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2004-2005-2006-2007
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
HEALTH LEGISLATION AMENDMENT BILL 2007
REVISED EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Health and Ageing,
the Honourable Tony Abbott MP)
THIS MEMORANDUM TAKES ACCOUNT OF AMENDMENTS MADE BY
THE HOUSE OF REPRESENTATIVES
TO THE BILL AS INTRODUCED
HEALTH LEGISLATION AMENDMENT BILL 2007
OUTLINE
This Bill provides for a number of amendments to the Private Health Insurance Act 2007 and
the National Health Act 1953, primarily for the purpose of correcting inadvertent restrictions
imposed by legislation in 2007.
Schedule 1 of the Bill contains amendments to the Private Health Insurance Act 2007 (the
PHI Act). The PHI Act commenced on 1 April 2007, and this Bill proposes necessary
amendments to that legislation to correct an inappropriately broad offence provision, and
certain other amendments, particularly relating to transition into the new regulatory
framework of the PHI Act.
The Bill protects individuals, general insurers and private health insurers by narrowing the
scope of an offence provision, section 84-1 of the PHI Act, which was only intended to apply
to complying health insurance policies. For example, the appropriately narrowed offence
provision ensures that general insurers can continue to offer overseas visitors health cover.
The Bill allows the Minister or the Private Health Insurance Administration Council (the
Council) to determine when a member of the Council can participate in a discussion when
there is a direct or indirect pecuniary interest in the matter being discussed. This ensures that
the provisions contained in section 270-45 of the PHI Act are not so restrictive as to prevent
valuable input into discussion by experienced Council members.
This Bill also contains other amendments of a technical or transitional nature, such as
permitting private health insurers a transitional period in relation to overseas student health
cover in order to adjust to newly imposed regulation by the Australian Prudential Regulatory
Authority and the Financial Services Reform legislation, and providing for transitional
protection in relation to overseas visitors health cover provided by private health insurers.
Schedule 2 of the Bill proposes a number of amendments to the National Health Act 1953
(the NH Act) relating to the Pharmaceutical Benefits Scheme (the PBS). Major amendments
to the PBS and the NH Act were made by the National Health Amendment (Pharmaceutical
Benefits Scheme) Act 2007 which commenced on 1 August 2007. An amendment made to
subsection 103(2A) unintentionally narrowed the meaning of the subsection, which relates to
the substitution of pharmaceutical benefits. Amendments proposed by this Bill rectify this
unintended narrowing of meaning and make a number of consequential clarifications to other
provisions of the NH Act.
Financial Impact Statement
This Bill has no financial impact for the Commonwealth.
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HEALTH LEGISLATION AMENDMENT BILL 2007
NOTES ON CLAUSES
Clause 1 - Short Title
This clause provides that the Bill may be cited as the Health Legislation Amendment Act
2007.
Clause 2 - Commencement
This clause provides for the commencement of the Bill.
Items 1-3 and 5 of Schedule 1 will apply with retrospective effect from 1 April 2007, the date
that the PHI Act commenced. Items 1-3 provide a narrowing of an offence provision in the
PHI Act in accordance with the original policy intention. The retrospective effect protects
the interest of individuals, general insurers and private health insurers from the time of
commencement of the PHI Act who may otherwise be subject to an offence by offering
general insurance or some insurance offered by private health insurers such as overseas
students' health cover. Item 5 is a transitional provision which provides an exemption from
two provisions, including an offence provision, until overseas visitors' cover is treated as
health related business on 1 July 2008.
Items 4 to 4B of Schedule 1 are technical amendments that will commence on the day after
this Bill receives Royal Assent.
Item 6 of Schedule 1 is a transitional provision and will commence on the day after this Bill
receives Royal Assent.
Items 1-6 and 8-11 of Schedule 2 will commence on 1 August 2007, the date amendments to
the NH Act made by the National Health Amendment (Pharmaceutical Benefits Scheme) Act
2007 commenced. The retrospective commencement is necessary to protect pharmacists who
could otherwise be prosecuted for offences inadvertently committed since 1 August 2007
under subsection 103(2). Subsection 103(2A) was unintentionally narrowed on
1 August 2007 making it an offence under subsection 103(2) for pharmacist to substitute
different pharmaceutical items, notwithstanding that they continued to be shown to be
equivalent in the Schedule of Pharmaceutical Benefits. Substitution across items was valid
prior to 1 August 2007, and pharmacists have continued to make such substitutions since that
date.
