the Risk Equalisation Trust Fund.

11.187 A Special Account is an appropriation mechanism that notionally sets aside amounts within the Consolidated Revenue Fund for expenditure on specific purposes. The conversion of the Risk Equalisation Trust Fund into a Special Account is required because of the different financial arrangements of APRA and the Council.

11.188 The Council was legally separate to the Commonwealth and could hold money, including the Trust Fund, on its own behalf and separately from the Consolidated Revenue Fund. While APRA is a body corporate legally separate to the Commonwealth, under its establishing legislation it holds all money on behalf of the Commonwealth.

11.189 A new Part 6-7 of the PHI Act has been substituted to effect the conversion. [Schedule 1, Part 1, item 147]

11.190 Section 318-1 of the PHI Act establishes the Private Health Insurance Risk Equalisation Special Account Fund and declares it to be a special account for the purposes of the Public Governance, Performance and Accountability Act 2013.

11.191 The conversion of the Risk Equalisation Trust Fund into the Risk Equalisation Special Account is not intended to result in any practical changes for insurers. The same kinds of amounts will be payable into the Special Account under section 318-5 of the PHI Act as were payable into the Risk Equalisation Trust Fund, specifically:

•

amounts received by APRA by way of Risk Equalisation Levy and late payment penalty in respect of that levy (subparagraph 318-5(a)(i) and (ii));

•

amounts paid to APRA under paragraph 45(b) of the Prudential Supervision Bill by a non-profit insurer where the insurer has assets left in its health benefits funds at the completion of a termination of those funds (subparagraph 318-5(b)(i));

•

amounts paid to APRA under section 46 of the Prudential Supervision Bill by the officers of an insurer where the insurer contravenes that Bill in relation to the conduct of a health benefits fund, the contravention resulted in a loss to the fund and the fund has been terminated (subparagraph 318-5(b)(i));

•

repayments of collapsed insurer assistance payments (within the meaning of section 54H of the APRA Act (subparagraph 318-5(b)(ii)); and

•

amounts paid to the Commonwealth or APRA, by a State or Territory, for crediting to the Risk Equalisation Special Account (paragraph 318-5(c)). Note that the full amount of all risk equalisation levy payments, and related late payment penalty, is to be credited to the Special Account and is based on paragraph 318-5(1)(b) of the PHI Act. [Schedule 1, Part 1, item 147]

11.192 A note to section 318-5 provides that an Appropriation Act may contain a provision to the effect that, if any of the purposes of a Special Account is a purpose covered by an item in the Act, then amounts may be debited against the appropriation for that item and credited to the Special Account.

11.193 Subsection 318-10(1) provides that the purpose of the Risk Equalisation Special Account is for APRA to make payments to insurers in accordance with the Private Health Insurance (Risk Equalisation Policy) Rules to meet the expenses of administering the Account. A statement on the purposes of a Special Account is standard when establishing a statutory Special Account.

11.194 Subsection 318-10(2) provides that the Private Health Insurance (Risk Equalisation Policy) Rules, which will continue to be made by the Health Minister, must specify:

•

the circumstances in which funds can be debited from the Account for payment to private health insurers; and

•

the methods for working out the amount to be debited from the Account to a private health insurer and the amount of Risk Equalisation Levy that an insurer is liable to pay. [Schedule 1, Part 1, item 147]

11.195 Subsection 318-10(3) requires the Health Minister to consult with APRA before making changes to the Private Health Insurance (Risk Equalisation Policy) Rules, noting that a failure to consult APRA does not affect the validity of those rules. [Schedule 1, Part 1, item 147]

11.196 Section 318-15 provides for the Private Health Insurance (Risk Equalisation Administration) Rules to be made setting out requirements for insurers that are liable to Risk Equalisation Levy to keep particular kinds of records, and also requirements about how records are to be kept.

11.197 Requirements for provision of information to APRA will instead be dealt with by standards to be made under the FS(CoD) Act.

Part 6-8 - disclosure of information

11.198 Part 6-8 of the PHI Act deals with the disclosure of 'protected information'.

11.199 Amendments to the Part are required to:

•

enable the disclosure of protected information obtained under the PHI Act to APRA and APRA officers to assist them to carry out their duties, functions and powers in relation to private health insurance;

•

ensure that APRA officers performing functions under the PHI Act (in relation to the Risk Equalisation Special Account or Risk Equalisation Levy) are not subject to the secrecy regime in the PHI Act. APRA officers will be subject to the secrecy regime in the APRA Act when performing these functions; and

•

repeal redundant provisions from Division 323.

11.200 Under section 323-1 of the PHI Act, a person commits an offence if the person has or had a duty, function or power under the PHI Act, the person discloses 'protected information' to another person and the disclosure is not an 'authorised disclosure'.

11.201 In order to exclude APRA officers from the PHI Act information disclosure regime:

•

information obtained by a person in the course of performing an 'APRA duty, function or power' has been excluded from being 'protected information' as defined in paragraph 323-1(2)(a); and [Schedule 1, Part 1, item 150]

•

the offence for the disclosure of protected information will not apply where a person has or had an APRA duty, function or power. [Schedule 1, Part 1, item 148]

11.202 An 'APRA private health insurance duty, function or power' is defined in new subsection 323-1(1A). [Schedule 1, Part 1, item 149]

11.203 It is a duty, function or power of APRA, or that a person has as an officer of APRA, under:

•

the PHI Act;

•

the Prudential Supervision Bill; or

•

the FISLC Act as that Act applies in relation to levies imposed on insurers or the FS(CoD) Act as that Act applies to private health insurers.

11.204 A note has been included to new subsection 323-1(1A) providing that the disclosure of information regime for information obtained under APRA private health insurance duties, functions and powers exists in Part 6 of the APRA Act, rather than Division 323 of the PHI Act.

11.205 Section 323-5 of the PHI Act specifies a number of authorised disclosures that may be made in the course of official duties.

11.206 However, a new paragraph, paragraph 323-5(aa), has been inserted in order to provide that a disclosure of information made for the purpose of enabling another person to perform or exercise an APRA private health insurance duty, function or power is an authorised disclosure under section 323-5 of the PHI Act. [Schedule 1, Part 1, item 153]

11.207 With the abolition of the Council, references to equivalent authorised disclosures to and by the Council and employees of or consultants to the Council have been removed from section 323-10. [Schedule 1, Part 1, item 154]. This is because the disclosure of information by APRA is to be regulated under the APRA Act rather than the PHI Act.

11.208 Section 323-25 of the PHI Act previously provided for the Council or the Secretary of the Department of Health or the Council to disclose information to a person expressly or implied authorised to obtain it by the person to whom the information relates. All reference to the Council has been repealed from the section and only the Secretary remains able to make an authorised disclosure under this section. [Schedule 1, Part 1, items 155 and 156]

11.209 Section 323-35 previously enabled the Council to make an authorised disclosure of information to the extent necessary to perform its public information function (making statistics and other financial information about an insurer available to the public) and its agency cooperation function (cooperating with other regulatory agencies on matters affecting insurers and the private health insurance industry generally and providing information to the Private Health Insurance Ombudsman for the purposes of the State of the Health Funds Report). Section 323-35 has been repealed in its entirety. [Schedule 1, Part 1, item 157]

11.210 As a consequence, reference to disclosure under section 323-35 as a form of authorised disclosure has also been removed from subsection 323-1(3). [Schedule 1, Part 1, item 151]

11.211 Section 323-25 is being inserted to ensure that a disclosure of information is an authorised disclosure. [Schedule 1, Part 1, item 155]

11.212 Ordinarily, section 323 prohibits disclosure if a person who has a duty, but not an APRA duty, discloses info that was obtained under PHI Act, but not while doing an APRA duty. For transitioning staff, they will have obtained info while doing a PHI Act duty and want to use it.

