HBF Health Fund Inc and Minister for Health and Ageing

[2005] AATA 599

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 599

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No W2005/113

GENERAL ADMINISTRATIVE  DIVISION		)
Re		HBF HEALTH FUND INC.

Applicant

And MINISTER FOR HEALTH AND AGEING

Respondent

DECISION

Tribunal The Hon R J Groom (Deputy President)

Date23 June 2005

PlacePerth

Decision The decision under review is affirmed.

[Sgd The Hon R J Groom]

Deputy President

CATCHWORDS

Health Insurance – National Health Act 1953 – registered health benefit organisation – intention to introduce new loyalty bonus scheme – benefits under scheme not payable until age 65 – amount of benefits subject to ancillary benefit claims history – concern by delegate that may be “improper discrimination” within meaning of s66(1) – organisation proposes rules change to implement scheme – delegate gives Direction under s73BEJ(1) to modify rules – meaning of “improper discrimination” – would scheme give rise to “improper discrimination” – whether organisation would be in breach of its condition of registration – whether Direction lawful – meaning of phrase “maybe in breach” s73(BEB(1) – whether the Direction otherwise the correct or preferable decision - decision under review affirmed.

National Health Act 1953 – ss5A, 66(1)(2), 73AAF, 73AAG(2)(3), 73AAH(1),(2)(3) and (4), 73AAJ, 73AAK,73BAA, 73BEB(1),(2),(3) and (4), 73BEC(1) and (2),73BEJ(1), 78(1)(4) and (7)

Age Discrimination Act 2004 – s33

Acts Interpretation Act 1901 - s15AA

Cameron v The Queen [2002] 209 CLR 339 at 443-4

Permanent Trustee Australia Ltd v Commissioner of State Revenue (2004) 211 ALR 18 at 40

Hospital Benefits Fund of Western Australia Inc v Australian Competition and Consumer Commission (1997) 76 FCR 369  

Barratt v Howard & Ors [1999] FCA 1132 at [45]

Re Wakim; Ex parte McNally [1999] HCA 27 at 79

Wentworth v NSW Bar Association [1992] 176 CLR 239 at 250.

Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (C’th) [1981] 147 CLR 197

Prospect Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR  355

Insurance Commission of Western Australian v Container Handlers Pty Ltd (2004) 206 ALR 335 at 365

Palgo Holdings Pty Ltd v Gowans [2005] HCA 28.

REASONS FOR DECISION

23 June 2005 The Hon R J Groom (Deputy President)

1.      The applicant, the HBF Health Fund Inc (“HBF”), has asked for a review of a decision made by a delegate of the Minister for Health and Ageing, giving a direction on 15 March 2005 to HBF (“the direction”) to modify its rules by adding a rule that HBF “will not further publicise and not further implement” a loyalty bonus scheme proposed by HBF.

2. The hearing was held in Perth on 17 and 18 May 2005. Mr D Solomon appeared for the applicant and Mr S Owen-Conway QC. with Dr G Rumble for the respondent. The T documents, lodged pursuant to s37 of the Administrative Appeals Tribunal Act 1975 were received into evidence. Following the hearing, and as directed by the Tribunal, written submissions on the meaning of s73BEB of the National Health Act 1953 (“the Act”) were received from the respondent’s solicitors on 25 May 2005 and from the applicant’s solicitors on 27 May 2005.

Background Facts

3.      I find the following background facts:

(a)HBF is a health benefits organisation registered under Part VI of the Act.

(b)It is a mutual “not for profit” membership organisation with approximately 950,000 members.   Most of its members reside in Western Australia.   It has some 69% of the Western Australian health insurance market.

(c)The act was amended by the Health Legislation Amendment Act (No 2) of 1999 which received Royal Assent on 19 April 1999. The amending Act provided a new subparagraph (ma) of Schedule 1 of the Act to permit registered health benefits organisations to implement Loyalty Bonus Schemes in recognition of length of membership.

(d)A new subsection 73BA (2A) of the then Act gave the Minister power to make guidelines for the establishment, by a registered organisation, of Loyalty Bonus Schemes.   The National Health (Loyalty Bonus Schemes) Guidelines (“the guidelines”) were then made and commenced operation on 20 October 1999.   Those guidelines remain in force.

(e)In the early months of 2004 HBF approached relevant officers of the Department of Health and Ageing (“the Department”) to explain details of a bonus loyalty scheme (“the scheme”) HBF intended introducing.

The proposed scheme was discussed at a meeting between the Department and HBF on 10 March 2004, and a detailed written background brief on the scheme was then provided. (see T Documents p46)

(f)The essential elements of HBF’s proposed loyalty bonus scheme as explained in its background brief of 10 March 2004 (see pp2 and 3 of that brief) were as follows:

·To quality for a loyalty benefit members must have either hospital or ancillary cover and have at 3 years continuous membership.

·Loyalty benefits increase as the length of membership increases.

·The HBF loyalty benefit includes an ancillary component rewarding members for either reducing or deferring claims for services viewed as discretionary.  This is to reward the member’s loyalty to the membership as a whole.