The amendment in item 7 of Schedule 2 is an amendment to proposed subsection 88(1D) of
the NH Act contained in the National Health Amendment (Pharmaceutical Benefits) Bill
2007, which is presently being considered by Parliament. This amendment to subsection
88(1D) proposed in this Bill will commence immediately after the commencement of the
subsection.
Clause 3 - Schedule(s)
This clause provides that each Act that is specified in a Schedule to this Bill is amended or
repealed as set out in the applicable items in the Schedule concerned, and any other item has
effect according to its terms.
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SCHEDULE 1 - Private health insurance
Part 1 - Amendments
Private Health Insurance Act 2007
Item 1 Paragraph 84-1(1)(b)
Item 1 replaces paragraph 84-1(1)(b) with a new paragraph (b) which refers to `health
insurance business'. `Health insurance business' is defined in Division 121 of the PHI Act.
The purpose of the section 84-1 offence provision is to prevent persons from engaging in
certain behaviour in circumstances where the PHI Act requires insurance to be in the form of
a `complying health insurance policy'. `Complying health insurance policy' is defined in
section 63-10 of the PHI Act.
The purpose of confining paragraph 84-1(1)(b) to health insurance business is to ensure that
where Division 121 of the PHI Act or the Private Health Insurance (Health Insurance
Business) Rules (the Health Insurance Business Rules) provide that business is not health
insurance business, the section 84-1 offence provision does not apply. For example, it will
not apply to overseas visitors health cover provided by private health insurers in accordance
with rule 17(1) of the Health Insurance Business Rules, or liability insurance business
provided in accordance with section 121-25 of the PHI Act.
Items 1, 2 and 3 will narrow the offence provision so that it will only apply in circumstances
where the PHI Act requires insurance to be in the form of a complying health insurance
policy. The items would apply with retrospective effect from 1 April 2007, the date that the
PHI Act commenced. The retrospective effect protects individuals, general insurers, and
private health insurers from the unintended breadth of the offence provision.
Item 2 Paragraph 84-1(1)(c)
Item 2 amends paragraph 84-1(1)(c) to prepare for the insertion of a new paragraph
84-1(1)(d).
Item 3 After paragraph 84-1(1)(c)
Item 3 inserts a new paragraph 84-1(1)(d) which provides that the section 84-1 offence
provision does not apply if the `health insurance business' is not business of a kind specified
in the Private Health Insurance (Complying Product) Rules (the Complying Product Rules),
as excluded from subsection 63-1(1).
Section 63-1 of the PHI Act provides that a private health insurer must ensure that the only
kind of insurance that it makes available as part of its health insurance business is insurance
in the form of complying health insurance products, unless the business is specified as
excluded in the Complying Product Rules.
The purpose of this amendment is to confine the section 84-1 offence provision to
circumstances where the PHI Act requires insurance to be in the form of a complying health
insurance policy. Although there are no excluding Complying Product Rules made for the
purpose of section 63-1, the amendment ensures that the offence provision is better aligned
with the structure of the PHI Act.
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Item 4 Subsection 126-20(4)
Item 4 amends subsection 126-20(4) by inserting, after the word `discrimination', the words
`in relation to the applicant's *complying health insurance policies'.
Subsection 126-20(4) requires the Private Health Insurance Administration Council (Council)
to refuse an application for registration as a private health insurer if the rules of the applicant
permit improper discrimination. The principle of community rating in section 55-5 of the
PHI Act applies to complying health insurance policies. The purpose of this amendment is to
clearly link the reference in subsection 126-20(4) to the principle of community rating.
Item 4A Subsection 270-45(4)
Item 4A amends subsection 270-45(4) to allow the Minister or Council members to
determine whether or not a Council member who has disclosed a pecuniary interest in a
private health insurer, may participate in discussion about that insurer.
