Private Health Insurance (Incentives) Amendment Rules (No. 1) 2020

Administered by Department of Health, Disability and Ageing

Legislation au F2020L00354 Rules Not in force Legislative Instrument

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EXPLANATORY STATEMENT

 

Issued by the Authority of the Minister for Health

 

Private Health Insurance Act 2007

 

Private Health Insurance (Incentives) Amendment Rules (No. 1) 2020

 

Authority

Section 333-20 of the Private Health Insurance Act 2007 (the Act) provides that the Minister may make Private Health Insurance (Incentives) Rules providing for matters required or permitted by Part 2-2, section 206-1 and Part 6-4 of the Act, or necessary or convenient to be provided in order to carry out or give effect to these provisions.

 

In addition to the power to make this instrument under section 333-20 of the Act, subsection 33(3) of the Acts Interpretation Act 1901 provides that where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character (including rules, regulations or by-laws), the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend or vary any such instrument.

 

The Private Health Insurance (Incentives) Amendment Rules (No. 1) 2020 (the Amendment Rules) amend the Private Health Insurance (Incentives) Rules 2012 (No. 2) (the Principal Rules).

 

Purpose

 

The Amendment Rules amend the Principal Rules to insert a revised section 5A.  Section 5A determines the adjustment factor for the purposes of subsection 22-10(5A) of the Act, defined for the purposes of the Principal Rules as the rebate adjustment factor. The rebate adjustment factor is used to uniformly adjust all rebate percentages.

 

New rule 5A :

 

Sets the rebate adjustment factor for the adjustment year commencing on 1 April 2020 to one (1). 

 

Background

The Private Health Insurance Rebate was announced in the ‘Tax Reform: not a new tax, a new tax system package’ in August 1998. The rebate commenced on 1 January 1999 as a 30% rebate payable for all complying hospital, general and combined (hospital and general) treatment insurance policies.

 

Higher rebates for older Australians were introduced from 1 April 2005; rebates increased to 35% for policyholders aged 65-69 years and to 40% for those 70 years and over.

 

From 1 April 2014, the rebate contribution from the Australian Government is calculated based on a weighted average ratio, known as a Rebate Adjustment Factor.

 

The Rebate Adjustment Factor takes into account the difference between the Consumer Price Index and the industry weighted average increase in premiums.

 

In late March 2020, due to the widespread impact on most Australians of the COVID-19 pandemic, the private health insurance industry indicated that a number of insurers were planning to defer their 1 April 2020 premium increase for three, six or twelve months.  The current formula does not envisage a situation where insurers do not implement approved premium increases uniformly.  The application of a Rebate Adjustment Factor less than 1 in this circumstance would disadvantage consumers by adjusting their Rebate amount while an approved increase to their premium was deferred.

 

Commencement

The Amendment Rules commence on 31 March 2020.

 

Details

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

 

Consultation

The Department has consulted with the Australian Prudential Regulation Authority, peak bodies within the private health insurer industry and several individual private health insurers.
 


ATTACHMENT

Private Health Insurance (Incentives)
Amendment Rules (No. 1) 2020

 

Section 1    Name

 

Section 1 provides that the name of the instrument is the Private Health Insurance (Incentives) Amendment Rules (No. 1) 2020 (the Amendment Rules).

 

Section 2    Commencement

 

Section 2 provides that the instrument commences on 31 March 2020.

 

Section 3    Authority

 

Section 3 provides that the Amendment Rules are made under section 333-20 of the Private Health Insurance Act 2007.

 

Section 4    Schedules

 

Section 4 provides that each instrument that is specified in a Schedule to the instrument is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to the instrument has effect according to its terms.

 

Schedule 1 – Amendments

 

Private Health Insurance (Incentives) Rules 2012 (No. 2)

 

Item 1

 

Item 1 repeals rule 5A of the Principal Rules and inserts a new rule 5A.

 

Section 5A determines the rebate adjustment factor as a formula for the purposes of subsection 22-15(5A) of the Private Health Insurance Act 2007 (the Act).

 

The rebate adjustment factor is calculated as a proportional rebate adjustment so that the rebate levels are reduced by the difference between the growth in premiums and the change in the Consumer Price Index (CPI).

 

The rebate adjustment factor is calculated to three decimal places. The rebate adjustment factor is expressed as a factor, rounding up where the fourth decimal place is five or more.

 

This amendment will prescribe the rebate adjustment factor for the adjustment year commencing 1 April 2020 to be one “1”.


Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Private Health Insurance (Incentives) Amendment Rules (No. 1) 2020

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

The purpose of the Private Health Insurance (Incentives) Amendment Rules (No. 1) 2020 (the Amendment Rules) is to amend the following instruments:

         Private Health Insurance (Incentives) Rules 2012 (No. 2) (the Incentive Rules)

 

These Amendment Rules insert a new Rule 5A to the Incentives Rules to update the formula for calculating the rebate adjustment factor by including the impact of age-based discounts and to state that rate protection is a variable in the formula.

 

Human rights implications

Some aspects of the Amendment Rules engage Article 12 of the International Covenant on Economic, Social and Cultural Rights, the right to health, by assisting with the progressive realisation by all appropriate means of the right of everyone to the enjoyment of the highest attainable standard of physical and mental health.

Private health insurance regulation assists with the advancement of these human rights by improving the governing framework for private health insurance in the interests of consumers. Private health insurance regulation aims to encourage insurers and providers of private health goods and services to provide better value for money to consumers, to improve information provided to consumers of private health services to allow consumers to make more informed choices when purchasing services and requires insurers to not differentiate the premiums they charge according to individual health characteristics such as poor health.