·For members with the same ancillary claims to contribution ratio, benefits under the initiative will be higher the longer the membership.

·Benefits accrue until the member reaches the age of 65, at which time they are available to be used, unless there are unforseen circumstances.

·Benefits can be used in conjunction with any health insurance claim to reduce `out of pocket’ expenses (both hospital and ancillary).

(g)The amount of the benefit accruing to a member at each allocation date depends on the recent ancillary benefits claim history of the member.   The claims profile is determined as a ratio of ancillary benefits claims paid divided by the premium received in the 3  previous years.   The claims profile is therefore determined on a 3 year rolling basis, as explained at paragraph 4 of the background brief (see T documents pp70 and 71).

(h)On 15 April 2004 the Department e-mailed HBF to express its concerns that the proposed scheme would provide bonuses based not only on the period of time contributions had been paid, but on claims history and age, and stating that the proposed scheme was inconsistent with the Act.

(i)HBF responded by e-mail dated 22 April 2004 stating that “… in preparing our rules of the loyalty benefits scheme and our submission we had of course considered in detail a number of issues, including the ones  you have raised, to satisfy ourselves that our scheme complied with the legislation and guidelines.

Further advice from Solomon Brothers addressing your issues reinforces in our mind that our scheme does comply.”

(j)On 1 July 2004 HBF informed the Department of its intention to proceed to publicise and implement the scheme on and from 19 July 2004.

(k)On 2 July 2004 HBF formally notified the Department of a rule change to establish the loyalty bonus scheme.  

(l)The Minister’s delegate by letter dated 15 July 2004 and purportedly pursuant to s73BEB of the Act, requested HBF to explain why it proposed to implement a loyalty bonus scheme which may be consistent with the Act.

(m)HBF provided the Minister’s delegate with a formal explanation on 28 July 2004.   HBF made a submission dated 28 July 2004 to the Minister setting out its reasons for pursuing the proposed loyalty bonus scheme.

(n)HBF and the Department obtained legal opinions supporting their respective contentions and these were exchanged.

(o)The Minister’s delegate wrote to HBF by letter dated 23 December 2004 purportedly written in accordance with s73BEC of the Act, stating that she was not satisfied with the explanation provided by HBF and enclosing a proposed direction and statement of reasons.

(p)On 23 December 2004, HBF wrote to the Minister and the delegate stating that in its view the rule change had formally commenced, had become effective and not been disallowed. HBF indicated that if it received a direction pursuant to s73BEC of the Act it would apply to this Tribunal for a review.

(q)The delegate wrote again to HBF on 7 January 2005 stating that the letter of 23 December 2004 was written pursuant 73BEC(2) of the Act and that the direction was to be made under s73BEJ of the Act.

(r)HBF again wrote to the delegate on 7 January 2005 restating its position and indicating that it looked forward to the Minister’s final determination.

(s)On 15 February 2005 the Minister wrote to HBF informing it that there was to be a review of the policy concerning loyalty bonus schemes and asking whether HBF might give an assurance not to implement the scheme pending the outcome of the review.

(t)By letter dated 21 February 2005 HBF replied to the Minister stating that it could not provide the written assurance sought because the scheme had been implemented as from 19 July 2004 and member communication had commenced on 27 January 2005.

(u)In February 2005 all HBF contributors aged 65 and over were sent letters introducing them to the scheme and advising each of the amounts of their accrued entitlement, and also advising them that they were entitled to claim against their entitlements as from 1 July 2005.   The total number of letters sent was 59,136.   An amount of 10 million dollars was allocated in the 2004/2005 financial year to a designated fund for the purpose of financing the scheme bonuses.

(v)The delegate then proceeded on 15 March 2005 to give the direction which is the subject matter of this application.

(w)The full direction is set out in the T documents at p11, however its essence is as follows:

“I, LINDA ADDISON, DELEGATE OF THE MINISTER FOR HEALTH AND AGEING, having regard to the nature of an explanation sought under section 73BEB of the National Health Act 1953 (“the Act”) and provided by HBF Health Funds Inc, consider that it will assist in the prevention of improper discrimination to give the following direction to HBF Health Funds Inc.

I DIRECT, pursuant to subsection 73BEJ(1) of the Act, that HBF Health Funds Inc. modify its rules by adding the following rule:

HBF Health Funds Inc. will not further publicise and will not further implement the Loyalty Benefit Scheme (“the Scheme”) described in the following documents provided to the Department of Health and Ageing:

-   “HBF Loyalty Benefit Scheme Background Brief” dated March 2004 (draft V1:2);

-   “HBF Health Funds Inc. Submission for Rule Change to Implement a Loyalty Benefit Scheme”, dated 31 March 2004; and

-   “HBF Rules made pursuant to HBF Regulations for a Loyalty Benefit Scheme”, draft dated 31 March 2004.”

(x)HBF applied to the Administrative Appeals Tribunal on 30 March 2005 for a review of the decision being the direction given on 15 March 2005.