Item 4B At the end of section 270-45
Item 4B inserts a new subsection 270-45(5) to provide that a Council member who has
disclosed a pecuniary interest in an insurer may not participate in discussion to determine
whether or not that Council member will be permitted to take part in discussion about the
insurer.
Part 2 - Transitional provisions
Item 5 Transitional provision in relation to health cover for overseas visitors
Item 5(1) provides that item 5 applies in relation to business that, at any time in the period
starting on 1 April 2007 and ending on 30 June 2008 (the transition period), is covered by
subrule 17(2) of the Health Insurance Business Rules.
Item 5(2) provides that during the transition period, sections 63-1 and 84-1 of the PHI Act do
not apply in relation to insurance that is that kind of business.
Item 5 will commence with retrospective effect on 1 April 2007, the date that the PHI Act
commenced. The retrospective effect is protective of private health insurers, and insured
overseas visitors, in relation to overseas visitor health cover provided by private health
insurers in the transitional period under a policy which is not a complying health insurance
policy.
Rule 17(2) of the Health Insurance Business Rules provides that in the transition period,
insurance provided by private health insurers to overseas visitors is `health insurance
business'. Since this business is `health insurance business' in the transition period, items 1,
2 and 3 of the Bill, which narrow the section 84-1 offence provision, would not be effective
in the transition period for Rule 17(2) of the Health Insurance Business Rules.
Item 6 Certain businesses taken to be health insurance business for certain purposes
during transition period
This item relates to the treatment of overseas student health cover and specified temporary
visa holder cover. Rule 18 of the Health Insurance Business Rules relates to overseas student
health cover and specified temporary visa holder cover which is provided by private health
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insurers. Rule 18 of the Health Insurance Business Rules requires that a private health
insurer must place overseas student health cover and specified temporary visa holder cover in
its health benefits fund, which is regulated by the Council.
Item 6 would provide that business that, at any time during the period starting on the day item
6 commences and ending on 30 June 2008 is covered by rule 18 of the Health Insurance
Business Rules made under the PHI Act, is, during that period, taken to be `health insurance
business' for the purposes of the Australian Securities and Investments Commission Act
2001, the Corporations Act 2001, the Insurance Act 1973, and the Insurance Contracts Act
1984.
The purpose of this amendment would be to provide that Australian Prudential Regulatory
Authority (APRA) requirements, and requirements under the Financial Services Reform
(FSR) legislation applying to financial products continue not to apply to overseas student
health cover in this transition period, to allow private health insurers time to adjust to new
regulatory systems.
Schedule 2 - Pharmaceutical benefits
National Health Act 1953
Item 1 Subsection 84(1)
This item inserts a new definition in subsection 84(1) for the term `Schedule equivalent'. It
has the meaning given by section 84AJ (see item 4).
Item 2 Subsection 84(1B)
This item substitutes a new subsection 84(1B) and is consequential to the proposed
amendments to subsection 103(2A) (see items 10 and 11). This is a definitional provision
which deems certain supplies of pharmaceutical benefits to be repeated supplies. Where a
pharmacist, upon a prescription that directs a repeated supply of a particular pharmaceutical
benefit (the specified benefit), supplies a substitute benefit as permitted under subsection
103(2A), the substitute benefit supplied (the supplied benefit) is taken to be a repeated supply
of the specified benefit.
The Minister has the power under paragraph 85A(2)(b) to determine the maximum number of
occasions on which the supply of a pharmaceutical benefit may, in one prescription, be
directed to be repeated. This item ensures that the restriction on the number of permissible
repeats cannot be circumvented by obtaining a substitute benefit rather than the benefit
directed to be supplied; the substitute benefit is taken to be the repeated supply of the benefit
directed to be supplied.
Item 3 Paragraph 84AAA(1)(a)
This item concerns the definition of an early supply of a specified pharmaceutical benefit,
and substitutes a new paragraph 84AAA(1)(a) as a consequence of the proposed amendments
to subsection 103(2A) (see items 10 and 11). An early supply of a pharmaceutical benefit
occurs when that pharmaceutical benefit is supplied within 20 days after the day of a
previous supply to the person of:
· the same pharmaceutical benefit; or
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· another pharmaceutical benefit that has the same pharmaceutical item (ie, another
brand of the same pharmaceutical item); or
· another pharmaceutical benefit that is stated in the Schedule of Pharmaceutical
Benefits to be equivalent to that pharmaceutical benefit.
