EXPLANATORY STATEMENT
Statutory Rules 1989 No. 292
Issued by the Authority of the Minister for Community Serviced and Health.
National Health Act 1953
National Health Regulations
Paragraph (b) of the definition of accident and sickness insurance business in subsection 67(4) of the National Health Act 1953 provides that a kind of business not to be included in that definition may be prescribed.
Section 67 of the National Health Act 1953 requires organizations conducting health insurance business to be registered under the said Act. This provision was introduced to preserve the community rating principle, which forms the basis for private health insurance in Australia. Under this principle, all persons are treated equally for health insurance purposes regardless of such factors as age, sex, medical condition or family size.
With the introduction of the above requirement, a considerable dispute arose as to the difference between accident and sickness insurance business and health insurance business [as defined in subsection 67(4)]. Commercial insurers related accident and sickness insurance benefit payments to episodes of hospitalisation rather than the occurrence of events such as illness or injury.
Following the establishment of a working party in 1986 comprising industry representatives, guidelines were developed in a attempt to distinguish between accident and sickness insurance business and health insurance business for administrative purposes. However, many of the commercial insurers have not adhered to the guidelines. When the guidelines were issued they were accompanied by a warning that in the event of non-compliance legislative action would be taken.
The Regulation preventing benefits payments under accident and sickness insurance policies being related to periods of hospitalisation ensures that the intention of the legislation is fulfilled, that is, health insurance business is controlled under the National Health Act 1953 in accordance with the community rating principle. The Regulation will commence on 1 December 1989. The commercial insurance industry was advised of the proposal in September 1989 to allow it sufficient time to restructure its products so that accident and sickness insurance payments are related to factors other than the period of hospitalisation. The Regulation will not affect liabilities entered into before 1 December 1989 (e.g. guaranteed renewable policies).