The Issues

4.      A review of the direction requires a determination by the Tribunal of four principal questions:

(a)Will the implementation of the proposed HBF loyalty bonus scheme constitute “improper discrimination” with the meaning of the Act?

(b)Will HBF be in breach of its condition of registration imposed by s73AAF and paragraph (ma) of Schedule 1 of the Act if it implements the scheme?

(c)Was the direction of 15 March 2005 lawful?

(d)Was the direction otherwise the correct and preferable decision?

Legislation and Guidelines

5. Section 66 of the Act relevantly provides:

“(1) In this Part, unless the contrary intention appears:

improper discrimination means a discrimination that is related to all or any of the following matters:

(ba)the age of a person, except to the extent that the person's age may be taken into account under section 73BAAA and Schedule 2;

(d) the amount, or extent, of the benefits to which a person becomes, or has become, entitled during a period;

…

(2) A reference in this Part to the principles of community rating is a reference to the general requirements imposed on a registered organization by virtue of the operation of subsections 73AAH(2) and (3) and also to the particular requirements imposed on a registered organization under sections 73AAI and 73AAJ.”

6.      Section 73AAH provides:

“(1) It is a condition of registration of a registered organization that the organization will ensure that its constitution and rules, and its actions, are at all times consistent with the principles of community rating.

(2) The constitution or rules of a registered organization will not be consistent with the principles of community rating if the constitution or rules permit the organization to undertake any activity that constitutes improper discrimination against a person who seeks to become, or who is, a contributor to the health benefits fund conducted by the organization or against a dependant of such a person.

Note: Improper discrimination is defined in subsection 66(1).

(3) An action of a registered organization will not be consistent with the principles of community rating if the action results in the undertaking of any activity that constitutes an improper discrimination against a person who seeks to become, or who is, a contributor to the health benefits fund conducted by the organization or against a dependant of such a person.

Note: Improper discrimination is defined in subsection 66(1).

(4) Determining entitlement to ancillary health benefits claimed in respect of a period by or on behalf of a contributor to a health benefits fund conducted by a registered health benefits organization, or by or on behalf of a dependant of such a contributor, by reference solely to the quantum of ancillary health benefits already claimed in respect of that period is consistent with the principles of community rating referred to in subsections (2) and (3). “

7. Section 73AAJ provides:

“It is a condition of registration of a registered organization that the organization will not, in determining, in relation to any contributor, or to any contributor included in a class of contributors, to the health benefits fund conducted by it:

(a) whether or not benefits are payable in accordance with an applicable benefits arrangement of the organization (whether or not modified by an election of the kind referred to in the condition set out in paragraph (ba) of Schedule 1); or

(b) if benefits are payable in accordance with an applicable benefits arrangement of the organization (whether or not modified by an election of the kind referred to in the condition set out in paragraph (ba) of Schedule 1)—the amount of the benefits so payable; or

(c) whether or not the contributor is entitled to make or revoke an election of the kind referred to in the condition set out in paragraph (ba) of Schedule 1; or

(d) the amount of the contributions payable in respect of an applicable benefits arrangement of the organization;

have regard to any matter that would cause the determination to constitute improper discrimination in respect of any contributor, or any contributor included in a class of contributors, to whom or to which the determination relates.”

8.      Section 73 AAF provides:

“The registration of an organization as a registered health benefits organization is, with effect from the date of its registration, subject to the conditions set out in this Division and the conditions set out in Schedule 1.”

9. Schedule 1 of the Act relevantly provides:

“… (ma)  The rules of the organization may permit the organization to implement a scheme (to be known as a loyalty bonus scheme) under which:

(i) the organization offers actual or contingent financial benefits to a contributor to the health benefits fund conducted by the organization, or to a dependant of such a contributor, or to a third party on behalf of such a contributor or dependant; or

(ii) the organization offers, or arranges for a third party to offer, goods or services to such a contributor or dependant;

in recognition of the period of time over which contributions have been paid by or on behalf of such a contributor under an applicable benefits arrangement or for a table of ancillary health benefits, only if the provision of such financial benefits, goods or services is consistent with any guidelines that are determined by the Minister under subsection 73AAG(2).

(mb) The organization will not, in determining whether a contributor or a dependant of a contributor may participate in a loyalty bonus scheme, have regard to any of the following matters:

(i) the suffering by the contributor, or a dependant of the contributor, from a chronic disease, illness or other medical condition or from a disease, illness or medical condition of a particular kind;

(ii)       the age of the contributor or of a dependant of a contributor;

(iii) the frequency of the rendering of professional services to the contributor or to a dependant of a contributor;

(iv) the amount, or extent, of the benefits to which the contributor becomes, or has become, entitled during a period;

(v)       any matter prescribed for the purpose of this provision.”

10. Until it was repealed in July 2004 the former s73BA(2A), which is referred to in paragraph (ma) of Schedule 1 provided :

“(2A) The Minister may determine, in writing, guidelines relating to the establishment by an organization, under its rules and in accordance with the conditions set out in paragraph (ma) of Schedule 1, of loyalty bonus schemes.”

