EXPLANATORY STATEMENT
Issued by the Authority of the Minister for Health and Ageing
Private Health Insurance Act 2007
Private Health Insurance (Complying Product) Amendment Rules 2011 (No. 5)
Authority
Section 333-20 of the Private Health Insurance Act 2007 (the Act) provides that the Minister may make Private Health Insurance (Complying Product) Rules providing for matters required or permitted by Chapter 3 of the Act, or necessary or convenient in order to carry out or give effect to the Act.
The Private Health Insurance (Complying Product) Amendment Rules 2011 (No. 5) (the Amendment Rules) amend the Private Health Insurance (Complying Product) Rules 2010 (No.2) (the Rules) which commenced on 14 January 2011.
Purpose
The purpose of the Amendment Rules is to allow private health insurers to conduct pilot projects to test innovative products with a limited group of policy holders in the interests of developing better and more cost effective health outcomes for consumers without risking breaching the community rating requirements of the Act. The pilot projects that an insurer can offer will be limited to the kind stated in the Amendment Rules and must meet the requirements as specified in the Amendment Rules.
Background
The principle of community rating prevents private health insurers from improperly discriminating between people on the basis of their health or for other reasons such as their age, gender or religious belief.
Section 55-15 of the Act was inserted by the Private Health Insurance Legislation Amendment Act 2008 so that the community rating principle in section 55-5 of the Act did not prevent insurers from developing and piloting innovative programs or products which align with broader health cover and prevention programs. This was necessary to enable an insurer to test (pilot) an innovative strategy on a select sub-set of its policy holders without breaching the improper discrimination provisions of subsection 55-5(2) of the Act.
Subsection 55-15(1) of the Act states that the principle of community rating in section 55-5 does not prevent a private health insurer from taking or failing to take action; or in making a decision, having regard or failing to have regard to any matter for the purposes of conducting a pilot project in accordance with the Rules. Subsection 55-15(2) of the Act states that the Rules may permit pilot projects of a kind specified in the Rules to be conducted by private health insurers in accordance with requirements specified in the Rules.
Details
The Amendment Rules insert a new Part 3 into the Rules for the purposes of section 55-15 of the Act. The Amendment Rules insert rules 17 and 18 to specify the kind of pilot projects permitted and the requirements pilot projects must meet respectively.
Further details of the Amendment Rules are set out in the Attachment.
Consultation
In December 2008 the Department, through Private Health Insurance Circular PHI 61/08, sought submissions in regard to the development of pilot project rules. The circular and discussion paper outlining the requirements as stated in rules 17 and 18 of the Amendment Rules can be found at: http://www.health.gov.au/internet/main/publishing.nsf/Content/39440DE0ABE28566CA2575210018DD65/$File/61_08.pdf
Seven written submissions were received, five from private health insurers, one from an insurer representative and one from a health consumer group. In general, all submissions supported the development of rules to ensure that genuine pilot projects can be offered outside the community ratings principles to assist innovation.
The submissions provided varied views on individual aspects of the proposal. For example, some insurers suggested that pilot projects should not have to be provided free of charge. One insurer was of the view that a two year time limit was too restrictive, another that the two year time limit was too generous and that appropriate evaluations could be made after one year. The Amendment Rules are framed to provide scope for innovation and trialling products, but also incorporates appropriate protection for consumers. The Department of Health and Ageing will monitor the implementation of pilot projects by insurers to ensure it meets the intention behind section 55-5 of the Act.
In 2011, the Department consulted with Medibank Private regarding a pilot project that they sought to implement. The Amendment Rules will enable that pilot project to commence.
The Amendment Rules commence the day after registration on the Federal Register of Legislative Instruments.
The Amendment Rules are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Authority: Section 333-20 of the Private Health Insurance Act 2007
PRIVATE HEALTH INSURANCE BRANCH
DEPARTMENT OF HEALTH AND AGEING
SEPTEMBER 2011
ATTACHMENT
DETAILS OF THE PRIVATE HEALTH INSURANCE (COMPLYING PRODUCT) AMENDMENT RULES 2011 (No. 5)
- Name of Rules
Rule 1 provides that the title of the Rules is the Private Health Insurance (Complying Product) Amendment Rules 2011 (No.5) (the Amendment Rules).
2. Commencement
Rule 2 provides that the Amendment Rules are to commence the day after registration.
3. Amendment of Private Health Insurance (Complying Product) Rules 2010 (No.2)
Rule 3 provides that the Schedule to the Amendment Rules amends the Private Health Insurance (Complying Product) Rules 2010 (No.2), which commenced on 14 January 2011.
Schedule – Amendments
Item 1 – Part 3 –Pilot Projects, Rule 17
Rule 17 ensures that insurers can conduct pilot projects to trial and develop, with a limited group of policy holders, a program that is being considered for broader implementation. Insurers are permitted to conduct pilot projects that aim to achieve any or all of the following:
(a) to increase the value to consumers of their health insurance products by better meeting their needs;
(b) to prolong health, improve quality of life and reduce expenditure on hospital benefits by preventing and reducing disease and prevent the need for hospitalisation;
(c) to produce products that better reflect advances in medical knowledge and service delivery models.
Item 1 – Part 3 –Pilot Projects, Rule 18
Rule 18 sets the requirements that all pilot projects must meet.
An insurer must not charge a person to participate in the project. Due to the trial nature of pilot projects and the potential cost benefits that an insurer may gain through the pilot process, the cost associated with running the pilot project must be met by the insurer. While it is accepted that benefits may also accrue to participants, there will be no additional charge made against any insured person to participate.
Participation in the pilot project must be on a voluntary basis. While insurers can target individuals to participate in a pilot project, individual policy holders have the right to choose whether or not to participate.
The Amendment Rules provide that an insurer may restrict participation in a pilot project on the basis of where a person lives. Limiting participation in a pilot project on the basis of any other reason listed in subsection 55-5(2) would amount to improper discrimination as defined by the Act.
A two year limit on pilot projects is consistent with the trial and development nature of a pilot project. Two years is considered sufficient to trial and evaluate a pilot project without leaving the community rating exception open to abuse. In addition, a written plan, including a timeline and evaluation process prior to commencement is required to ensure compliance with the Act. The written plan must be provided to the Department of Health and Ageing at least 28 days before the pilot project commences.
PRIVATE HEALTH INSURANCE BRANCH
DEPARTMENT OF HEALTH AND AGEING
SEPTEMBER 2011