 

The amendment Rules do not change the overall private health insurance regulation’s support for human right to health.

Analysis

The amendments relating to the updated formula in relation to the entitlement to rebates by specified persons who hold private health insurance are entirely administrative in nature and therefore do not engage human rights.


Conclusion

The Amendment Rules are compatible with human rights because the amendment introduced by these Rules continue to ensure that existing arrangements that advance the protection of human rights are maintained.

 

Brian Kelleher
Assistant Secretary
Private Health Insurance Branch
Medical Benefits Division
Department of Health

 

Overview

The Private Health Insurance (Incentives) Amendment Rules (No. 1) 2020 were enacted to address the impact of the COVID-19 pandemic on the private health insurance industry, particularly in relation to the deferral of premium increases by insurers. This legislative instrument amends the Private Health Insurance (Incentives) Rules 2012 (No. 2), inserting a revised rule 5A to determine the rebate adjustment factor for the adjustment year commencing on 1 April 2020, which was set to one (1). This adjustment ensures that consumers are not disadvantaged during the period when insurers defer their premium increases. The rules were made under the authority of section 333-20 of the Private Health Insurance Act 2007 and commenced on 31 March 2020. The policy objective of these amendments is to maintain equitable treatment for consumers in the context of the pandemic, ensuring that the rebate system continues to support access to private health insurance for Australians. The Private Health Insurance (Incentives) Amendment Rules (No. 1) 2020 were developed to mitigate the adverse effects of the COVID-19 pandemic on the private health insurance market. By setting the rebate adjustment factor to one, the rules prevent consumers from experiencing a reduction in their rebate while insurers defer their premium increases. This legislative change aims to uphold the integrity of the rebate system and ensure that consumers are not unfairly impacted by the economic disruptions caused by the pandemic. The rules were issued in accordance with the authority granted by the Private Health Insurance Act 2007 and were accompanied by a Statement of Compatibility with Human Rights, confirming their alignment with international human rights standards.

Scope and Application

The Private Health Insurance (Incentives) Amendment Rules (No. 1) 2020 amends the Private Health Insurance (Incentives) Rules 2012 to update the formula for calculating the rebate adjustment factor, which is used to uniformly adjust all rebate percentages. The amendment introduces a new rule 5A that sets the rebate adjustment factor for the adjustment year commencing on 1 April 2020 to one (1). The purpose of this amendment is to account for the deferral of premium increases by private health insurers due to the impact of the COVID-19 pandemic on Australians. The rules apply to all entities involved in private health insurance in Australia and are made under the authority of the Minister for Health. The Amendment Rules are compatible with human rights, as they do not change the overall support for the human right to health provided by the existing private health insurance regulation. The Amendment Rules apply to the entire Commonwealth of Australia and affect all entities involved in private health insurance, including private health insurers, health funds, and policyholders. The rules do not specify any exclusions, exemptions, or thresholds. However, the application of the rules may be extended or restricted through subordinate instruments. The Amendment Rules are compatible with human rights and do not engage human rights beyond the administrative amendments made to the formula for calculating the rebate adjustment factor. The rules aim to assist with the progressive realisation of the right to health by improving the governing framework for private health insurance in the interests of consumers.

Key Provisions

The main operative sections of the Private Health Insurance (Incentives) Amendment Rules (No. 1) 2020 pertain to the adjustment of the rebate adjustment factor, which is a formula used to determine the rebate levels for private health insurance policies. Specifically, section 5A of the Amendment Rules sets the rebate adjustment factor for the adjustment year commencing 1 April 2020 to one (1). This adjustment factor is used to proportionally reduce the rebate levels based on the difference between the growth in premiums and the change in the Consumer Price Index (CPI). This change aims to ensure that the rebate levels are adjusted uniformly, even in circumstances where insurers defer approved premium increases. The obligations and requirements imposed by these Amendment Rules on parties and entities governed by the Private Health Insurance Act 2007 (the Act) include the application of the revised rebate adjustment factor formula as outlined in section 5A. Insurers and policyholders must adhere to this new calculation method for determining rebate levels, which involves accounting for the impact of age-based discounts and the variable of rate protection. This adjustment ensures that rebates are calculated in a manner that is equitable and reflective of the actual changes in premium costs and inflation, thereby maintaining the integrity of the rebate system. Breaches of the provisions outlined in the Amendment Rules may result in civil or criminal consequences, although the specific penalties are not detailed in the explanatory statement. The Act and associated regulations may provide for penalties in cases where insurers fail to correctly apply the rebate adjustment factor or otherwise contravene the requirements of the Act. These penalties could include fines or other administrative sanctions, but the exact penalties would need to be referred to in the relevant sections of the Act or subsequent regulations. The introduction of the Private Health Insurance (Incentives) Amendment Rules (No. 1) 2020 represents a necessary adjustment to the rebate calculation formula in light of the COVID-19 pandemic's impact on the private health insurance industry. By setting the rebate adjustment factor to one for the adjustment year starting 1 April 2020, the Amendment Rules aim to prevent consumers from being unfairly disadvantaged by adjustments to their rebates when insurers defer approved premium increases. This amendment ensures that the rebate system remains fair and equitable, supporting the broader objectives of the Act in providing incentives for private health insurance and protecting consumers.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.