11.     Section 73BA(2A) has now been replaced by s73AAG(2) which is in identical terms.

12.     Former section 73BA(2B), now replaced by an identical section 73AAG(3), relevantly provides:

“Such guidelines:

(a)       may cover all or any of the following:

(i)the circumstances in which organizations can offer financial benefits, goods or services under a loyalty bonus scheme;

(ii)the types of actual and contingent financial benefits that can be offered to a contributor, a dependant of a contributor or a third party under such a scheme;

(iii)the types of goods or services that can be offered by the organization or, at the instigation of the organization, by a third party, to a contributor or dependant; and

(b) are disallowable instruments for the purposes of section 46A of the Acts Interpretation Act 1901.”

13.     In 1999 the Minister made the Guidelines pursuant to the power contained in s73BA(2A).  The following two guidelines are relevant to this application:

“5        Loyalty Bonus to be based on membership duration

For subsection 73BA(2A) of the Act, a loyalty bonus may be offered by an organisation only in the circumstances described in paragraph (ma) of Schedule 1 of the Act.

11       Uniformity

The type of loyalty bonus that can be offered by an organisation is unlimited except that each person eligible to receive the loyalty bonus must be offered the same type, or the same choice of types, as each other eligible person.”

14. Section 73 BEB of the Act provides:

“If, having regard:

(a)to any information that is available to the Minister at any time concerning a registered organization; or

(b)       to such information and to performance indicators in force at that time;

the Minister believes that the organization may be in breach of the Act, the Minister may write to the organization expressing the Minister's concerns and requesting the organization to provide an explanation of its operations relevant to those concerns.

(2)       In requesting an explanation of particular operations of a registered organization, the Minister must specify the time within which the organization is required to provide that explanation.

(3)       If the organization is unable to provide an explanation within the time specified by the Minister, it may, within that time, explain to the Minister the reason for that inability and request the Minister to extend the time for it to provide the explanation.

(4)       If the Minister refuses to extend the time limit for providing the explanation, the Minister must inform the organization accordingly and indicate the reasons for the refusal.”

15. Section 73BEJ(1) provides:

“If, having regard to:

(a)the failure of a registered organization to provide an explanation of its operations sought by the Minister under Subdivision A; or

(b)       the nature of an explanation so sought that is provided to the Minister;

the Minister considers that it will assist in the prevention of improper discrimination to do so, the Minister may give a direction to the organization:

(c)       requiring it to modify its constitution or its rules in a particular respect; or

(d)       requiring it to modify its day-to-day operations in a particular respect.”

16.     Section 78 relevantly provides:

“(1) If, after the registration of an organization under this Part, the registered organization changes its rules, the registered organization must ensure that the Secretary receives notification of the change in accordance with this section.

…

(4) Where the Minister is of the opinion that a change:

(a) would or might result in a breach of this Act or of a condition of registration of an organisation;

(b) imposes an unreasonable or inequitable condition affecting the rights of any contributors; or

(c) might, having regard to the advice of the Council, adversely affect the financial stability of a health benefits fund;

the Minister may, by declaration in writing, declare that the change shall not come into operation.

…

(4B) The Minister must cause a copy of a declaration under subsection (4A) to be laid before each House of the Parliament within 15 sitting days after the declaration is made.”

Will Implementation of the Proposed HBF Loyalty Bonus Scheme Constitute “Improper Discrimination” within the meaning of the Act?

Improper Discrimination

17. As the direction was given under s73BEJ(1) of the Act, it follows that it was based on the belief of the delegate that the direction would “… assist in the prevention of improper discrimination.”

18. In paragraphs 4.10 – 4.19 of the direction, the delegate finds that the scheme, if implemented, would give rise to improper discrimination as defined in s66(1)(ba) of the Act (age discrimination). In paragraphs 4.20 – 4.25 the delegate finds that the scheme, if implemented would give rise to improper discrimination as defined in s66(1)(d) of the Act (claims history discrimination). The Tribunal will deal with each of those issues in turn.

Age Discrimination

19.     The applicant argues, that the contingency on which payment of a loyalty bonus depends, namely the attaining of 65 years of age, is not discrimination because it is not “the unequal treatment of equals which is not the product of a distinction which is appropriate and adapted to the attainment of a proper objective” - see Cameron v The Queen [2002] 209 CLR 339 at 443-4 per Gaudron, Gummow and Callinan JJ applied in Permanent Trustee Australia Ltd v Commissioner of State Revenue (2004) 211 ALR 18 at 40 per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ.

20. Further it is contended on behalf of the applicant that if the Act is construed harmoniously as a whole, and it argues it should be, then the conferring of an actual or contingent financial benefit within the meaning of paragraph (ma) does not amount to discrimination.

21. In addition the applicant contends that the Act does not evince an intention to prohibit conferral of financial benefits under a loyalty bonus scheme on those who have attained a certain age.

