EXPLANATORY STATEMENT
Issued by the Authority of the Minister for Health and Ageing
Private Health Insurance Act 2007
Private Health Insurance (Complying Product) Rules 2007 (No.2)
Section 333-20 of the Private Health Insurance Act 2007 (the Act) provides that the Minister may make Private Health Insurance (Complying Product) Rules (the 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 Chapter 3 of the Act.
The Private Health Insurance (Complying Product) Rules 2007 (No.2) (the Rules) commence on 1 September 2007.
The Rules revoke and replace the Private Health Insurance (Complying Product) Rules 2007. The rule which relates to discounting has been changed.
Section 66-5 of the Act relates to permitted discounts on premiums, and in particular paragraph 66-5(1)(c)(ii) of the Act provides for the Private Health Insurance (Complying Product) Rules to specify the total percentage discount permitted on premiums.
Rule 6 of the Private Health Insurance (Complying Product) Rules 2007 (No.2) continues to specify that the maximum percentage discount allowed on premiums is 12% per annum.
Rule 6 no longer includes brokerage fees or commissions. Brokerage fees or commissions are better characterised as recruitment and marketing costs.
Rule 6 also no longer includes one-off promotional offers, provided the cost of the one-off promotional offer does not exceed 12% of the full premium for the year.
The Department conducted consultation with the private health insurance industry as part of a review of corporate products, and also through a broad consultation during the rewrite of private health insurance legislation in 2006/2007.
The Act does not specify any conditions which need to be met before the power to make the Rules may be exercised.
Details of the Rules are set out in the Attachment. The Rules are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The Rules commence on 1 September 2007.
Authority: Section 333-20 of the Private Health Insurance Act 2007
ATTACHMENT
DETAILS OF THE PRIVATE HEALTH INSURANCE (COMPLYING PRODUCT) RULES 2007 (No.2)
PART 1 - Preliminary
1. Name of Rules
Rule 1 provides that the title of the Rules is the Private Health Insurance (Complying Product) Rules 2007(No.2)
2. Commencement
Rule 2 provides for the Rules to commence on 1 September 2007.
3. Revocation
Rule 3 provides for the Private Health Insurance (Complying Product) Rules to be revoked.
4. Definitions
Rule 4 provides that terms used in the Rules have the same meaning as in the Act. Rule 4 also defines specific terms used in the Rules.
PART 2 - General
5. Insured Groups
Rule 5 provides for the purposes of paragraph 63-5 (2A) (b) of the Act, the insured groups which are referred to by the number of people in each group.
6. Maximum percentage of discount
Rule 6 (1) provides that the maximum percentage discount allowed under section 66-5 (1) (c)(ii) of the Act is 12% per annum.
Rule 6 (2) provides that the discount for a policy is the difference between the full premium and the net premium.
Rule 6 (3) provides that a full premium for a policy is the premium that would be received by the private health insurer for a policy in the same product subgroup without any reduction due to the circumstances set out in paragraphs 66-5(3)(a) to (e) of the Act. For example, people who pay a premium at least 3 months in advance, or who pay a premium by payroll deduction or automatic transfer.
Rule 6 (4) provides that the net premium is the full premium less any cost listed in the Rules such as incentive payment, promotional payment or any other inducement.
Rule 6(5) excludes from the calculation of net premium in Rule 6(4) a brokerage fee or other commission paid in respect of the policy.
Rule 6(5) also excludes from the calculation of net premium in Rule 6(4) a one-off promotional offer provided the cost of the one-off promotional offer does not exceed 12% of the full premium, for a year, of the policy purchased. The promotion must be offered to a person at the time the person first purchases a policy from the insurer, and the promotion must be provided in the first year after the person purchases the policy.
7. Benefits authorised to be provided under a policy
Rule 7 (1) provides that specified benefit means a benefit specified in subrule 7 (3).
Rule 7 (2) provides that if a person was entitled to a specified benefit as listed in subrule 7 (3), under an applicable benefits arrangement or a table of ancillary health benefits as in force at the commencement of the Act, the provision of the same specified benefit under the person’s policy continues to be authorized for the purposes of paragraph 69-1(1)(b) of the Act as long as the policy continues to cover the same specified treatments and to provide the same benefits.
Rule 7 (3) provides that specified benefits for Rule 7 are benefits paid in connection with the birth of a baby, funeral benefits, and disability benefits.
Rule 7 (4) provide that ancillary health benefit has the same meaning as under section 67 of the National Health Act 1953 as in force immediately before the commencement of the Act.
8. Complying products – coverage requirements
Section 69-1 of the Act provides that the only treatments a complying health insurance policy can cover are:
- specified treatments that are hospital treatment; or
- specified treatments that are hospital treatment and specified treatments that are general treatment; or
- specified treatments that are general treatment but none that are hospital-substitute treatment.
An insurance policy meets the coverage requirements if the policy provides a benefit for anything else and the provision of that benefit is authorized by the Private Health Insurance (Complying Product) Rules.
Subsection 69-1(2) of the Act provides that the policy must also cover any treatment that a policy of its kind is required by the Rules to cover.
