Private Health Insurance (Risk Equalisation Levy) Rules 2007

Administered by Department of Health, Disability and Ageing

Legislation au F2007L00911 Rules Not in force Legislative Instrument

Legislation content

EXPLANATORY STATEMENT

 

Issued by the Authority of the Minister for Health and Ageing

 

Private Health Insurance (Risk Equalisation Levy) Act 2003

 

Private Health Insurance (Risk Equalisation Levy) Rules 2007

 

Section 10A of the Private Health Insurance (Risk Equalisation Levy) Act 2003 (the Act) provides that the Minister may make Private Health Insurance (Risk Equalisation Levy) Rules (the Rules) providing for matters required or permitted by the Act, or necessary or convenient in order to carry out or give effect to the Act.

 

The purpose of the private health insurance risk equalisation levy is to transfer and share risk across private health insurers so that insurers with an older and less healthy demographic membership are not disadvantaged.  The risk equalisation levy enables private health insurers to charge the same premium to everyone, regardless of their individual risk (community rating). 

 

As part of reforms to private health insurance announced by the Australian Government on 26 April 2006, regulation of private health insurance was moved from the National Health Act 1953 (NHA) (and regulations under the NHA) into the new Private Health Insurance Act 2007 (PHI) (and Private Health Insurance Rules made under the PHI).

 

These reforms entailed associated amendments to private health insurance legislation, including the Private Health Insurance (Reinsurance Trust Fund Levy) Act 2003, which became the Private Health Insurance (Risk Equalisation Levy) Act 2003 due to item 2, Schedule 1 of the Private Health Insurance (Reinsurance Trust Fund Levy) Amendment Act 2007  (the amendment Act).

 

Paragraph 6(1)(a) of the Act provides that risk equalisation levy is imposed on each private health insurer on each day specified in the Rules as a levy day for a financial year.  The purpose of these Rules is to specify the levy days for a financial year. The levy days are the 21st day of the second month of each quarter in a financial year.

 

Section 6(2) of the Act provides that the Rules must not specify more than 4 levy days in a financial year.  Item 21, Schedule 1 of the Amendment Act provides that the total number of levy days for the financial year ending on 30 June 2007 must not exceed 6 days.

 

The Private Health Insurance (Reinsurance Trust Fund Levy) Regulations 2004 no longer have operative effect, as section 6(1)(a) of the Act provides for the levy day or days to be specified in the Rules.

 

Private health insurers were extensively consulted and provided with opportunities to comment upon the new Private Health Insurance legislative package.  Consultations were attended by representatives from individual private health insurers and peak industry bodies (the Australian Health Insurance Association and Health Insurance Restricted Membership Association members funds), private hospitals and their industry representatives (Australian Private Hospitals Association and Catholic Health Australia), the Australian Medical Association, the Private Health Insurance Administration Council, the Private Health Insurance Ombudsman, Consumers’ Health Forum of Australia and central agencies.  All of the industry representatives have expressed strong support for the proposed legislative framework including the Private Health Insurance Rules.

 

A Regulation Impact Statement (RIS) was prepared for the Private Health Insurance Bill 2006 (PHI Bill) which analysed the options associated with the Australian Government’s recent initiatives to improve the attractiveness of and participation in private health insurance for consumers.  The measures included those under the Private Health Insurance Act 2007 and associated private health insurance levies legislation, and legislative instruments.  The Office of Best Practice Regulation has advised that no additional RIS is required. 

 

Details of the Rules are set out in the Attachment.

 

The Act does not specify any conditions that need to be met before the power to make the Rules may be exercised.

 

These Rules are a legislative instrument for the purposes of the Legislative Instruments Act 2003. 

 

The Rules commence at the same time as Schedule 1 of the amendment Act commences; or, if the Rules are registered on or after Schedule 1 of the amendment Act commences, the Rules commence on the day on which they are registered.

 

 

Authority: Section 10A of the Private Health Insurance (Risk Equalisation Levy) Act 2003

 

 

 

 


ATTACHMENT

 

DETAILS OF THE PRIVATE HEALTH INSURANCE (RISK EQUALISATION LEVY) RULES 2007
 

 

1. Name of Rules

 

Rule 1 provides that the title of the Rules is the Private Health Insurance (Risk Equalisation Levy) Rules 2007.

 

2. Commencement

 

Rule 2 provides for the Rules to commence at the same time as Schedule 1 of the amendment Act commences; or, if the Rules are registered on or after Schedule 1 of the amendment Act commences, the Rules commence on the day they are registered.