22. In response the respondent argues that the scheme, if implemented, would give rise to improper age discrimination as defined in paragraph 66(1)(ba) of the Act. This is because, it argues, the rules of the scheme expressly preclude a contributor from accessing benefits until the person attains the age of 65. The respondent argues that persons who are less than 65 years old are treated less favourably than those above 65 and are therefore improperly discriminated against.

23. It is agreed by the parties, and it is also the Tribunal’s view, that the issue of age discrimination must be considered in the special context of the Act. The community rating principle, which is a legislated foundation stone of fairness in the Australian health insurance system, seeks to spread both premiums and benefits, so that those who need frequent health care are not required to bear an additional financial burden.

24.     According to the Macquarie Dictionary “discrimination”, which is the word used to define “improper discrimination”, means:

“1.       the act of discriminating;

2.        the resulting state;

3.the making of a difference in particular cases, as in favour of or against a person or thing….”.

25. In the sense of the ordinary meaning of “discrimination” the proposed scheme, if implemented, would discriminate in favour of contributors who are over the age of 65 years. One only receives the financial benefits of the scheme when one reaches that age. A single person, for example, could be a contributor with HBF for forty years, dies before reach 65 and never receive a bonus under the scheme. But the question is whether it is “improper discrimination” within the meaning of s66(1)(ba).

26.     It can be argued, and indeed it was on behalf of the applicant, that the scheme only discriminates in a positive way to assist those who have attained the age of 65 years.   This may be said to be a proper objective as people over 65 generally tend to have lower incomes, but increased needs.   

27. Looking beyond health insurance it is fair to say that there exists in Australia many different schemes which provides benefits to people of a certain age. In a number of the states, if not all, senior cards provide a range of benefits and discounts only for those over 60 years of age. It is interesting to note that in s33 of the Age Discrimination Act 2004 (C’th) an exemption is provided if “… (a) the act provides a bona fide benefit to persons of a particular age.”

28. It was put on behalf of the respondent that the general provisions of anti-discrimination legislation such as the Commonwealth Act referred to above render positive age discrimination unlawful and that is why it is necessary to expressly provide specific exemptions, such as exists in s33. It is further pointed out that the National Health Act has no such exemptions except the limited exemptions referred to in s66(1)(ba). Such exemptions could have been easily included by the legislature had that really been its intention.

29. The definition of improper discrimination in s66(1) of the Act and the nature of many of the grounds specified in (a) to (e) of that subsection make it clear that the grounds were specifically chosen in order to protect the integrity of the health insurance system. Some of the grounds are very different from those one would expect to find in broad based anti-discrimination. In other words “discrimination” here has a particular relevance and application to health insurance. The desire to protect, for example, those who need frequent medical services and the full range of age groups is self evident in the Act.

30. The Tribunal is satisfied that the legislature in enacting the health insurance provisions of the National Health Act did not intend to allow age discrimination, including positive discrimination, in favour of any particular age group. To do so would be contrary to the community rating principles. Limited exceptions are expressly provided in the Act (see s73BAAA and Schedule 2). The relevant provisions of the Act were intended to prevent benefits being paid only to contributors of a specified age. This is evident not only in the wording of s66(1)(ba), 73AAH(1)(2) and (3) and paragraphs (ma) of Schedule 1, but also in paragraph (mb) in Schedule 1. Paragraph (mb) aids the interpretation of the overall intention in its specific reference in (ii) to “…the age of the contributor.”

31.     It is not so much the provision of benefits to people over the age of 65 which is the concern, but rather the fact that contributors of any other age, whether it be at age 20, 30, 40 or whatever age, have no right, at that age, to receive any financial benefit under the scheme.    This is despite the fact that their contributions may indirectly assist to finance the benefits which flow only to that limited age group.

32. The Tribunal does not concur with the view expressed that the age discrimination provision in s66(1)(ba) relates only to discriminating on the ground that a person is “too old” as distinct from requiring that they reach a certain age before being entitled to obtain an actual benefit under a loyalty bonus scheme. The case cited, Hospital Benefits Fund of Western Australia Inc v Australian Competition and Consumer Commission (1997) 76 FCR 369, is not authority for such a proposition. That suggested interpretation would place an artificially restrictive meaning on the word “age” as used in the Act.

33. Nor does it agree with the suggestion that a careful consideration of (ma) of Schedule 1 of the Act and reading all of the provisions of the Act harmoniously results in a conclusion that the scheme will not improperly discriminate. Indeed the Tribunal has formed the view that a reading of the plain meaning of the various provisions together leads to the conclusion that the legislature intended that loyalty bonus schemes not improperly discriminate, and that payment of a benefit under such a scheme should not be conditional upon attaining a particular age.

34.     The Tribunal therefore finds that the age element of the applicant’s proposed rules breaches s73AAH(1) interacting with s73AAH(2) and implementation of the rules will breach s73AAH(1)  interacting with s73AAH(3).

Claims History Discrimination

35.     As explained in paragraph 3(e) above the scheme provides that the amount of the benefits to be paid to a contributor is based, in part, on the person’s ancillary benefits claim history.