Rule 8 (1), made for the purpose of subsection 69-1(2) of the Act, provides in Item 1 that a policy that includes cover for hospital-substitute treatment, must also cover hospital treatment for the same types of treatment covered by the policy for hospital-substitute treatment.
Rule 8 (1) also provides that a policy that covers hospital treatment either partly or wholly must cover Item 2 the provision of the prosthesis where it includes a prosthesis listed in the Private Health Insurance (Prostheses) Rules and either:
(a) a medicare benefit is payable for the professional service associated with the provision of the prosthesis; or
(b) the provision of the prosthesis is associated with podiatric treatment by an accredited podiatrist.
Under Item 3 a policy that wholly or partly covers hospital-substitute treatment where the treatment includes a prosthesis listed in the Private Health Insurance (Prostheses) Rules and a medicare benefit is payable in respect of the professional services associated with the prosthesis, must also cover provision of the prosthesis.
Rule 8 (2) provides, for the avoidance of doubt, that a policy that includes cover for hospital-substitute treatment, though required by Rule 5(1) to also provide cover for the same types of hospital treatment, may also cover other types of hospital or general treatment.
9. Waiting periods – former gold card holders
Rule 9 provides that no waiting period or benefit limitation period applies to former gold card holders, or persons entitled to treatment under a Department of Veterans’ Affairs gold card, when obtaining private health insurance.
Rule 9 (1) provides that the waiting period requirements in section 75-1 of the Act are, as permitted by subsection 72-1(2) of the Act, modified by Rule 7.
Rule 9 (2) provides that if the person applies for insurance no longer than 2 months after the person ceases to hold, or have entitlements under the gold card, waiting periods or benefit limitation periods will not apply for any hospital treatment or general treatment covered by the policy.
Rule 9 (3) provides that gold card has the same meaning as in section 34-15 of the Act. Section 34-15 of the Act provides that a gold card is a card that evidences a person’s entitlement to be provided with treatment in accordance with the Treatment Principles prepared under section 90 of the Veterans’ Entitlements Act 1986, or, in accordance with a determination made under section 286 of the Military Rehabilitation and Compensation Act 2004.
Benefit limitation period is defined as the period starting at the time the person becomes insured under the policy and ending at the time specified in the policy, during which the amount of benefit in relation to the period is less than the amount for which the person would be eligible during any other period.
10. Transfer certificates
Rule 10 sets out the time periods within which an old insurer must provide a transfer certificate to a former insured person, a new insurer must request a transfer certificate from an old insurer, and an old insurer must provide a transfer certificate to a new insurer.
11. Performance indicators
Rule 11 provides for the performance indicators to be used by the Minister in monitoring private health insurers’ compliance with the principle of community rating. The performance indicators listed in the Rules include, for example, the number and kind of complaints made to the Private Health Insurance Ombudsman about private health insurers, and changes in the number of episodes of hospital treatment and hospital-substitute treatment (and the average number of episodes of each) for particular age groups.
PART 3 - Standard Information Statements
12. Definitions
Rule 12 defines specific terms used for the purpose of this Part.
13. Information and form
Rule 13 (1) provides that Part 4 of the Rules, and Schedules 1, 2, 3, and 4 set out the permitted form and content of a statement about a complying health insurance product.
Rule 13 (2) requires that no additions, deletions, rearrangement or modification can be made to the form or content of the statements in Schedules 1, 2 and 3, except as specified in the relevant Schedules, or to omit, when inapplicable, the grey text, or to omit text for which the grey text is the appropriate alternative.
Rule 13 (3) requires that a statement must not exceed one A4 page, except in the case of a policy covering both hospital and general treatment where the statement must not exceed two A4 pages.
14. Policies covering hospital treatment only
Rule 14 provides that for policies covering hospital treatment only, the statement must be in the form set out in Schedule 1 and must contain the permitted content specified in Parts 1 and 2 of Schedule 4 as is relevant to the particular product.
15. Policies covering general treatment only
Rule 15 provides that for policies covering general treatment only, the statement must be in the form set out in Schedule 2 and must contain the permitted content specified in Parts 1 and 3 of Schedule 4 as is relevant to the particular product.
16. Policies covering hospital and general treatment
Rule 16 provides that for policies covering both hospital and general treatment, the statement must be in the form of the statement set out in Schedule 3, must contain the permitted content specified in Parts 1, 2 and 3 of Schedule 4 as is relevant to the particular product, and must not exceed two A4 pages.
Schedule 1 – Standard information statements: hospital treatment
This schedule provides for the form of statements for hospital treatment as set out in Part 3 Standard information statements of these Rules.
Schedule 2 – Standard information statements: general treatment
This schedule provides for the form of statements for general treatment as set out in Part 3 Standard information statements of these Rules.
Schedule 3 – Standard information statements: combined products
This schedule provides for the form of statements for combined products as set out in Part 3 Standard information statements of these Rules.
Schedule 4 – Standard information statements: permitted content
This schedule provides for the permitted content for all statements as set out in Part 3 Standard information statements of these Rules.