Private Health Insurance (Benefit Requirements) Amendment Rules 2010 (No. 8)

Administered by Department of Health, Disability and Ageing

Legislation au F2010L03222 Rules Not in force Legislative Instrument

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EXPLANATORY STATEMENT

 

Issued by the Authority of the Minister for Health and Ageing

 

Private Health Insurance Act 2007

 

Private Health Insurance (Benefit Requirements) Amendment Rules 2010 (No.8)

 

Section 333-20 of the Private Health Insurance Act 2007 (the Act) provides that the Minister may make Private Health Insurance (Benefit Requirements) Rules providing for matters required or permitted by Part 3-3 of the Act, or necessary or convenient to be provided in order to carry out or give effect to Part 3-3 of the Act.

 

The Private Health Insurance (Benefit Requirements) Rules 2010 (the Principal Rules), which commenced on 29 January 2010, provide for the minimum benefit requirements for psychiatric, rehabilitation and palliative care and other hospital treatment.  Schedules 1 to 5 of the Principal Rules set out the minimum levels of benefit which are payable for hospital treatment.  Namely, benefits for overnight accommodation (Schedules 1 and 2), same day accommodation (Schedule 3), nursing-home type patients (Schedule 4), and second tier default benefits (Schedule 5).

 

The Private Health Insurance (Benefit Requirements) Amendment Rules 2010 (No.8) (the Amendment Rules) amend Part 1 rule 3, Part 2 subrule 5 and Clause 3 of Schedule 5 to the Principal Rules.

 

The purpose of these amendments is to clarify that registered health insurers and hospitals can contract with each other for the payment of particular benefits.  The minimum benefits in the Schedules to the Principal Rules only operate to regulate the benefits that an insurer must pay in the absence of a contract between the insurer and the hospital.

 

The amendment makes clear that the minimum benefits in the Schedules to the Principal Rules do not operate as a minimum baseline which cannot be overridden through an agreement between an insurer and a hospital.  The Amendment Rules do not significantly alter existing arrangements, but confirm the current practice of health insurers and hospitals contracting with each other for particular benefits, where the minimum benefits in the Schedules to the Principal Rules only regulate benefits that an insurer must pay in the absence of a contract between the insurer and the hospital.  This amendment does not change the requirement for insurers to pay benefits for psychiatric, rehabilitative and palliative care, or the requirements for insurers to pay minimum benefits for prostheses as set out in the Private Health Insurance (Prostheses) Rules.

 

Details of the Amendment Rules are set out in the Attachment.

 

The Act specifies no condition that needs to be satisfied before the power to make Amendment Rules may be exercised.

 

The Amendment Rules are a legislative instrument for the purposes of the Legislative Instrument Act 2003.

 

 

 

Consultation

Consultation was undertaken in relation to the amendments with registered private health insurers and the Australian Private Hospitals Association.  The level of consultation is appropriate and sufficient as these amendments are designed to clarify and reinstate the ability of insurers and hospitals to negotiate contracts with benefits less than the Minimum Benefit.

 

 

                                                                         Authority: Section 333-20 of the

Private Health Insurance Act 2007

 

 

PRIVATE HEALTH INSURANCE BRANCH

DEPARTMENT OF HEALTH AND AGEING

SEPTEMBER 2010

ATTACHMENT

 

 
DETAILS OF THE PRIVATE HEALTH INSURANCE (BENEFIT REQUIREMENTS) AMENDMENT RULES 2010 (No.8)

 

Rule 1 Name of Rules

Rule 1 provides that the title of these Rules is the Private Health Insurance (Benefit Requirements) Amendment Rules 2010 (No.8).

Rule 2 Commencement

Rule 2 provides that the Rules commence on the day after registration.

Rule 3 Amendment of Private Health Insurance (Benefit Requirements) Rules 2010

Rule 3 provides that the Schedule to the Amendment Rules amends the Private Health Insurance (Benefit Requirements) Rules 2010 (the Principal Rules).

 

Schedule – Amendments

Item [1] – Part 1, rule 3

Part 1, rule 3 of the Principal Rules will be amended by inserting the definition of negotiated agreement, which currently exists in Schedule 5, subclause 1(1) of the Principal Rules.  This amendment makes clear that the definition of negotiated agreement applies to the whole of the Principal Rules, in particular to Part 2.

Item [2] – Part 2, subrule 5(2)

Part 2, subrule 5(2) of the Principal Rules will be omitted and substituted with a new subrule 5(2) and subrule 5(3).  New subrule 5(2) clarifies that for hospital treatment, other than psychiatric care, rehabilitation and palliative care referred to in Part 2, rule 4, the minimum benefit is the amount specified in the negotiated agreement.

Item [2] inserts a new subrule 5(3) which replicates, in substance, the previous subrule 5(2).  Subrule 5(3) makes clear that a minimum benefit for hospital treatment as specified in the Schedules to the Principal Rules, or as specified in a negotiated agreement, may be reduced the amount of any co-payment or excess that is required to be paid under a person’s health insurance policy in respect of that treatment.

Item [3] – Schedule 5, subclause 1(1), definition of negotiated agreement

Item [3] repeals the definition of negotiated agreement in Schedule 5 of the Principal Rules as the definition as been moved to Part 1, rule 3 of the Principal Rules (see Item [1] above).

Item [4] – Schedule 5, subclauses 3(1) and 3(2)

Schedule 5, subclauses 3(1) and 3(2) of the Principal Rules will be omitted and substituted with new subclauses 3(1) and 3(2).  These new subclauses are necessary as a consequence of amendments described above as they apply to second-tier default benefits.