36. In paragraphs 4.20 – 4.25 of the Direction, the delegate finds that the scheme, if implemented, would give rise to improper discrimination under s66(1)(d) of the Act.

37. Section 73AAJ of the Act makes it a condition of the registration of a Registered Health Benefits Organisation that there not be improper discrimination with respect to benefits payable in accordance with “an applicable benefits arrangement”.

38. “Applicable benefits arrangements” is defined in s5A of the Act and is restricted to in-hospital treatment and does not include “ancillary health benefits” which are defined in s67 (4) of the Act.

39. The applicant argues that s73AAJ is a specific provision dealing with improper discrimination and as it applies only to “applicable benefits arrangements” (i.e. in-hospital cover) and not “ancillary health benefits”, the ancillary benefits claims history the aspect of the scheme is not in breach of the more general provisions of 73AAH. It contends that the general provisions cannot override what it considers to be an intentional exclusion of ancillary benefits from the specific provision of s73AAJ. It contends also that this view is supported by the statement at page 15 of the Explanatory Memorandum to the 2004 Reform Act that:

“The condition in s73AAJ does not apply to ancillary cover tables.”

40. It is, of course, self evident that s73AAJ does no apply to ancillary cover tables. The section itself makes that perfectly clear. The issue is whether the omission of ancillary cover tables from s73AAJ was intended to mean that the general provisions of s73AAH also do not apply. It appears to the Tribunal that this is not so much an argument that the specific overrides the general, it clearly does in the case of applicable benefits arrangements which are obviously covered by the specific provisions, but rather it is a version of the maxim “inclusio unius est exclusio alterius”. The problem with that is that it is drawing an inference rather that relying on express words. The courts have been extremely cautious in applying the maxim to draw inferences which could easily be expressly stated. (See Barratt v Howard & Ors [1999] FCA 1132 at 45 and Re Wakim; Ex parte McNally [1999] HCA 27 at 79 and Wentworth v NSW Bar Association [1992] 176 CLR 239 at 250.

41. The Tribunal’s view is that s73AAH is a provision of general application aimed at underpinning the principles of community rating and ensuring that improper discrimination does not occur. Section 73AAJ highlights and stresses particular prohibitions applying to applicable benefits arrangements, but the presence of the specific provisions in s73AAJ does not mean that the provisions in the wider s73AAH do not apply to the use of ancillary benefits claims history in determining entitlements under a loyalty bonus scheme. The Tribunal agrees with the respondent’s contention that if s73AAH was intended to authorise the use of ancillary claims benefits history which would otherwise be in breach of s73AAH, then a provision similar to that contained in the first line of s73AAK, or another appropriate provision, could have been included to unambiguously exclude ancillary benefits claims history from the application of s73AAH when considering loyalty bonus schemes. We are not here considering ancillary cover tables per se but the issue of the use of ancillary benefits claims history in determining the amount of benefits payable under a loyalty bonus scheme.

42. Taking into account the totality of the legislative scheme including the Act and its various relevant provisions as well as the guidelines, in the Tribunal’s view the clear intention of the legislation was to exclude any claims history, for ancillary benefits or otherwise, from the process of determining an entitlement to benefits under a loyalty bonus scheme.

43.     The Tribunal therefore finds that the claim history element of the applicant’s proposed rules breaches s73AAH(1) interacting with s73AAH(2) and implementation of the rules will breach s73AAH(1) interacting with s73AAH(3).

Will HBF, in Implementing the Scheme, be in Breach of the Conditions of its Registration Imposed by S73AAF and paragraph (ma) of Schedule 1 of the Act.

44. In paragraph 4.4 of the Direction the delegate contends that by implementing the scheme HBF would breach the condition of registration imposed by s73AAF and paragraph (ma) of Schedule 1. The Tribunal notes that the delegate stated in paragraph 4.4 “This finding is not a pre condition for making a direction under subsection 73BEJ(1), but is a consideration that I have taken into account in making this direction.    The key words in paragraph (ma) which is set out in full in  paragraph 10 above, are:

“… only if the provisions of such financial benefits, goods or services is consistent with any guidelines that are determined by the Minister under subsection 73AAG(2)…”.

45.     Paragraph 5 of the guidelines, which is also set out in paragraph 9, states, in part,  “… a loyalty bonus may be offered of an organisation only in the circumstance described in paragraph (ma) of Schedule 1. (the Tribunal’s emphasis).   That singular permitted “circumstance” is clearly intended to be “…in recognition of the period of time over which contributions have been …”.

46.     The applicant argues that the entitlement to benefits under the scheme is predicated on, and varied according to, the length of membership.   Attaining 65 years of age it is suggested merely “a contingency” on the use of the benefits.   It argues the underlying factor entitling a contributor to a benefit is solely the length of time the contributor has made contributions.

47.     According to the Macquarie Dictionary “circumstance” means:

… 1 a condition, with respect to time, place, manner, agent etc, which accompanies, determines, or modifies a fact or event…”.

