Explanatory Memorandum
(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP)Chapter 14 - Private Health Insurance Collapsed Insurer Levy
Outline of chapter
14.1 Chapter 14 relates to amendments to the Collapsed Insurer Levy Act.
14.2 Unless otherwise stated, all references in this Chapter relate to the Collapsed Insurer Amendment Bill.
Summary of new law
14.3 The Collapsed Insurer Amendment Bill makes amendments consequential on the transfer of responsibility for the Collapsed Insurer Levy from the Council and the Health Minister to APRA and a Treasury Minister. There are related amendments to the FISLC Act that will give APRA responsibility for the collection of the levy.
14.4 The Collapsed Insurer Amendment Bill amends the legislative framework for the imposition and calculation, of a levy, and the setting of levy days. The purpose of the levy will not change. It will continue to be used, if required, to recover the cost of meeting a collapsed insurer's liabilities to the people insured under its complying health insurance policies, that it is unable to meet itself.
14.5 For private health insurers, the Collapsed Insurer Levy, if activated, will operate as it would have prior to the cessation of the Council.
Comparison of key features of new law and current law
| New law | Current law |
| The Collapsed Insurer Levy will be imposed in the case of a private health insurers' collapse by a Treasury Minister. | The Collapsed Insurer Levy is imposed in the case of a collapsed private health insurers' by the Health Minister. |
| Before making a determination imposing the levy a Treasury Minister must obtain and take into account, advice from APRA in relation to:
Any advice received by the Minister from APRA must be laid before each House of Parliament with the determination to which the advice relates. |
Before making a determination the Minister for Health must obtain and take into account, advice from the Council in relation to:
Any advice received by the Minister from the Council must be laid before each House of Parliament with the determination to which the advice relates. |
Detailed explanation of new law
14.6 In Section 5, the definition of 'collapsed insurer' has been replaced to reflect APRA's role and the transfer of provisions on the external management and terminating management of health benefits funds from the PHI Act to the Prudential Supervision Bill. This is not intended to alter the substantial effect of the definition. It will ensure that a private health insurer is a 'collapsed insurer' if at least one of the following applies to at least one of the insurer's health benefits funds:
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- APRA has approved the termination of the health benefits fund under section 37 of the Prudential Supervision Bill [Schedule 1, Part 1, Item 2(a)];
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- APRA has appointed an external manager of the health benefits fund under section 51 of the Prudential Supervision Bill [Schedule 1, Part 1, Item 2(b)];
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- the Federal Court of Australia has ordered the appointment of a terminating manager of the health benefits fund under section 67 of the Prudential Supervision Bill. [Schedule 1, Part 1, Item 2(c)]
14.7 In Section 5, the definition of 'health benefits fund' has also been inserted and it will have the same meaning as in the PHI Act, as the term is referred to in the definition of 'collapsed insurer'. [Schedule 1, Part 1, Item 4]
14.8 Finally, in Section 5, 'private health insurer' now has the same meaning as in the Prudential Supervision Bill, rather than that contained in the PHI Act. [Schedule 1, Part 1, Item 5]
14.9 Subsection 7(3) is inserted to clarify that any determination specifying a collapsed insurer levy day must also specify the payment day for that levy. [Schedule 1, Part 1, Item 6]
14.10 Subsection 8(2), paragraphs (a) and (b) are being replaced to align with the new prudential standards outlined in the Prudential Supervision Bill. That is:
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- a prudential standard (within the meaning of the Prudential Supervision Bill) relating to capital adequacy or solvency that applies in relation to the insurer; or
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- a direction given to the insurer under section 96 of the Prudential Supervision Bill. [Schedule 1, Part 1, Item 7]
14.11 Section 10 is to be renamed 'Minister to obtain advice from APRA'. Subsection 10(1) and 10(2) are to be amended to replace 'Council' with 'APRA'. [Schedule 1, Part 1, Items 8,9, and 11]
14.12 Paragraph 10(1)(ca) will be inserted to clarify that the Minister must also obtain advice from APRA in relation to the 'payment day' to be specified in relation to the Collapsed Insurer Levy. [Schedule 1, Part 1, Item 10]
14.13 Section 11 is to be repealed [Schedule 1, Part 1, Item 12] and Subsection 12(2) is to be amended to replace 'Council' with 'APRA'. [Schedule 1, Part 1, Item 13]
Transitional provisions
14.14 Section 14 is to be inserted to ensure that any determination in force immediately before the commencement of this item under sections 7, 8 or 9 of the Collapsed Insurer Levy Act will continue to have effect. [Schedule 1, Part 1, Item 14]
Part 2 - Other Amendments
14.15 The Collapsed Insurer Amendment Bill is 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 12 Item 15]