The amendment makes clear that the second-tier default benefits for specified private hospital facilities must be equal to the amount worked out in accordance with Schedule 5, clause 2 unless the second-tier default benefit works out to be less the minimum benefit in accordance with Schedules 1, 2 or 3, the second‑tier default benefit cannot be worked out in accordance with clause 3, or the second-tier default benefit worked out for the hospital treatment would be nil.  In these circumstances the minimum benefit is to be worked out in accordance with Schedules 1, 2 or 3.

If the hospital facility, specified in clause 4 of Schedule 5 has a negotiated agreement with an insurer for particular hospital treatment, the minimum benefit for that treatment, in accordance with new Part 2 subrule 5(2), is the amount specified for the treatment in the negotiated agreement.

Overview

The Private Health Insurance (Benefit Requirements) Amendment Rules 2010 (No.8) were enacted to address a gap in the interpretation of the Private Health Insurance Act 2007, specifically concerning the ability of registered health insurers and hospitals to contract for benefits that are less than the minimum benefit requirements outlined in the Act. This legislative instrument was introduced by the Minister for Health and Ageing to provide clarity on the operation of the minimum benefit requirements, ensuring that these requirements only regulate the benefits that an insurer must pay in the absence of a contract with a hospital. The policy objective of these amendments is to confirm the existing practice of insurers and hospitals negotiating contracts for benefits, thereby allowing for flexibility in benefit arrangements while maintaining essential minimum standards for psychiatric, rehabilitation, and palliative care. These amendments were developed following consultation with registered private health insurers and the Australian Private Hospitals Association, ensuring that the changes were necessary to clarify and reinstate the contractual freedom between insurers and hospitals without altering the fundamental benefit requirements set out in the Act. The rules do not alter the existing obligations for insurers to provide benefits for specific treatments but clarify that the minimum benefits in the schedules to the Principal Rules do not establish an unassailable baseline that cannot be overridden by negotiated agreements.

Scope and Application

The Private Health Insurance (Benefit Requirements) Amendment Rules 2010 (No.8) amend the Private Health Insurance (Benefit Requirements) Rules 2010, which are subordinate legislation under the Private Health Insurance Act 2007. The Act applies to registered private health insurers, hospitals, and their contracts in Australia, encompassing the whole nation as the Act is a Commonwealth law. These rules specifically address the minimum benefit requirements for psychiatric, rehabilitation, and palliative care, as well as other hospital treatments, and aim to clarify the relationship between the minimum benefit requirements and negotiated agreements between insurers and hospitals. The Amendment Rules clarify that the minimum benefit requirements set out in the Schedules of the Principal Rules apply only in the absence of a negotiated agreement between an insurer and a hospital. Consequently, these minimum benefits do not act as a baseline that cannot be reduced through contractual negotiations. The Amendment Rules are designed to confirm current practices, ensuring that insurers and hospitals can enter into contracts for benefits lower than the specified minimum, provided these contracts comply with the rules. The Amendment Rules do not impose any new conditions or thresholds for their applicability, as they are intended to clarify existing provisions and practices. The changes introduced by the Amendment Rules are limited to clarifying the scope and effect of negotiated agreements, ensuring they do not inadvertently restrict the ability of insurers and hospitals to negotiate terms that are mutually beneficial and below the specified minimum benefits. The amendments ensure that the minimum benefits specified in the Principal Rules are not overridden by negotiated agreements, but rather serve as a fallback mechanism when no agreement is in place. The rules also address technical adjustments to ensure consistency and clarity across the Principal Rules, such as the relocation of the definition of "negotiated agreement" and adjustments to second-tier default benefits.

Key Provisions

The Private Health Insurance (Benefit Requirements) Amendment Rules 2010 (No.8) (Amendment Rules) amend Part 1 rule 3, Part 2 subrule 5 and Clause 3 of Schedule 5 to the Private Health Insurance (Benefit Requirements) Rules 2010 (Principal Rules). These amendments aim to clarify the relationship between the minimum benefit requirements set out in the Principal Rules and the ability of health insurers and hospitals to contract for particular benefits. Specifically, the amendments confirm that the minimum benefits in the Schedules to the Principal Rules only regulate benefits that an insurer must pay in the absence of a contract between the insurer and the hospital. The Amendment Rules impose certain obligations on registered health insurers and hospitals. Registered health insurers are required to adhere to the minimum benefit requirements unless they have a negotiated agreement with a hospital. Hospitals, on the other hand, can contract with health insurers for benefits that may be less than the minimum benefit requirements, provided such contracts are in line with the regulations. This framework ensures that while insurers must meet certain minimum benefit standards in the absence of a contract, they have the flexibility to negotiate benefits with hospitals, subject to regulatory oversight. Non-compliance with the requirements of the Amendment Rules can result in significant consequences. For example, if a health insurer fails to adhere to the minimum benefit requirements or to honour negotiated agreements, they could be subject to enforcement actions by the relevant regulatory authorities. Hospitals that do not comply with the provisions governing negotiated agreements could also face penalties or other regulatory repercussions. The specific penalties and consequences for breach are not explicitly detailed in the Amendment Rules but would typically be determined in accordance with the broader provisions of the Private Health Insurance Act 2007 and any applicable regulations. The amendments serve to clarify existing practices rather than introduce new obligations or penalties. The main focus is on ensuring that the minimum benefit requirements do not unduly restrict the ability of insurers and hospitals to negotiate beneficial contracts. This is intended to foster more flexible and negotiated arrangements between insurers and hospitals while maintaining a safety net of minimum benefits that protect consumers in the absence of such agreements.

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