Part 6-9 - review of decisions

11.213 Part 6-9 of the PHI Act deals with review of decisions made under the Act by the AAT.

11.214 The table in section 328-5 of the PHI Act sets out decisions for which review by the AAT is available. Items 5 to 30 and item 44 of the table, which related to decisions made exclusively by the Council, have been repealed. [Schedule 1, Part 1, items 158 and 160]

11.215 AAT review of decisions made by APRA under the Prudential Supervision Bill, is dealt with in section 167 of that Bill. Review of decisions in relation to the waiver of Collapsed Insurer Levy or late payment penalty for made under the FISLC Act are dealt with in section 27 of that Act.

11.216 Item 43 of the table in section 328-5 previously excluded from review decisions not to waive or to only partially waive late payment penalty in respect of the Collapsed Insurer Levy, as review of such decisions was provided for by item 44 of the table.

11.217 As the Collapsed Insurer Levy is no longer administered under the PHI Act this exclusion has become redundant and item 43 has been amended to remove reference to the Collapsed Insurer Levy. Access to AAT review of decisions not to waive or to only partially waive late payment penalty in respect of the Complaints Levy, the Risk Equalisation Levy and the National Joint Replacement Register Levy is still available under this item. [Schedule 1, Part 1, item 159]

11.218 Access to AAT review of decisions by the Health Minister not to waive or to only partially waive late payment penalty in respect of the Complaints Levy, the National Joint Replacement Register Levy is still available under this item. AAT review of similar decisions by APRA in respect of the Risk Equalisation Levy will also be available under item 43 of table to section 328-5.

11.219 The general introduction to Part 6-9 in section 328-1 has been amended to remove the reference to the review of decisions made by the Council (among others) and substitute reference to APRA.

Part 6-10 - Miscellaneous

11.220 Part 6-10 of the PHI Act deals with a number of miscellaneous matters, including the delegation of powers, the making of approved forms and Private Health Insurance Rules made under the Act.

11.221 With the abolition of the Council, reference in subsection 333-1(1) to the Health Minister delegating powers to the Council is redundant and has been repealed. [Schedule 1, Part 1, items 161 and 162]

11.222 Section 333-10 of the PHI Act provides for the making of approved forms. The Council previously approved a range of forms, mainly forms for applications and notices made under Part 4 of the PHI Act in relation to the operation of health benefits funds. All reference to the Council's power to approve forms for the purposes of the PHI Act has been removed from section 333-10 by the repeal of item 3 of the table to subsection 333-10(1). [Schedule 1, Part 1, item 163]

11.223 Sections 333-20 and 333-25 of the PHI Act empower the making of legislative rules under the Act. With the transfer of the prudential regulation of private health insurers to APRA, some matters dealt with in rules previously made by the Health Minister or the Council are now dealt with in corresponding APRA Rules made under the Prudential Supervision Bill, or have become wholly redundant. As a result, references to the making of following rules have been repealed from sections 333-20 and 333-25 of the PHI Act:

•

the Private Health Insurance (Registration) Rules;

•

Private Health Insurance (Health Benefits Fund Enforcement) Rules;

•

Private Health Insurance (Management) Rules; and

•

Private Health Insurance (Council) Rules. [Schedule 1, Part 1, item 164]

11.224 A note has been inserted to advise that there are consultation requirements that apply in relation to the making of rules mentioned in items 6, 8 and 15 of the above table: see subsections 115-5(2), 131-5(2) and 318-10(3). [Schedule 1, Part 1, item 165]

11.225 Section 333-25, which previously dealt with Private Health Insurance Rules made by the Council, has been replaced with a new section 333-25. The new section provides that APRA may make Private Health Insurance (Risk Equalisation Administration) Rules providing for matters mentioned in section 318-15 (record-keeping for insurers liable for the Risk Equalisation Levy). It also provides that, to the extent that Private Health Insurance (Risk Equalisation Administration) Rules deal with matters dealt with in rules made by the Health Minister under section 333-20, they must not be inconsistent. [Schedule 1, Part 1, item 166]

11.226 Section 333-25 enabled the making of Private Health Insurance (Health Benefits Fund Administration) Rules and Private Health Insurance (Insurer Obligation) Rules by the Council. Matters previously dealt with in those rules will be included in APRA Rules made under the Prudential Supervision Bill.

Schedule 1 - Dictionary

11.227 The following definitions are being repealed from the Dictionary in Schedule 1 as they are expressions that will no longer be used in the PHI Act after it is amended by the Consequential Amendments and Transitional Provisions Bill. [Schedule 1, Part 1, items 167, 169, 171, 173, and 177] For example, the definition of policy liability is being repealed because that expression is currently used only in sections 137-10(2), 146-1(4), 146-5(5) and in the dictionary definition of net asset position: all those provisions are being repealed by the Consequential Amendments and Transitional Provisions Bill:

•

ADI;

•

application provision;

•

applied Corporations Act provision;

•

appointed actuary;

•

assets;

•

capital adequacy direction;

•

capital adequacy standard;

•

census day;

•

Chief Executive Officer;

•

collapsed insurer levy;

•

Commissioner;

•

Council;

•

Council administration levy;

•

Council-supervised obligation;

•

Deputy Commissioner;

•

disqualified person;

•

external management;

•

external manager;

•

fringe benefit;

•

Human Services Department;

•

Human Services Minister;

•

inspector;

•

makes a capital payment;

•

manager;

•

member;

•

net asset position;

•

policy group;

•

policy liability;

•

prudential direction;

•

prudential matters;

•

prudential standard;

•

registered as a for profit insurer;

•

responsible insurer;

•

restricted access group;

•

Risk Equalisation Trust Fund;

•

senior manager;

•

solvency direction;

•

solvency standard;

•

terminating management;

•

terminating manager;

•

termination day; and

•

voluntary deed of arrangement.

11.228 The definition of personal information in the PHI Act has been retained. It is noted that after the amendments made by the Consequential Amendments and Transitional Provisions Bill and the Private Health Insurance Amendment Bill (No. 2) 2014, the PHI Act will not actually use the expression personal information. However, the definition is retained because the Private Health Insurance Amendment Bill (No. 2) 2014 includes a provision inserting into section 3(1) of the Ombudsman Act a definition of 'personal information' that cross-refers to the definition of personal information in the PHI Act.

11.229 The definition of 'private health insurer' mirrors the definition in the PHI Act in order to reduce the risk of cross-referencing becoming unlinked.

11.230 New definitions for the following terms have been inserted into the Dictionary in Schedule 1 [Schedule 1, Part 1, items 168 and 176]:

•

APRA - defined as meaning the Australian Prudential Regulation Authority;

•

'APRA private health insurance duty, function or power' - readers are referred to subsection 323-1(1A). This definition is relevant for identifying the types of information protected under the disclosure of information provisions of the PHI Act in Division 323; and

•

'Risk Equalisation Special Account' - readers are referred to subsection 318-1(1) of the PHI Act. The Risk Equalisation Special Account replaces the Risk Equalisation Trust Fund.