48. In the Tribunal’s view the matter of both age and claims history are additional “circumstances” recognised in the scheme over and above the sole circumstance permitted by paragraph (ma) of Schedule 1 of the Act and the guidelines namely “… the period of time over which contributions have been paid...”.

49.     It is suggested on behalf of the applicant “… that the types of loyalty bonus schemes that can be offered are unlimited…”. This is said to be the supported by guideline 11. However in the Tribunal’s view “types” does not mean the circumstances and conditions applying to the scheme, but rather the nature of the actual bonus. The bonus need not be a financial benefit, it can also be “goods or services”. (See paragraph (ma)(ii) of Schedule 1).

50.     There can be “actual” as well as “contingent” financial benefits offered to a contributor which accord with the sole circumstance permitted by paragraph (ma).   For example, benefits might not be payable immediately but be contingent on a number of years of further contributions or other preconditions.    Any contingency must be consistent with the legislature’s clear intention to limit loyalty bonus schemes to recognition and reward for a person’s period of contributions, and its further intention to prohibit improper discrimination and maintain community rating.

51. The Tribunal therefore finds that if HBF implements the scheme as it stands it would be in breach of the condition of its registration imposed by s73AAF at paragraph (ma) of Schedule 1 of the Act.

Was the Direction of 15 March 2005 Lawful?

52.     By letter dated 15 July 2004 the delegate wrote to the applicant in part as follows:

“I refer to the notification of a rule change submitted on 2 July 2004 regarding the establishment of a Loyalty Bonus Scheme, rule change to take effect on 19 July 2004.

I consider, having regard to information available to me, that HBF Health Funds Inc (HBF) may, on and from 19 July 2004, be in breach of the National Health Act 1953 (the Act) by making this rule change, and implementing its proposed Loyalty Bonus Scheme.

I request, in accordance with section 73BEB of the Act, that HBF provide an explanation as to why it proposes to implement a Loyalty Bonus Scheme which, it appears, may be inconsistent with the Act, and that the explanation be provided by close of business 30 August 2004.

I am concerned that on and from 19 July 2004, HBF may, in relation to its proposed Loyalty Bonus Scheme, operate in breach of one or more of the following provisions of the Act:

-         Paragraph (ma), Schedule 1;

-         Subsection 73AAH(2), by reference to paragraph 66(1)(ba) and/or 66(1)(d);

-         Subsection 73AAH(3), by reference to paragraph 66(1)(ba) and/or 66(1)(d).

Therefore, I hope that you will not be taking steps to implement the Scheme prior to resolution of this matter.”

53.     It was argued at the hearing on behalf of the applicant that as at 15 July 2004 when the delegate wrote the abovementioned letter the rule change had not come into effect, and there was no proper basis for seeking an explanation pursuant to s73BEB(1) of the Act. The contention is that the words “… may be in breach of the Act…” really mean in breach of the Act or likely to already be in breach. Mr Solomon submitted “… because there was no rule change at the time the whole process has no lawful basis.”  This point was further expanded in the applicant’s written submission.

54.     In the relevant sense of its meaning, the word “may” suggests uncertainty.  It is a notoriously ambiguous word (See, for example, Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (C’th) [1981] 147 CLR 197 at 320 per Mason and Wilson JJ). In interpreting the words “may be in breach” it is necessary to consider the context in which it is used. We are not considering here a penal provision, but one which simply allows an expression of concern and the seeking of an explanation.

55.     The purpose of s73BEB is to initiate a process whereby the Minister or the Minister’s delegate, when concerned there may be a breach of the Act, writes to the organisation and requests an explanation. Under s73BEC, if not satisfied with the explanation provided, the Minister or delegate can then take certain courses of action specified in that section including “(c) to give the organisation a direction under subdivision D”.

56.     In s73BEC(3)(a) such a direction can be given “… whether or not the minister is satisfied, having regard to the explanation and to any other relevant information known to the Minister, that the organisation has breached, or is likely to have breached the Act; …”.

57.     The delegate’s direction was given pursuant to s73BEJ(1). This follows an explanation provided after the s73BEB request. The delegate must have “… regard to…”  the explanation provided and if the delegate considers “… it will assist in the prevention of the improper discrimination to do so…”  the delegate “…. may give a direction.”

58.     In the Tribunal’s view a restrictive interpretation of the words “may be” to mean a present breach or likely present breach does not sit well with the obvious desire of the legislature, as expressed in the legislation, to prevent breaches of the Act including “…the prevention of improper discrimination.” (see s73BEJ(1)).

59.     It is appropriate to apply a “purposive” approach in interpreting s73BEB. This approach was recognised at common law but is now established in legislation. Section 15AA of the Commonwealth Acts Interpretations Act 1901  states as follows:

“In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object.”

60.     The purposive approach as expressed in s15AA above and in similar statutes of the various States of Australia is now recognised as an accepted approach to statutory interpretation by Australian courts.  (see Prospect Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 per McHugh, Gummow, Kirby and Hayne JJ at p381 and also Insurance Commission of Western Australian v Container Handlers Pty Ltd (2004) 206 ALR 335 at 365 per Kirby J and Palgo Holdings Pty Ltd v Gowans [2005] HCA 28.

