PRIVATE HEALTH INSURANCE (PRUDENTIAL SUPERVISION) RULES 2016
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority
Private Health Insurance (Prudential Supervision) Act, 2015 subsection 174(1)
Section 174(1) of the Private Health Insurance (Prudential Supervision) Act 2015 (the Act) provides that the Australian Prudential Regulation Authority (APRA) may make APRA rules prescribing matters required or permitted by the Act to be prescribed by APRA rules, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.
The Private Health Insurance (Prudential Supervision) Rules 2016 (the instrument) will commence on the day after they are registered on the Federal Register of Legislative Instruments.
The Instrument revokes the Private Health Insurance (Prudential Supervision) Rules 2015 (previous instrument).
The instrument differs from the previous instrument by incorporating a new Rule 6A. Rule 6A deals with two matters.
Firstly, Rule 6A(1) specifies that donating to medical research is a specified purpose under subparagraph 28(2)(a)(iv) of the Act. As such, the operation of Rule 6A(1) is to enable health benefits fund assets to be applied for the purpose of donating to medical research.
Secondly, Rule 6A(2) operates to ensure the validity of transactions involving health benefits fund assets which were applied for donations to medical research from 1 July 2015 to the commencement of the instrument. Rule 6A(2) is made in accordance with paragraph 29(1)(b) of the Act which allows APRA to include a class of transactions in APRA rules to give effect to transactions entered into in contravention of section 28 of the Act. Rule 6A(2) specifies that any donations made from the assets of a health benefits fund to medical research in the period from 1 July 2015 until the commencement of the instrument are permitted under the Act.
- Background
As a consequence of private health insurance functions being split between the Department of Health (DoH) and APRA, the legislative provisions governing the expenditure of health benefits fund assets were removed from subsection 137(10) of the Private Health Insurance Act 2007 (PHI Act) and remade in section 28 of the Act.
Section 28 of the Act contains provisions relating to the expenditure and application of assets of health benefits funds. A private health insurer must not apply, or deal with, assets of a health benefits fund, whether directly or indirectly, except in accordance with Part 3, Division 3 of the Act. Further to those purposes specified in subsection 28(2) of the Act, the assets of a health benefits fund may also be applied for a purpose specified in APRA rules as per subparagraph 28(2)(a)(iv) of the Act.
In June 2015, the DoH amended the Private Health Insurance (Health Benefits Fund Policy) Rules 2007 (No. 3) to reflect the changes made to the PHI Act. One of the amendments removed the reference that permitted donations to medical research from the assets of the health benefits fund. Rule 7 of these rules previously provided that donating to medical research is a purpose specified for the purposes of subparagraph 137-10(2)(a)(iv) of the PHI Act.
The original intent was to transfer this provision to a rule made by APRA. However, this change was overlooked during drafting.
2. Purpose of the instrument
The purpose of the instrument is to rectify the abovementioned omission by enabling health benefit fund assets to be applied for donations to medical research and validating any such application from 1 July 2015 to the commencement of this instrument.
In particular:
- Rule 6A(1) of the instrument prescribes that donating to medical research is a purpose specified for the purposes of subparagraph 28(2)(a)(iv) of the Act and as such the assets of a health benefits fund may be applied for the purposes of donating to medical research.
- Rule 6A(2) of the instrument validates donations made in the period from 1 July 2015 until the commencement of the instrument. This ensures that any private health insurer that has made a donation to medical research from the assets of its health benefits fund during the period will not be in breach of the Act.
3. Consultation
APRA consulted with the DoH on the drafting of this proposal.
APRA’s previous consultation materials made it clear that it was APRA’s intention to ensure that the private health insurance prudential framework continued substantively unchanged after transition to APRA. Given this, no further consultation was undertaken.
4. Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
A Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 is provided at Attachment A to this Explanatory Statement.
ATTACHMENT A
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Private Health Insurance (Prudential Supervision) Rules 2016
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 (HRPS Act).
Overview of the Legislative Instrument
The Private Health Insurance (Prudential Supervision) Rules 2016 prescribe matters applicable to private health insurers.
The instrument sets rules in relation to the expenditure and application of health benefits funds, restructure of health benefits funds, mergers and acquisitions of health benefits funds and reporting and notifications requirements.
Human rights implications
APRA has assessed this Legislative Instrument and is of the view that it does not engage any of the applicable rights or freedoms recognised or declared in the international instruments listed in section 3 of the HRPS Act. Accordingly, in APRA’s assessment, the instrument is compatible with human rights.
Conclusion
The Private Health Insurance (Prudential Supervision) Rules 2016 are compatible with human rights because it does not raise any human rights issues.