11.231 The definition of private health insurer in the Dictionary has been amended to 'private health insurer means a body that is registered under Division 3 of Part 2 of Prudential Supervision Bill' to reflect that APRA has assumed the role of registering insurers under that Bill. [Schedule 1, Part 1, item 170]

11.232 The definition of restricted access insurer in the Dictionary has also been amended to 'restricted access insurer has the same meaning as in the Prudential Supervision Bill'. That Bill defines a restricted access insurer as an insurer registered under Division 3 of Part 2 of that Bill as a restricted access insurer. [Schedule 1, Part 1, item 174]

11.233 The definition of 'referable', which specifies the health benefits fund, previously provided that a policy was referable to a fund if:

•

it was identified by an insurer as referable to the fund under section 93-15 of the PHI Act when an adult first became insured under the policy and had not been made referable to another fund under a restructure, merger or acquisition of funds under Division 146 of the PHI Act; or

•

had been made referable to the fund under Division 146.

11.234 The reference to Division 146 of the PHI Act has been updated to refer to Division 4 of Part 3 of the Prudential Supervision Bill, under which restructures, mergers and acquisitions of health benefits funds are now regulated. [Schedule 1, Part 1, item 172]

11.235 The definition of 'risk equalisation jurisdiction' has also been amended to refer readers to subsection 131-20(1) of the PHI Act, which provides that an area is a risk equalisation jurisdictions if Private Health Insurance (Health Benefits Fund Policy) Rules so provide. These rules are made by the Health Minister (following consultation with APRA). The jurisdictions were previously set in the Private Health Insurance (Health Benefits Fund Administration) Rules made under subsection 146-1(6) of the PHI Act, which has been repealed. [Schedule 1, Part 1, item 175]

Division 2 - Other amendments

Ombudsman Act 1976

11.236 To enable the sharing of information, the secrecy provisions in section 35 of the Ombudsman Act 1976 have been amended.

11.237 Subection 35(6D) provides that an officer may, if the disclosure is made in accordance with any requirements of the Private Health Insurance (Information Disclosure) Rules, disclose the information to certain people.

11.238 The Private Health Insurance Ombudsman could previously disclose these categories of information to the same recipients under section 323-10 of the PHI Act, which also provides for the sharing of information about insurers between agencies.

11.239 As the Council will no longer exist, subsection 35(6D) has been amended to repeal:

•

a member of the Council (paragraph35(6D)(d); and

•

a person employed, or a consultant engaged, by the Council (paragraph35(6D)(e). [Schedule 1, Part 1, item 178]

11.240 Instead of the Council, information is now able to be disclosed to:

•

an APRA member (within the meaning of the APRA Act); or

•

an APRA staff member (within the meaning of the APRA Act);

in addition to the other people listed in subsection 35(6D). [Schedule 1, Part 1, item 178]

Private Health Insurance Act 2007

11.241 Section 323-10 of the PHI Act makes the sharing of certain information between specified persons, including the Secretary of the Department of Health, APS employees within the Department of Health, the Private Health Insurance Ombudsman and the Chief Executive Medicare (eligible persons), an authorised disclosure. The information must not be information of a kind specified in the Private Health Insurance (Information Disclosure) Rules as information that may not be shared under the section.

11.242 Section 323-10 has been amended to allow eligible persons to disclose information about private health insurers, applicants to become an insurer, persons carrying on health insurance business and directors and officers of insurers to APRA, an APRA member or APRA staff member as an authorised disclosure. [Schedule 1, Part 1, item 179]

11.243 An amendment to new subsection 323-10(1A), as proposed to be inserted by item 17 of Schedule 1 to the Private Health Insurance Amendment Bill (No. 2) 2014 has been made. The current intention is that this Bill be drafted on the assumption that the Private Health Insurance Amendment Bill (No. 2) 2014 will commence on the same day as, or after (but not before) these amendments. The commencement provision ensure that the amendment to subsection 323-10(1A) will commence immediately after item 17 of the Private Health Insurance Amendment Bill (No. 2) 2014. [Schedule 1, Part 1, item 179]

11.244 Section 328-1 has been amended to remove reference to the Council and replace it with APRA. The reference to APRA is needed because APRA will, in relation to late payment penalty on the risk equalisation levy, be making decisions which are reviewable because of item 43 of the table in section 328-5. [Schedule 1, Part 1, item 180]

Private Health Insurance (Prudential Supervision) Act 2015

11.245 The Prudential Supervision Bill will be extended to Norfolk Island on and after the commencement of Part 1 of Schedule 2 to the Norfolk Island Legislation Amendment Act 2015 [Schedule 1, Part 1, item 181].

11.246 Paragraph 92(7)(b) will be amended to update the reference from the Legislative Instruments Act to the Legislation Act 2003. The amendment is contingent on the commencement of the Acts and Instruments (Framework Reform) Bill 2014. [Schedule 1, Part 1, item 182]

Part 2 - Repeals

11.247 The Private Health Insurance (Council Administration Levy) Act 2003 has been repealed in its entirety. [Schedule 1, Part 1, item 183]

Schedule 2 - Transitional provisions

11.248 A number of transitional provisions have been provided relating to the repeal of provisions establishing the Council and the transfer of functions of the Council to APRA.

11.249 Such provisions are needed to ensure that legal actions undertaken or deemed to be undertaken under the PHI Act immediately before the transition time are taken to be undertaken under equivalent provisions in the Prudential Supervision Bill. This includes certain instruments.

11.250 However, it should be noted that the Council's capital, solvency and prudential standards are not grandfathered under the transitional provisions. Instead APRA will be making new prudential standards (including prudential standards relating to capital and solvency) under the Prudential Supervision Bill to take effect on commencement of that Bill.

11.251 The new prudential standards will largely replicate the requirements of the Council's capital, solvency and prudential standards. Accordingly it will not be necessary for the transitional provisions to preserve the Council's standards

Part 2 - Specific transitional provisions

Division 1 - Registration of private health insurers

Proceedings for injunctions relating to carrying on health insurance business without registration

11.252 If proceedings for an injunction relating to carrying on health insurance business without registration are pending in the Federal Court under section of the 118-5 of the PHI Act, immediately before the transition time, then these proceedings will continue. If the proceedings were commenced by the Health Minister or Council then they will continue as if the proceedings had been commenced by an application by APRA under section 11 of the Prudential Supervision Bill, therefore APRA will take them over. [Schedule 2, Part 2, item 2, subitems 1 and 2]

11.253 If proceedings were initiated by someone else, then the proceedings will continue as if that person had standing to commence the proceedings under section 11 of the Prudential Supervision Bill, therefore that person will continue to bring the proceedings. [Schedule 2, Part 2, item 2, subitem 3]

Continuing the registration of private health insurers

11.254 If before transition, an insurer is registered under Part 4-3 of the PHI Act, then from the transition time the registration is taken to be a registration of the body under Division 3 of Part 2 of the Prudential Supervision Bill subject to the same terms and conditions as would have applied immediately before the transition time. [Schedule 2, Part 2, item 3, subitem 1(a) and (b)]

11.255 Registrations will also retain the appropriate status as under the PHI Act, whether it be a restricted access insurer or a for profit insurer. [Schedule 2, Part 2, item 3, subitem 1(c)]

11.256 At the transition time, an insurer can, in writing, request APRA to vary the body's registration terms and conditions by amending or revoking one or more of the terms and conditions. [Schedule 2, Part 2, item 3, subitem 3(a) and (b)]

11.257 This power allows amendment or revocation of one or more conditions, but it does not allow the imposition of additional terms or conditions.

11.258 APRA may, by written notice to the insurer, vary the body's registration terms and conditions, as per the insurer's request. If APRA decides not to agree to the insurer's request, that will not be a reviewable decision. This is because this provision is intended to allow APRA to 'clean up' obviously out-of-date registration conditions rather than to allow private health insurers to seek a more fundamental re-examination of existing conditions. This provides industry certainty about the continuation of registration conditions during the transition from regulation by the Council to APRA. [Schedule 2, Part 2, item 3, subitem 4]

11.259 This provides insurers with the opportunity to review their registration terms and conditions and seek to update them if they are no longer valid or dated.

