Issued by the authority of the Minister for Health and Ageing

Medical Indemnity Act 2002

Determination under section 34ZN

MEDICAL INDEMNITY (RUN-OFF COVER CLAIMS AND ADMINISTRATION) PROTOCOL 2006

The purpose of the Medical Indemnity (Run-off Cover Claims and Administration) Protocol 2006 (the Protocol) is to allow for the reimbursement of costs incurred by insurers as a result of administering the run-off cover indemnity scheme (ROCS).  There are two aspects to this administration cost: the implementation cost and the annual compliance cost.  The Protocol establishes eligibility criteria for the payment of both the implementation and compliance costs.  These payment criteria are enacted under paragraph 34ZN(1)(c) of the MI Act.

The ROCS was established on 1 July 2004.  Under the scheme, the Medicare Australia CEO reimburses medical defence organisations and medical indemnity insurers for eligible run-off cover claims in respect of eligible persons no longer in private medical practice.  This cover is at no cost to the medical practitioners who are eligible under ROCS.  The cost of the claims is recouped from the insurers through the Medical Indemnity (Run-Off Cover Support Payment) Act 2004.

Under the Protocol, payments in respect of implementation costs will reimburse insurers for the costs incurred in implementing systems that give the insurer capacity to administer the ROCS. The kinds of costs that are reimbursed are things such as costs relating to product design, staff training, and system development.

Payments in respect of annual compliance costs will reimburse insurers for the general administration costs and related costs of the annual compliance with the ROCS requirements under the Medical Indemnity (Prudential Supervision and Product Standards) Act 2003. The Protocol applies only to the financial years beginning 1 July 2004, and 1 July 2005.

The amount of compliance costs payable is calculated with reference to the number of medical practitioners for whom the insurer provided medical indemnity cover in respect of which a ROCS support payment was payable. Where the number of practitioners is less than 1000 for a particular insurer, the number of practitioners is taken to be 1000. The payment is at a rate of $23.00 per practitioner.

During the development of the Protocol interested stakeholders including the medical indemnity insurers, Medicare Australia and the Australia Government Actuary were consulted.

This Protocol is made by the Minister for Health and Ageing under section 34ZN of the Act.

Part 1 Preliminary

Section 1 - Name of Protocol

This section provides that the title of the Protocol would be the Medical Indemnity (Run-Off Cover Claims and Administration) Protocol 2006.

Section 2 - Commencement

This section provides that the Protocol would commence on the day after it is registered.

Section 3 - Revocation

This section provides that the Medical Indemnity (Run-Off Cover Claims and Administration) Protocol 2004 would be revoked on the commencement of the Protocol.  No applications or payments have been made under that instrument.

Section 4 - Definitions

This section establishes the definitions of words and expressions that are used within the protocol.  Where a word or expression is common to the Protocol and the Medical Indemnity Act, it has the same definition as given in that Act.

Part 2 Payment of implementation costs and compliance costs

Section 5 - Implementation Costs

This section establishes eligibility criteria for the payment of implementation costs.

The Protocol authorises the payment (reimbursement) of costs where the insurer has provided medical indemnity cover to practitioners before 1 July 2004 and has incurred legal, administrative or other costs (whether on its own behalf or otherwise) in respect of implementing a system or part of a system or making modifications to an existing system, for the provision of medical indemnity cover for the sole purpose of complying with Division 2A of Part 3 of the Medical Indemnity (Prudential Supervision and Product Standards) Act 2003, and has incurred those costs in the ordinary course of business. This applies only to costs incurred prior to 1 July 2006.

Section 6 – Payments in respect of annual compliance costs

This section establishes eligibility criteria for the payment of annual compliance costs.

The Protocol authorises the payment (reimbursement) of costs where the insurer has incurred legal, administrative or other costs (whether on its own behalf or otherwise) in respect of administering a system or administering part of a system for the provision of medical indemnity cover for the sole purpose of complying with Division 2A of Part 3 of the Medical Indemnity (Prudential Supervision and Product Standards) Act 2003 and those costs have been incurred in the ordinary course of business. These costs must have been incurred in the financial year starting on 1 July 2004 or the financial year starting on 1 July 2005.

The amount payable is calculated in reference to the Annual Total Number of Practitioners (ATNP) for whom the insurer provided medical indemnity cover in respect of which a ROCS support payment was payable in the first contribution year for that insurer which started on 1 July 2004. Where the ATNP is less than 1000 for a particular insurer, the ATNP will be taken to be 1000 for the purposes of calculating the compliance costs payable. The calculation of the compliance cost payable is made using the formula:

ATNP × $23.00 = amount of ongoing compliance costs payable

Part 3 General

Section 7 – Application for payment

Any application for payment under sections 5 or 6 of the Protocol must be made in accordance with section 7.  This requires that application for payment is made in writing to the CEO of Medicare Australia in the approved form and accompanied by the required supporting documentation.

Section 8 - Payment date

This section requires that the Medicare Australia CEO must make a payment under the Protocol before the end of the month immediately following the month in which the insurer applied for the payment.  In the case that the application by the insurer for payment has not complied with the requirements of the application form, or the Medicare Australia CEO has requested further information under section 34ZO of the Medical Indemnity Act in relation to the application, then the payment is required to be made before the end of the month immediately following the month in which the insurer has complied with the requirements of the application form, or has provided the information requested.

Section 9 - Recovery of Overpayments

This section provides that where an overpayment is made by the Medicare Australia CEO under the Protocol that this amount is a debt due to the Commonwealth and may be recovered via court action or the deduction, or offset, from future amounts payable to the insurer under the Protocol.