61. A narrow construction of s73BEB would require the delegate to wait until a breach of the Act had actually occurred or is likely to have occurred. That approach would frustrate the real purpose of s73BEB which is to uphold the Act and stop breaches from occurring, including the prevention of improper discrimination.

62.     The Tribunal finds therefore that s73 BEB can be utilised when there is a prospective breach which the delegate believes is likely to occur unless appropriate action is taken.   The delegate’s letter of 15 July 2004 expressing concern that HBF “… may, on and from 19 July 2004 be in breach of the National Health Act 1953 …”, in the Tribunal’s view, and taking a purposive rather than literalist approach, was consistent with the Act. This is not overriding meaning but sensibly recognising real intent and purpose.

63. As the Tribunal has made a finding that the s73BEB process undertaken by the delegate was in accord with the section and lawful, it is unnecessary for it to consider the issues of estoppel and waiver raised by the respondent in its written submission.

64.     The applicant also argues that the direction has placed HBF in an impossible predicament because it directs that its rules be modified by adding a rule which requires that HBF “not further publicise” the scheme, yet under s78(7) of the Act HBF is required to inform affected contributors of the nature of any change to its rule and so has to further publicise the scheme.

65. Section 78(7) provides as follows:

“A registered organization that proposes to make any rule change that is, or could be, detrimental to the interests of all or any of its contributors must, before the rule change comes into effect, take all reasonable steps to ensure that affected contributors are informed of the nature of the change in terms that can reasonably be expected to be understood.”

66. It is a reasonable interpretation of the direction under s73BEJ, requiring a change to the organisation’s rules, that the change to the rules was to be in accordance with the provisions of the Act, and that in turn requires properly informing contributors of that change pursuant to s78(7) of the Act. However in the Tribunal’s view so informing contributors is not “further publicising the scheme” in the sense prohibited by the direction.

Was the Direction Otherwise the Correct or Preferable Decision?

67. As already stated the Tribunal is of the view that the delegate, having regard to the explanation provided by HBF and the legal advice obtained, was entitled to take appropriate action under the Act to prevent the implementation of the scheme thus in turn preventing improper discrimination.

68. It appears to the Tribunal that there were three possible options which might have been considered by the delegate. They were (1) a declaration under s78(4) of the Act, (2) a direction under s73BEJ or (3) to impose a further condition pursuant to s73BEC(2)(d) of the Act.

69.     As far as s78 is concerned it would have been inappropriate to make a declaration which would be based on an assumption that notification had been given in accordance with that section.  Also it is a more arbitrary approach.    There is not the legislated opportunity for explanations and dialogue.

70. The s73BEC(2)(d) option was a possibility, but seems not to suit the particular circumstances which had given rise to the need for urgent action. The imposition of a further condition on registration is really not an appropriate step in a situation where there was a need simply to modify rules which may cause breaches of the Act.

71. In all the circumstances the Tribunal considers that the course adopted, that is to give a s73BEJ (1) direction, was, and is, the correct or preferable course to adopt. That section is expressly intended to be used to “…assist in the prevention of improper discrimination…” which is the issue at the very heart of the current impasse. It can be used to cause an organisation to modify its rules so that they comply with the Act.

72. The applicant also contends that the scheme as proposed is consistent with the policy of the Act and is complementary to “Lifetime Health Cover”. It argues that as stated in the explanatory memorandum to the 2004 Reform Act, the objective of the Parliament is to make private health insurance more competitive and attractive to consumers and to “…give Australians greater choice in health care…”.   These general expressions of policy, important as they are, cannot override the clear intention of parliament as expressed in the Act. In any event, those worthwhile policy objectives can no doubt be achieved without breaching the community rating principle or other sections of the Act.

Conclusion

73.     The Tribunal finds:

(a)that if implemented the proposed HBF Loyalty Bonus Scheme would constitute “improper discrimination” on the ground of both “the age of a person” and “the amount, or extent of benefits in which a person becomes, or has become, entitled during a period” would result in breaches of the Act as detailed in paragraphs 34 and 43 above.

(b)that HBF would be in breach of its condition of registration imposed by s73AAF and paragraph (ma) of Schedule 1 of the Act if it implements the scheme;

(c)that the direction of 15 March 2005 was lawful; and

(d)that the direction given was otherwise then and now the correct or preferable decision.

Decision

74.     The Tribunal affirms the decision under review.

I certify that the 76 preceding paragraphs are a true copy of the reasons for the decision herein of The Hon R J Groom (Deputy President)

Signed: K L Miller (Administrative Assistant)

Date/s of Hearing  17 and 18 May 2005
Date of Decision  23 June 2005
Counsel for the Applicant         Mr D Solomon
Solicitor for the Applicant          Solomon Brothers Barristers
Counsel for the Respondent     Mr S Owen-Conway QC with Dr G Rumble
Solicitor for the Respondent     Philips Fox