Applications for registration as private health insurer

11.260 Registration applications made under section 126-10 of the PHI Act, but not yet decided upon by the transition time, will continue to progress as if the application had been made under section 12 of the Prudential Supervision Bill. [Schedule 2, Part 2, item 4, subitem 1]

11.261 For the purposes of whether APRA requires additional information (section 13) or whether APRA can refuse an application (section 17) under the Prudential Supervision Bill, the application is taken to have been made at the transition time. Accordingly, under section 13, APRA will have 90 days from the transition time, rather than the time the application was made, to give the applicant written notice requiring information about the application. Under section 17, deemed refusal of an application will occur 90 days after the transition time or 90 days after the applicant provides information under s 13 (as the case may be). [Schedule 2, Part 2, item 4, subitem 2]

11.262 Further, if under section 126-15 of the PHI Act, the Council gave the applicant notice that further information was required for the purposes of the application, but the information has not yet been provided by the transition time, the notice is taken to have been given by APRA under section 13 of the Prudential Supervision Bill at the transition time. [Schedule 2, Part 2, item 4, subitem 3]

11.263 These transitional provisions will ensure that APRA has sufficient time to properly assess an application for registration made but not determined before the transition time.

Conversion to for profit status

11.264 If under section 126-42 of the PHI Act, an insurer has been approved to convert to being registered as a for profit insurer, then the approval will continue as if it were made by APRA under section 20 of the Prudential Supervision Bill. [Schedule 2, Part 2, item 5, subitem 1]

11.265 If an application made to the Council has not yet been completed by the transition time, then section 20 of the Prudential Supervision Bill will apply as if the application had been made under that section. [Schedule 2, Part 2, item 5, subitem 2(a)]

11.266 In addition, acts undertaken by the Council (such as causing a notice to be published or giving an applicant notice requiring further information) will be deemed to have been taken by APRA. [Schedule 2, Part 2, item 5, subitems 2(b) and 2(c)]

Division 2 - Health benefits funds - restructures, mergers and acquisitions, and terminating and external management

Restructures of health benefits funds

11.267 If under section 146-1 of the PHI Act an approval was in place for a restructure, then from the transition time the approval has effect as if it were made by APRA under section 32 of the Prudential Supervision Bill. [Schedule 2, Part 2, item 6, subitem 1]

11.268 If an application made to the Council before the transition time under section 146-1 of the PHI Act has not yet been decided upon by the transition time, section 32 of the Prudential Supervision Bill applies in relation to the application. [Schedule 2, Part 2, item 5, subitem 2]

Mergers and acquisitions of health benefits funds

11.269 If under section 146-5 of the PHI Act an approval was in place for a merger or acquisition, then from the transition time the approval has effect as if it were made by APRA under section 33 of the Prudential Supervision Bill. [Schedule 2, Part 2, item 7, subitem 1)]

11.270 If an application made to the Council before the transition time under section 146-5 of the PHI Act has not yet been decided upon by the transition time, section 33 of the Prudential Supervision Bill applies in relation to the application. [Schedule 2, Part 2, item 7, subitem 2]

Terminating management and external management of health benefits funds

11.271 If under section 149-10 of the PHI Act an approval was in place for a termination of health benefits funds, then from the transition time the approval has effect as if it were made by APRA under section 37 of the Prudential Supervision Bill. [Schedule 2, Part 2, item 8, subitem 1]

11.272 If under section 149-1 of the PHI Act an application for approval of a termination of health benefits funds had been made to the Council but not yet decided, then from the transition time the application is taken to have been made to APRA under section 35 of the Prudential Supervision Bill. [Schedule 2, Part 2, item 8, subitem 2]

11.273 Further, for the purposes of sections 36 and 38 of the Prudential Supervision Bill, the application is taken to have been made by APRA at the transition time. Section 36 of the Prudential Supervision Bill is based on section 149-5 of the PHI Act and provides that, within 28 days after a termination application is made, APRA may give the applicant written notice requiring the applicant to give such further information relating to the termination application as is specified in the notice. Section 38 of the Prudential Supervision Bill is based on section 149-15 of the PHI Act and provides that an application for termination is taken to have been refused if APRA does not notify the applicant of its decision the application within 90 days of it being made or within 90 days after information has been given in compliance with a notice seeking further information.

11.274 The time limits specified in sections 36 and 38 will start to run from the transition time. This will ensure that, if an application for termination under Division 149 of the PHI Act is made but not determined before the transition time, APRA will have sufficient time to seek information and consider the application.

11.275 In addition, if before the transition time, the Council gave the applicant notice under section 149-5 of the PHI Act requiring the provision of further information, and it has not yet been provided, then the notice is taken to have been given by APRA, under section 36 of the Prudential Supervision Bill, at the transition time. [Schedule 2, Part 2, item 8, subitems 3 and 4]

11.276 Appointment of terminating managers that are in force under the PHI Act immediately before the transition time will continue to have effect from the transition time as if it were made under section 37 of the Prudential Supervision Bill (where the original appointment was made by the Council under section 149-10 of the PHI Act) or Division 7 of Part 3 of the Prudential Supervision Bill (where the original appointment was made via the court process in Division 220 of the PHI Act). [Schedule 2, Part 2, item 8, subitem 5]

11.277 A health benefits fund that is under terminating management, or external management, immediately before the transition time will continue to be so under the Prudential Supervision Bill. Things done, by or in relation to the Council under the PHI Act will be taken to be done, by or in relation to APRA under the corresponding provision of the Prudential Supervision Bill. Things done by or in relation to the terminating manager or external manager under a provision of the PHI Act will, likewise, be taken to be done by or in relation to the terminating manager or external manager under the corresponding provision of the Prudential Supervision Bill. [Schedule 2, Part 2, item 8, subitem 6]

11.278 The Minister may make rules that relate to how a terminating management or external management is to continue under the Prudential Supervision Bill. [Schedule 2, Part 2, item 8, subitem 7]

Division 3 - Other obligations of private health insurers

Directions

11.279 Directions given to a private health insurer that are in force immediately before the transition time will continue in effect as if it were a direction given by APRA under section 96 of the Prudential Supervision Bill. This will apply for directions given under the following provisions of the PHI Act:

•

section 140-20 (solvency direction);

•

section 143-20 (capital adequacy directions);

•

section 163-15 (directions to comply with standards); and

•

section 200-1 (other directions). [Schedule 2, Part 2, item 9, subitem 1]

11.280 Section 104 of the Prudential Supervision Bill, which sets penalties for non-compliance with an APRA direction under that Bill will not apply in relation to a grandfathered Council direction, unless it was given under section 163-15 of the PHI Act. This is to ensure that the penalty under section 104 only applies to a Council direction to which a criminal penalty already applied (that is, to a direction under section 163-15). [Schedule 2, Part 2, item 9, subitem 2]

11.281 If a direction is to apply for a certain period, then the direction will continue to cease to have effect at the end of the specified period. [Schedule 2, Part 2, item 9, subitem 3]

Actuaries

11.282 Actuaries of private health insurers that are appointed under section 160-1 of the PHI Act immediately before the transition time will continue as if it were an appointment under section 106 of the Prudential Supervision Bill. [Schedule 2, Part 2, item 10]

Disqualified persons

11.283 The definition of 'disqualified person' (subsection 119(1)) in the Prudential Supervision Bill also includes a person who was disqualified under section 166-20 of the PHI Act. [Schedule 2, Part 2, item 11]

11.284 APRA may revoke a disqualification grandfathered under the above provision upon application by the person or of its own initiative and the revocation will take effect on the day on which it is made. This ensures that a person disqualified by the Council's administrative processes may seek to have their disqualification revoked by APRA via an administrative process, rather than having to approach the court under the new provisions in the Prudential Supervision Bill. [Schedule 2, Part 2, item 11]

11.285 When APRA makes a decision on an application for revocation of a grandfathered Council disqualification, APRA must give the person written notice of a revocation of the disqualification, or of a refusal to revoke the disqualification. APRA may also give notice in any other way that it considers appropriate. [Schedule 2, Part 2, item 11]

11.286 An application regarding a refusal of revocation of a grandfathered disqualification may be made to APRA for internal review and then, if dissatisfied with the decision on internal review, to the AAT for a review of a decision made by APRA.