The subsection ensures that the provisions of the NH Act concerning the early supply of
pharmaceutical benefits cannot be circumvented by the supply of another brand of the
pharmaceutical benefit, or an equivalent pharmaceutical benefit, rather than the particular
pharmaceutical benefit initially supplied.
Item 4 At the end of Division 1 of Part VII
This item inserts a new definitional section, section 84AJ. A new term `Schedule equivalent'
has been introduced into the NH Act for cross-reference purposes. Subsection 103(2A)
enables a pharmacist to supply a substitute pharmaceutical benefit for the one directed to be
supplied in the prescription in the specified circumstances. One of the necessary conditions
is that the two benefits are stated to be equivalent in the Schedule of Pharmaceutical Benefits
(ie, that the benefits are `Schedule equivalent'). The term `Schedule equivalent' is proposed
to be used in two provisions of the NH Act: in relation to `early supply' in subparagraph
84AAA(1)(a)(iii) - item 3 of this Bill; and in relation to `repeated supply' in subparagraph
88(8)(b)(i) - item 8 of this Bill.
Item 5 Paragraph 84C(3)(b)
This item makes a minor technical amendment to paragraph 84C(3)(b) by substituting `a
pharmaceutical benefit' for `the pharmaceutical benefit' to reflect the fact that the
pharmaceutical benefit supplied upon a prescription may not be the pharmaceutical benefit
directed to be supplied by the prescription.
Items 6 and 7 Subsection 88(1AA) and (1B) / Subsection 88(1D)
These amendments, together with the amendment in item 9, clarify that when a prescriber
writes a prescription, he or she directs the supply of a pharmaceutical benefit but need not
specify a particular pharmaceutical benefit. To specify a particular pharmaceutical benefit,
the prescriber would have to specify the listed drug, the form, the manner of administration
and the brand. A prescription will validly direct the supply of a pharmaceutical benefit,
notwithstanding that it does not specify a brand and/or a manner of administration, and thus
does not specify a particular pharmaceutical benefit; however, a listed drug and a form of the
drug must be specified (subsection 88(1AA)).
Item 8 Paragraphs 88(8)(a) and (b)
This item amends subsection 88(8) which sets out the circumstances in which a prescription
directing the supply of more than one pharmaceutical benefit is taken to direct the repeated
supply of one of those benefits. Where two benefits are Schedule equivalent or are listed
brands of the same pharmaceutical item, the prescription is taken to direct the repeated
supply of the first benefit.
The subsection ensures that the restrictions in the NH Act on the permissible number of
repeats that may be prescribed cannot be circumvented by prescribing in the one prescription,
two pharmaceutical benefits that are Schedule equivalent, or that are different brands of the
same pharmaceutical item.
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Item 9 Paragraph 103(2)(a)
This amendment is analogous to those made by items 6 and 7. It clarifies that when a
prescriber writes a prescription, he or she directs the supply of a pharmaceutical benefit, but
need not specify a particular pharmaceutical benefit.
Item 10 Subsection 103(2A)
This item, together with item 11, amends subsection 103(2A), which was unintentionally
narrowed in meaning by amendments to the NH Act which commenced on 1 August 2007.
The current provision enables the substitution of other listed brands of the same
pharmaceutical item. The amendment proposed by this item will enable the substitution of
different pharmaceutical benefits, as was the case prior to the 1 August 2007 amendments. In
each case substitution is only permitted if each of the other requirements of subsection
103(2A) are satisfied, including that the Schedule of Pharmaceutical Benefits states that the
two benefits are equivalent.
Item 11 After paragraph 103(2A)(b)
This item inserts a new paragraph (c) in subsection 103(2A) which requires the substitute
benefit to be a listed brand of a pharmaceutical item. Substitution is thus only possible under
subsection 103(2A) in relation to ready-prepared pharmaceutical benefits.
Extemporaneously-prepared benefits do not have brand determinations and thus would not
satisfy paragraph (c).
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