 

3.                    Definitions

 

Rule 3 provides that the Act means the Private Health Insurance (Risk Equalisation Levy) Act 2003.

 

4.      Risk equalization levy day

 

Rule 4 provides that the risk equalization levy days are the 21st day of the second month of each quarter in a financial year.

 

Overview

The Private Health Insurance (Risk Equalisation Levy) Act 2003, enacted by the Australian Parliament, was introduced to address the gap in equitable risk distribution among private health insurers, particularly those with older and less healthy demographics. This Act allows for the imposition of a risk equalisation levy on private health insurers to ensure that they can charge the same premiums regardless of individual risk, thereby promoting community rating. The accompanying Private Health Insurance (Risk Equalisation Levy) Rules 2007 specify the levy days for a financial year, which are the 21st day of the second month of each quarter. The policy objective of these Rules is to facilitate the implementation of the risk equalisation levy as a means to achieve a balanced distribution of risk across the private health insurance sector, enhancing the overall attractiveness and participation in private health insurance for consumers. The Rules were developed following extensive consultation with industry representatives, including private health insurers, hospitals, medical associations, and consumer groups, all of whom expressed support for the legislative framework.

Scope and Application

The Private Health Insurance (Risk Equalisation Levy) Act 2003 applies to private health insurers in Australia, aiming to ensure that insurers are not disadvantaged due to their membership demographics by enabling them to charge the same premium to all members. This Act forms part of the broader legislative framework governing private health insurance in Australia, which was reformed in 2007, shifting regulatory control from the National Health Act 1953 to the Private Health Insurance Act 2007. The risk equalisation levy is imposed on each private health insurer on specified levy days within a financial year, as detailed in the Private Health Insurance (Risk Equalisation Levy) Rules 2007. These rules specify that the levy days are the 21st day of the second month of each quarter, with a maximum of four levy days per financial year. The Rules also reflect a transitional provision allowing up to six levy days for the financial year ending on 30 June 2007. The Act and its subsidiary rules facilitate the equitable distribution of risk among private health insurers, ensuring that premiums can be standardised across the industry, regardless of individual member risk profiles.

Key Provisions

The Private Health Insurance (Risk Equalisation Levy) Rules 2007, made under Section 10A of the Private Health Insurance (Risk Equalisation Levy) Act 2003, provide for the imposition of a risk equalisation levy on private health insurers. This levy aims to transfer and share risk across insurers to ensure that those with older and less healthy members are not disadvantaged (Section 6(1)(a)). The Rules specify the levy days for a financial year, which are the 21st day of the second month of each quarter, with a maximum of four levy days per year (Section 6(2)). These levy days ensure a structured and predictable schedule for levy collection, thereby maintaining the financial stability of the risk equalisation system. The Act imposes several obligations on private health insurers, primarily centred around the timely payment of the risk equalisation levy. Insurers must ensure that the levy is paid on the specified levy days to maintain compliance with the legislative framework. Additionally, the Act mandates that the Rules be adhered to strictly, ensuring that the levy is collected as per the stipulated schedule. Failure to comply with these obligations could lead to financial penalties and potential disruptions in the insurer's operations. Breaches of the Act can result in both civil and criminal consequences. Under the Private Health Insurance (Risk Equalisation Levy) Act 2003, non-compliance with the levy requirements can lead to financial penalties. For example, failure to pay the levy on the specified levy days may result in fines or other financial penalties as stipulated in the Act. Additionally, persistent non-compliance or fraudulent activities could lead to criminal charges, with potential penalties including imprisonment. The maximum penalties for such breaches are detailed within the Act, ensuring that there are clear deterrents against non-compliance. The Rules were developed after extensive consultation with industry representatives, including private health insurers, peak industry bodies, private hospitals, medical associations, and consumer groups. This consultation process ensured that the proposed legislative framework received strong support from all stakeholders. The Office of Best Practice Regulation also reviewed the Rules, advising that no additional Regulation Impact Statement was required. This thorough consultation and review process underscores the collaborative approach taken to implement the risk equalisation levy, aiming to balance the interests of all parties involved in the private health insurance market.

Legal classification tags

Area of Law
Insurance Law
Health Law
Instrument
Regulation
Concepts
Definitions & Interpretation
Commencement Provisions
Reporting & Disclosure Obligations

Interactions

Authorises

All Versions

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.