Division 4 - Enforcement

Investigations

11.287 Investigations that the Council had commenced into a private health insurer under Division 194 or 214 of the PHI Act at the transition time, but were not yet completed, will continue under Division 194 or 214 of the PHI Act (as the case may be) as if the relevant investigation provisions remained in force. [Schedule 2, Part 2, item 12, subitems 1 and 2]

11.288 The investigation will continue as if references to the Council in the grandfathered investigation provisions were references to APRA and things done, by or in relation to the Council, before the transition time, will be taken to have been done, by or in relation to APRA. [Schedule 2, Part 2, item 12, subitems 1 and 2]

11.289 An appointment of an inspector under section 214-1(1) of the will also continue as if APRA had appointed the inspector. [Schedule 2, Part 2, item 12, subitem 3]

11.290 If required, the Minister may make rules under item 43 in relation to how an investigation will continue to apply. [Schedule 2, Part 2, item 12, subitem 4]

11.291 Under Division 3, Part 6 of the Prudential Supervision Bill, APRA will be able to investigate breaches of Council-supervised obligations that occurred pre-transition. This will ensure that APRA can investigate breaches that occurred prior to the transition time, as well as breaches that occurred from that time. [Schedule 2, Part 2, item 12, subitem 5]

Enforceable undertakings

11.292 Enforceable undertakings that were accepted by the Council under subsection 197-1(2) of the PHI Act pre-transition will continue as if accepted by APRA under subsection 152(1) of the Prudential Supervision Bill. [Schedule 2, Part 2, item 13]

Federal Court remedies

11.293 Proceedings commenced by the Council under Division 203 of the PHI Act will continue after transition with APRA substituted for the Council as a party. Division 203 of the PHI Act includes power for the Council to apply to the Federal Court seeking a declaration of contravention of a Council-supervised obligation under the PHI Act, and also seek certain other orders such as an order for pecuniary penalty or another order redressing the contravention. [Schedule 2, Part 2, item 14]

11.294 As a result, Division 203 will continue in relation to proceedings commenced, but not concluded, at the transition time. In continuing these proceedings, references in Division 203 to the Council shall be read as references to APRA and things done, by or in relation to the Council, prior to the transition time, will be taken to have been done, by or in relation to APRA. [Schedule 2, Part 2, item 14]

11.295 APRA is not able to commence proceedings under Division 203 after the transition time. If APRA wants to commence proceedings after the transition time in relation to a contravention of a Council-supervised obligation that is continuing at the transition time, or to a contravention of such an obligation that occurred prior to transition time, proceedings will need to commence under Part 8 of the Prudential Supervision Bill. To this end, Part 8 of the Prudential Supervision Bill will have effect as if references in that Part to enforceable obligations also included references to Council-supervised obligations. [Schedule 2, Part 2, item 14]

Proceedings for injunctions relating to non-complying policies

11.296 If immediately prior to the transition, proceedings for an injunction are pending in the Federal Court under section 84-10 of the PHI Act (for example, in relation to conduct concerning complying policies or false representation of policies as complying policies), and the proceedings were commenced by the Council, then the proceedings will continue, from the transition time, with the Health minister substituted for the Council as a party. [Schedule 2, Part 2, item 15]

Division 5 - Financial matters

Crediting of Council money to special accounts

11.297 Upon transition, all money held by the Council (Council money) must be credited to a special account. There are three special accounts under the new legislative regime:

•

a Risk Equalisation Special Account, established under Division 318 of the PHI Act, as amended;

•

a Collapsed Insurer Special Account, established under the new Division 2A of Part 5 of the APRA Act, as amended; and

•

the (existing) APRA Special Account, under Division 1 of Part 5 of the APRA Act, which relates mainly to APRA's costs of administration. [Schedule 2, Part 2, item 16, subitem 1]

11.298 For the Risk Equalisation Special Account, the following amounts should be credited:

•

amounts that were credited to the Risk Equalisation Trust Fund immediately prior to transition;

•

any amounts of Council money that, immediately before the transitional time, were required by section 318-5 of the PHI Act, to be paid to the Risk Equalisation Trust Fund but that had not been paid prior to transition; and

•

any other amount of Council money that consists of a repayment to the Council of a payment made, before the transition time, for the purpose of helping to meet liabilities as described in section 6 of the Collapsed Insurer Levy Act. [Schedule 2, Part 2, item 16, subitem 2]

11.299 In the event that an insurer, that collapsed prior to the transition, receives proceeds from the insurer levy, repayments from the insurer will be credited to the Risk Equalisation Special Account. This will enable the recovered amount to be returned to industry via an adjustment to the risk equalisation payment relating to each insurer.

11.300 For the Collapsed Insurer Special Account, the following amounts of Council money are to be credited:

•

any amount that consists of Collapsed Insurer Levy, or a related late payment penalty, received by the Council before the transition time;

•

any amount that consists on proceeds from investments made using Collapsed Insurer Levy, or related late payment penalty. [Schedule 2, Part 2, item 16, subitem 3]

11.301 All other amounts of Council money will be credited to the APRA Special Account after the transition time. [Schedule 2, Part 2, item 16, subitem 4]

11.302 The purposes for which funds in APRA's Special Account can be utilised are outlined in section 54 of the APRA Act.

Collection and recovery of Council administration levy and collapsed insurer levy imposed before the transition time

11.303 If the imposition day for an amount of Council administration levy or collapsed insurer levy is prior to transition time, and the levy has not been paid, then Division 307 and section 328-5 (as it relates to decisions made under Division 307) of the PHI Act will continue to apply as if certain references to the Council were references to APRA (acting for and on behalf of the Commonwealth). Division 307 of the PHI Act contains the PHI Act levy collection provisions and section 328-5 provides for review by the AAT of various decisions, including a decision on Division 307 relating to the waiver of levy or late payment penalty on levy. [Schedule 2, Part 2, item 17]

11.304 Any amount paid or recovered (including related late payment penalties) relating to the Council administration levy must be credited to the APRA Special Account. [Schedule 2, Part 2, item 16, subitem 3]

11.305 Similarly, any amount paid or recovered (including related late payment penalties) relating to the collapsed insurer levy must be credited to the Collapsed Insurer Special Account. [Schedule 2, Part 2, item 16, subitem 4]

11.306 The Private Health Insurance Supervisory Levy Imposition Bill will, for the 2015-16 financial year, preserve the imposition dates and rates determined by the Private Health Insurance (Council Administration Levy) Rules as in force immediately before the transition time.

Entitlements to be paid an amount out of the Risk Equalisation Trust Fund

11.307 If immediately before the transition time, a private health insurer has an entitlement to be paid an amount from the Risk Equalisation Trust Fund that has not been met, then APRA must pay that amount after the transition time. The amount must be debited from the Risk Equalisation Special Account. [Schedule 2, Part 2, item 18]

Division 6 - Other matters

Secrecy obligations

11.308 Sections 323-1 and 323-40 of the PHI Act prohibit certain persons, including staff of the Council, from disclosing information generally relating to private health insurers, unless the disclosure is an 'authorised disclosure' within the meaning of the PHI Act.

11.309 A disclosure of information, where that information was obtained under the PHI Act before the transition time, will be considered an authorised disclosure under sections 323-1 and 323-40 of the PHI Act (and therefore permissible) if the disclosure is:

•

made in the course of performing or exercising an APRA private health insurance duty, function or power (within the meaning of section 323-1 of the PHI Act); or

•

one that the person would have been able to make under section 56 of the APRA Act, had the information been obtained in the course of performing such a duty, function or power. [Schedule 2, Part 2, item 19]

11.310 This has the effect of preserving secrecy in relation to information transferred to APRA, and/or known by employees of the Council who have been transferred to APRA, while ensuring that, if the information can be disclosed under a provision in APRA's secrecy provision, it may be disclosed without having to also be an 'authorised disclosure' under the PHI Act.

Report on operations of private health insurers before transition time

11.311 If by the transitional time, the Council has not given a report in relation to a financial year ending at or before the transition time under section 364-15 of the PHI Act as in force immediately before the transition time, that section of the PHI Act is taken to continue in force as if the reference to the Council were instead a reference to APRA. [Schedule 2, Part 2, item 20]

Part 3 - General transitional provisions

Division 1 - Transitional functions

11.312 To allow both the Council and APRA to prepare for the transfer, the functions of both the Council and APRA have been extended to allow such steps as may be necessary or convenient to prepare for or give effect to the abolition of the Council, through the operation of this Schedule and the enactment of the Consequential Amendments and Transitional Provisions Bill and the Prudential Supervision Bill. [Schedule 2, Part 3, item 21]

11.313 This will allow the Council and APRA to work together to ensure the transition is carried out effectively.

11.314 The transition period is defined as the period commencing from the day the Bill receives the Royal Assent and ends immediately before the transition time. Transition time is defined in item 1 of Part 1 to Schedule 2 to mean the commencement of section 3 of the Prudential Supervision Bill (which is when the substantive provisions of that Act are to come into effect). [Schedule 2, Part 3, subitem 21(3)]

Division 2 - Transfer of assets and liabilities

Vesting of assets and liabilities

11.315 Immediately before the Council is abolished, the assets and liabilities of the Council will be transferred to APRA.

11.316 At the transition time, the assets will cease to be assets of the Council and become assets of APRA. For example, this would include the remaining cash reserves and equipment of the Council among other assets, immediately before the transition. [Schedule 2, Part 3, item 22]

11.317 Similarly, at the transition time, all liabilities will cease to be liabilities of the Council and will become liabilities of APRA. For example, APRA will be responsible for the Council's liabilities including employees' annual leave and any accounts payable, immediately before, or after, the transition time. [Schedule 2, Part 3, item 23]

11.318 The APRA Minister may also make a determination, in writing, that specified assets or liabilities will become assets of the Commonwealth. [Schedule 2, Part 3, subitems 22(3)-(5) and 23(3)-(5)]

11.319 It is expected that all assets and liabilities held by the Council immediately before the transition time will transfer to APRA and such a determination would only be made should unforeseen circumstances arise.

Transfers of land may be registered

11.320 If required, the transitional provisions also provide for the transfer of land (including an interest in land under a lease) from the Council to APRA or the Commonwealth. [Schedule 2, Part 3, item 24]

11.321 The provision provides that to facilitate the land transfer, a certificate that is signed by the APRA Minister, identifies the land and states that the land is now vested in APRA or the Commonwealth, should be lodged with a land registration official. The certificate is not a legislative instrument within the meaning of the Legislative Instruments Act and there is a statement to this effect for information purposes. [Schedule 2, Part 3, item 24]

11.322 When the land registration official registers the matter in a manner that is the same as, or similar to, the way in which dealings in land of that kind are registered, the deal will give effect to the certificate. [Schedule 2, Part 3, item 24]

Certificates relating to vesting of assets other than land

11.323 If required, the transitional provisions also provide for the registration of transfer of assets other than land from the Council to APRA or the Commonwealth. This would be relevant if, for example, an intellectual property interest, or a security interest associated with an asset, required registration. [Schedule 2, Part 3, item 25]

11.324 The provision provides that to facilitate the asset transfer (other than land), a certificate that is signed by the APRA Minister, identifies the asset and states that the asset is now vested in APRA or the Commonwealth, should be lodged with an assets official. The certificate is not a legislative instrument within the meaning of the Legislative Instruments Act and there is a statement to this effect for information purposes. [Schedule 2, Part 3, item 25]

11.325 The assets official may deal with, and give effect to, the certificate as if it were a proper and appropriate instrument for transactions in relation to assets of that kind and make entries in the register. [Schedule 2, Part 3, item 25]

Division 3 - Transfer of other matters

Things done by, or in relation to, the Council

11.326 Any action done by, or in relation to, the Council before the transition time, will, following the transition time have effect as if it had been done by, or in relation to, APRA. [Schedule 2, Part 3, item 26]

11.327 The APRA Minister may also make a determination, in writing, which specifies that a specified thing can be attributed to the Commonwealth. Alternatively, the APRA Minister may also make a determination, in writing, which states that this item does not apply to a specified thing. A determination made under subitem 3 is not a legislative instrument within the meaning of the Legislative Instruments Act and there is a statement to this effect for information purposes. [Schedule 2, Part 3, item 26]

11.328 It is expected that all actions of the Council will be imputed to APRA and such a determination would only be used in unforeseen circumstances where there are sound reasons for imputing the action of thing to the Commonwealth rather than APRA.

References in certain instruments to the Council

11.329 Instruments that are in force immediately before the transition time and contain a reference to the Council will be taken to refer to APRA. [Schedule 2, Part 3, item 27]

11.330 This will include instruments that relate to:

•

an asset or liability of the Council that will become an asset or liability of APRA under item 22 or 23;

•

a thing done by, or in relation to, the Council that is taken to be done by, or in relation to, APRA under item 26. [Schedule 2, Part 3, subitem 27(2)]

11.331 An instrument is defined to include:

•

a contract, undertaking, deed or arrangement; and

•

a notice, authority, order or instruction; and

•

an instrument made under an Act or under a legislative instrument. [Schedule 2, Part 3, subitem 27(8)]

11.332 This will only translate references to the Council in instruments that continue in force after the transition time. It will not cover prudential standards or solvency or capital standards made by the Council. Such prudential standards will cease to have effect upon the repeal of the PHI Act and APRA will make wholly new prudential standards under the Prudential Supervision Bill.

11.333 An instrument does not include:

•

an Act;

•

an instrument made under the Consequential Amendments and Transitional Provisions Bill; or

•

an instrument specified in rules made under item 43. [Schedule 2, Part 3, subitem 27(8)]

11.334 Where under one of the above provisions the Minister determines that an asset or liability should be transferred to the Commonwealth or that a thing should be imputed to the Commonwealth (for example, where a contract has been transferred to the Commonwealth), the transitional provisions also provide for an associated instrument (in the example, the contract) that refers to the Council to be taken to refer to the Commonwealth. [Schedule 2, Part 3, subitem27(4)]

11.335 The APRA Minister may determine in writing that the reference to the Council, at and after the transition time, should be a reference to APRA or the Commonwealth. This power would be used to make it clear that a reference in an instrument to the Council should be taken to be a reference to the Commonwealth or APRA and would only be relevant if the Minister had determined that an asset should be transferred to the Commonwealth rather than APRA or that a thing or action should be imputed to the Commonwealth rather than APRA. [Schedule 2, Part 3, subitem27(4)]

11.336 The determination may be made before or after the transition time. A determination is not a legislative instrument.

Legal proceedings of the Council

11.337 Any legal proceedings to which the Council was a party and are pending in any court of tribunal immediately before the transition time will continue with APRA as a party to those proceedings, in place of the Council, from the transition time. [Schedule 2, Part 3, item 28]

11.338 Alternatively, the APRA Minster may determine, in writing, that the Commonwealth is substituted for the Council as a party to those proceedings. [Schedule 2, Part 3, item 28]

11.339 The APRA Minister can make a determination before or after the transition time and it is not a legislative instrument within the meaning of the Legislative Instruments Act and there is a statement to this effect for information purposes. [Schedule 2, Part 3, item 28]

Transfer of Council's records and documents

11.340 Any records or documents that were in the possession of the Council immediately before the transition time will transfer to APRA after the transition time. [Schedule 2, Part 3, item 29]

11.341 Alternatively, the APRA Minster may determine, in writing, that a record or document should be transferred to the Commonwealth after the transition time. [Schedule 2, Part 3, item 29]

11.342 The determination may be made before or after the transition time. A determination is not a legislative instrument. [Schedule 2, Part 3, item 29]

11.343 For the purposes of the Public Governance, Performance and Accountability Act 2013, sections 37 and 41 will apply to any records or documents transferred to an entity within the meaning of that Act (for example, APRA, and if relevant another Commonwealth agency to which records might be transferred) as if the records or document related to that entity. Section 37 provides for the accountable entity of a Commonwealth authority to keep records that properly record and explain the entity's performance in achieving its purposes and section 41 provides in similar terms in relation to accounts that explain the entity's transactions. [Schedule 2, Part 3, subitem 29(7)]

Transfer of the Ombudsman investigations

11.344 If, before the transition time, a complaint was made to the Commonwealth Ombudsman under the Ombudsman Act 1976 in relation to something done by the Council, or the Ombudsman has been conducting an investigation in relation to such a matter and it has not been finally disposed of, the Ombudsman Act is to apply in relation to the matter as if APRA had done the thing that is subject to the complaint or investigation. This will ensure that the Ombudsman's processes can continue despite the transfer of functions and staff to APRA. [Schedule 2, Part 3, item 30]

Division 4 - Staff and officers of the Council

Transferring employees - transfer to APRA

11.345 In transferring the Council's functions to APRA, it is expected that all Council employees at the transition time will transfer to APRA to ensure regulatory continuity and transfer of knowledge of the industry.

11.346 At the transition time, staff employed by the Council under subsection 273-15(1) of the PHI Act immediately before the transition time (a transferring employee):

•

cease to be employed by the Council; and

•

are taken to have been appointed as an employee under section 45 of the APRA Act. [Schedule 2, Part 3, item 30]

11.347 Section 45 of the APRA Act allows APRA to appoint permanent, temporary or casual staff as it considers necessary for the performance of its functions.

11.348 A transferring employee is not entitled to receive any payment or other benefit as a result of the fact that he or she ceased being an employee of the Council. [Schedule 2, Part 3, subitem 31(3)]

Transferring employees - terms and conditions of employment with APRA

11.349 It is expected that the terms and conditions of employment of transferring staff will be set under an enterprise agreement, under the Fair Work Act 2009, or in the case of certain senior staff by a separate agreement, and in all cases supplemented by terms and conditions determined under subsection 45(2) of the APRA Act. The Chair of APRA has the ability to determine terms and conditions of appointment (including remuneration) for APRA employees. [Schedule 2, Part 3, item 32]

11.350 A transferring employee's terms and conditions of appointment must be no less favourable, considered on an overall basis, than the terms and conditions of employment to which the employee was entitled, immediately before the transition time, as an employee of the Council. [Schedule 2, Part 3, subitem 32(1)]

11.351 However, where an enterprise agreement (within the meaning of the Fair Work Act 2009), made on or after the transition time, applies to employees of APRA as appointed under subsection 45(1) of the APRA Act, subitem 1 ceases to have effect. [Schedule 2, Part 3, subitem 32(2)

11.352 This will ensure that an employee that is compulsorily transferred is no worse off, looking at their conditions on an overall basis, as a result of the implementation of this Government decision.

11.353 A determination made under subsection 45(2) of the APRA Act for the transferring employee is able to be made before or after the transition time and may take effect from the transition time or a later time. [Schedule 2, Part 3, subitem 32(3)]

11.354 However, to avoid doubt:

•

the Chair of APRA may determine different terms and conditions of appointment under subsection 45(2) of the APRA Act for different transferring employees; or

•

a transferring employee may be covered by either of the following instruments (whether made before or after the transition time):

•

a fair work instrument (within the meaning of the Fair Work Act 2009);

•

a determination made under subsection 45(2) of the APRA Act. [Schedule 2, Part 3, subitem 32(4)]

Transferring employees - accrued leave and prior service

11.355 All leave accrued by a transferring employee immediately before the transition time, in relation to a transferring employee's employment by the Council, will be considered as leave in relation to periods of service as an employee of APRA appointed under section 45 of the APRA Act. [Schedule 2, Part 3, item 33]

11.356 Furthermore, the service of a transferring employee as an employee of the Council will be taken to have been continuous with his or her service as an employee of APRA appointed under section 45 of the APRA Act. [Schedule 2, Part 3, item 33]

Transferring employees - processes begun before transition time

11.357 Rules made under item 34 may provide for 'staffing procedures' of the Council and APRA to apply, or to continue to apply, in relation to:

•

processes begun before, but not completed by, the transition time; or

•

things done by, for or in relation to the Council or a transferring employee before that time. [Schedule 2, Part 3, item 34]

11.358 Staffing procedures includes procedures and policies related to:

•

recruitment, promotion or performance management; or

•

inefficiency, misconduct, forfeiture of position, fitness for duty or loss of essential qualifications; or

•

disciplinary action, grievance processes or reviews of or appeals against staffing decisions; or

•

transfers, resignations or termination of employment; or

•

leave. [Schedule 2, Part 3, subitem 34(2)]

Safety, Rehabilitation and Compensation Act 1998 - rehabilitation provisions

11.359 Item 35 provides that the Safety, Rehabilitation and Compensation Act 1988 (the SRC Act) applies to an employee of the Council, who suffered an injury before the transition time, as if the employee had been an employee of APRA. [Schedule 2, Part 3, item 35]

11.360 An employee of the Council under subsection 273-15(1) of the PHI Act at any time, regardless of whether or not the person is a transferring employee, or an employee of the Council within the meaning of the SRC Act are covered. [Schedule 2, Part 3, item 35]

11.361 The item ensures that APRA is the relevant employer of employees of the Council (including employees who ceased employment with the Council before the commencement time) in respect of an injury within the meaning of the SRC Act sustained before the commencement time.

No transfer of Council officers or consultants

11.362 A Council officer includes:

•

the Commissioner of Private Health Insurance Administration;

•

any other member of the Council;

•

the Chief Executive Officer of the Council. [Schedule 2, Part 3, subitem 36(2)]

11.363 Nothing in this Part provides that the appointment of a Council officer immediately before the transition time has effect at or after the transition time as if it were an appointment of the person in relation to APRA or the Commonwealth. [Schedule 2, Part 3, item 36]

11.364 Similarly, nothing in this Part provides that a person engaged as a consultant to the Council under subsection 273-15(3) of the PHI Act immediately before the transition time becomes engaged at or after the transition time as a consultant under subsection 47(1) of the APRA Act. [Schedule 2, Part 3, item 36]

Division 5 - Annual reporting obligation

Final annual report for the Council

11.365 APRA will assume the residual annual reporting obligation of the Council. In doing so, the Chair of APRA must prepare and give a report (the final report) on the activities of the Council during the final reporting period to the APRA Minister for presentation to the Parliament. [Schedule 2, Part 3, item 37]

11.366 The final reporting period is defined as the period:

•

beginning:

•

if, by the transition time, no annual report for the Council has been given to the Health Minister for the most recent reporting period for the Council that ended before the transition time - at the start of that reporting period; or

•

otherwise - at the start of the reporting period for the Council that includes the transition time; and

•

ending immediately before the transition time. [Schedule 2, Part 3, subitem 37(6)]

11.367 In practice this means that if the transition day is 1 July 2015, APRA will fulfil the requirement to publish an annual report in respect of the 2014-15 financial year on behalf of the Council. If the transition time is later but before the Council has given its 2015-15 annual report to the Health Minister (for example, a transition day of 1 September 2015) then APRA will prepare a final report on behalf of the Council covering the period from 1 July 2014 to the transition day (in the example, 1 July 2014 to 31 August 2015). If the transition time is after the Council has provided its 2014-15 annual report to the Health Minister, APRA will prepare a final report for the period 1 July 2015 to the end of the day that is immediately before the transition time.

11.368 Sections 39, 40, 42, 43 and 46 of the Public Governance, Performance and Accountability Act 2013, and associated rules made for the purposes of those sections, apply in relation to the Council and the final reporting as if references in those sections and rules:

•

to an annual report for a Commonwealth entity were references to the final report; and

•

to a reporting period for a Commonwealth entity were references to the final reporting period; and

•

to a Commonwealth entity were references to the Council; and

•

to the accountable authority for a Commonwealth entity were references to the Chair of APRA; and

•

to the responsible Minister for a Commonwealth entity were references to the APRA Minister. [Schedule 2, Part 3, subitem 37(2)]

11.369 A reporting period for the Council means the reporting period for the Council under the Public Governance, Performance and Accountability Act 2013. [Schedule 2, Part 3, subitem 37(6)]

11.370 The annual report is a report under section 46 of the Public Governance, Performance and Accountability Act 2013. [Schedule 2, Part 3, subitem 37(6)]

11.371 These provisions will ensure that both the financial reporting and report on operations are dealt with in the final annual report in the normal way.

11.372 The Chair of APRA must give the final report to the APRA Minister by the 15th day of the fourth month after the end of the final reporting period. As explained above, the end of the reporting period will be the end of the day that falls immediately before the transition time. The APRA Minister may grant an extension of time in special circumstances. [Schedule 2, Part 3, subitem 37(3)]

11.373 As soon as possible after receiving the report, the APRA Minister must table the final report in each House of the Parliament. [Schedule 2, Part 3, subitem 37(4)]

11.374 Also, APRA must publish the final report on its website as soon as possible after the report has been tabled in the House of Representatives. [Schedule 2, Part 3, subitem 37(5)]

Part 4 - Miscellaneous

Relationship between Part 3 and other provisions

11.375 The general transitional provisions in Part 3 of Schedule 2 have effect subject to the more specific transitional provisions in Part 2 and any rules made under item 43. Part 2 outlines the transitional provisions which preserve, among other things, legal actions (including injunction applications and proceedings for a pecuniary penalty) undertaken under the PHI Act immediately before the transition time. These will be taken over by APRA under equivalent provisions in the Prudential Supervision Bill, or modified provisions of the PHI Act, but this will be achieved by the specific provisions in Part 2 and not by the general provisions relating to court proceedings in Part 3. [Schedule 2, Part 4, item 38]

Exemption from stamp duty and other State or Territory taxes

11.376 Item 39 provides that no stamp duty or other tax is payable under a law of a State or a Territory in respect of an exempt matter, or anything connected with an exempt matter. [Schedule 2, Part 4, item 39]

11.377 For this purpose, an exempt matter is:

•

the vesting of an asset or liability under this Schedule; or

•

the operation of this Schedule in any other respect. [Schedule 2, Part 4, subitem 39(2)]

11.378 The APRA Minister may certify in writing:

•

that a specified matter is an exempt matter; or

•

that a specified thing was connected with a specified exempt matter. [Schedule 2, Part 4, subitem 39(3)]

11.379 A certificate under subitem 3 is not a legislative instrument within the meaning of the Legislative Instruments Act and there is a statement to this effect for information purposes. A certificate will be prima facie evidence of the matters stated in the certificate in all courts, for all purposes (other than for the purposes of criminal proceedings). The certificate is merely for evidentiary purposes and the making of a certificate is not a precondition for the application of the exemption from stamp duty and other tax as the exemption applies because of subitem 39(1).

Certificates taken to be authentic

11.380 A document that appears to be a certificate made or issued under a particular provision of this Schedule is taken to be such a certificate and is taken to be properly given unless the contrary is established. [Schedule 2, Part 4, item 40]

Delegation by APRA Minister

11.381 If required, the APRA Minister may delegate all or any of his or her powers and functions to:

•

the Secretary of the Department responsible for administering the APRA Act; or

•

an SES employee, or acting SES employee, in that Department. [Schedule 2, Part 4, subitem 41(1)]

11.382 'SES employee' and 'acting SES employee' are defined in the Acts Interpretation Act 1901.

11.383 Any delegate of the APRA Minister must comply with any directions. [Schedule 2, Part 4, subitem 41(2)]

11.384 The delegation power of the APRA Minister does not apply to a power to make, vary or revoke a legislative instrument (such as transitional rules under 43). [Schedule 2, Part 4, subitem 41(3)]

Compensation for acquisition of property

11.385 If the operation of the Consequential Amendments and Transitional Provisions Bill were to result in an acquisition of property (within the meaning of paragraph 51(xxxi) of the Constitution) from a person otherwise than on just terms (within the meaning of that paragraph), the Commonwealth is liable to pay a reasonable amount of compensation to the person. [Schedule 2, Part 4, item 42]

11.386 The person may institute proceedings in a court if the Commonwealth and the person cannot agree on the amount of the compensation. The court would determine a reasonable amount of compensation and would recover the amount for the Commonwealth. [Schedule 2, Part 4, item 42]

Transitional rules

11.387 The APRA Minister may, by legislative instrument, make rules regarding transitional matters relating to:

•

the amendments or repeals made by the Consequential Amendments and Transitional Provisions Bill; or

•

the enactment of the Consequential Amendments and Transitional Provisions Bill or the Prudential Supervision Bill. [Schedule 2, Part 4, item 43]

11.388 The rules are intended to be used where the transition provisions do not cover a situation that may arise during the transition but cannot be predicted with any certainty or catered for in detail prior to it occurring (for example, to enable the making of rules, for the purposes of item 34, catering for the continuation of a process commenced by the Council, in relation to transferring staff). A number of the general transitional provisions expressly refer to particular situations being catered for in transitional rules, if necessary.

11.389 The rules may not:

•

create an offence or civil penalty provision;

•

provide:

•

powers of arrest or detention; or

•

powers relating to entry, search or seizure;

•

impose a tax;

•

set an amount to be appropriated from the Consolidated Revenue Fund under an appropriate in the Consequential Amendments and Transitional Provisions Bill;

•

directly amend the text of the Consequential Amendments and Transitional Provisions Bill. [Schedule 2, Part 4, subitem 43(3)]

11.390 The Consequential Amendments and Transitional Provisions Bill (other than subitem (3)) does not limit the rules that may be made.