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2002-2003
THE PARLIAMENT OF
THE COMMONWEALTH OF AUSTRALIA
HOUSE OF
REPRESENTATIVES
EXPLANATORY MEMORANDUM
(Circulated by
authority of the Minister for Health and Ageing,
Senator the Hon. Kay
Patterson)
The Australian National Audit Office Audit Report No. 32 1999-2000:
“Management of Commonwealth Non-Primary Industry Levies”, identified
issues with the Private Health Insurance Administration Council (Council)
administration levy (established via subparagraph 82G(1)(h)(i) of the
National Health Act 1953) having regard to the operation of section 55 of
the Commonwealth of Australia Constitution (the Constitution).
Section
55 provides that laws imposing taxation shall deal only with the imposition of
taxation, and any provision therein dealing with any other matter shall be of no
effect.
This Bill, together with three other Bills, reimposes four health
insurance industry levies (and validates previous impositions of the levies)
having regard to section 55 of the Constitution with a view to removing any
doubt regarding the technical validity of the levies.
The four private
health insurance industry levies being reimposed
are:
§ the Private Health Insurance
Administration Council administration levy (subparagraph 82G(1)(h)(i)
National Health Act 1953);
§ the collapsed organization levy (paragraph
82G(1)(j) National Health Act 1953);
§ the Acute Care Advisory Committee (ACAC)
review levy (subparagraph 82G(1)(h)(ii) National Health Act 1953);
and
§ the
Reinsurance Trust Fund levy (section 73BC National Health Act
1953).
These levies are to be reimposed via the following
Bills:
§ Private Health Insurance (Council
Administration Levy) Bill 2003;
§ Private Health Insurance (Collapsed
Organization Levy) Bill 2003;
§ Private Health Insurance (ACAC Review
Levy) Bill 2003; and
§ Private Health Insurance (Reinsurance
Trust Fund Levy) Bill 2003.
The National Health Amendment (Private Health
Insurance Levies) Bill 2003 amends the National Health Act 1953 making
changes ancillary to, or consequential to, the reimposition of four private
health insurance industry levies.
The reimposition effects a technical
change in process. The changes effectively repeal the existing levy mechanisms
replacing them having regard to section 55 of the Constitution. While the
levies will still be administered by the Council, the money collected under the
levies will be placed into the consolidated revenue fund and then appropriated
for the purposes of those levies.
These levies only apply to the private
health insurance industry. Only registered health benefits organizations are
required to meet liabilities imposed via the levies. The purpose of the
reimposition of the levies is not to increase the financial burden on the
private health insurance industry. This proposal does not involve a change in
policy but rather corrects a technical defect to ensure that the legislation
functions as intended.
Doubt in relation to the validity of the levies
has the potential to substantially reduce or impede Council in undertaking its
functions including the prudential regulation of the private health insurance
industry. Given the role of Council its financial basis should not be
compromised by doubt in relation to section 55 of the
Constitution.
Reinsurance Trust Fund levy
This Bill
reimposes the Reinsurance Trust Fund levy. The purpose of the reimposed
Reinsurance Trust Fund levy is the same as in the current provision in section
73BC of the National Health Act 1953. A payment is imposed on each
registered health benefits organization, to be calculated in accordance with the
principles determined in writing by the Minister pursuant to subsection 73BC(5B)
of the National Health Act 1953, for the purpose of the registered health
benefits organization’s participation in the Reinsurance Trust
Fund.
Participation in the Reinsurance Trust Fund is a condition of
registration for registered health benefits organizations. The Reinsurance
Trust Fund provides for internal cross-subsidisation for aged, chronic and
long-term acute care patients within the industry. The Reinsurance Trust Fund
supports community rating by cross-subsidisation for high cost contributors.
The Reinsurance Trust Fund operates as a zero sum equation. The amount
of money paid into it is the amount that is redistributed to the industry.
Organizations are required to pay into the Reinsurance Trust Fund levy when they
have 500 or more single equivalent units in a State or Territory. Payments are
made from the Reinsurance Trust Fund for contributors who are either over 65
years of age or have been in-hospital for 35 days cumulative within a 12-month
period.
The original intent of the Reinsurance Trust Fund levy has not changed.
This legislation addresses a technical concern first identified by the
Australian National Audit Office. As such, this Bill validates the previous
purported impositions of the Reinsurance Trust Fund levy.
The Private Health Insurance (Reinsurance Trust Fund Levy) Bill 2003
is not expected to have any significant impact upon the finances of the
Commonwealth.
NOTES ON CLAUSES
This clause provides that upon enactment this Act may be cited as the
Private Health Insurance (Reinsurance Trust Fund Levy) Act 2003.
This clause provides for the commencement of the Act on 1 July 2004 to
enable a seamless transition in the reimposition of the Reinsurance Trust Fund
levy between financial years.
This clause provides that this Act binds the Crown in each of its
capacities.
This clause provides that this Act extends in its application to the
Territory of Cocos (Keeling) Islands and to the Territory of Christmas
Island.
This clause establishes a range of definitions for the purposes of the
Act. In particular the clause defines the Reinsurance Trust Fund as the Health
Benefits Reinsurance Trust Fund established by subsection 73BC(2) of the
National Health Act 1953.
Clause 6: Imposition of the Reinsurance Trust Fund levy
Subclause 1 provides that the Reinsurance Trust Fund levy is imposed on each
registered health benefits organization
on:
• Each day specified in the regulations
as a Reinsurance Trust Fund levy day for a financial year;
and
• Each day (if any) determined in writing by
the Minister as a supplementary Reinsurance Trust Fund levy day for a financial
year.
The Minister’s power to determine supplementary Reinsurance
Trust Fund levy days is included to cover unforeseen needs in relation to the
Reinsurance Trust Fund.
Subclause 2 of this clause provides that the
regulations may not impose more than four Reinsurance Trust Fund levy days for a
financial year.
Subclause 3 of this clause provides that the Minister may
not determine more than two supplementary Reinsurance Trust Fund levy days for a
financial year.
The purpose of the Reinsurance Trust Fund levy is to require payment of monies from registered health benefits organizations, calculated having regard to the principles determined by the Minister in relation to the operation of the Reinsurance Trust Fund levy, for their participation within the Reinsurance Trust Fund. The purpose is set out in the National Health Amendment (Private Health Insurance Levies) Bill 2003.
Clause 7: Rate of the Reinsurance Trust Fund levy
This clause provides that the rate of the Reinsurance Trust Fund levy to be
imposed on the Reinsurance Trust Fund levy day is the rate that is determined in
writing by the Council and applies on that day. This clause also provides that
the rate of the Reinsurance Trust Fund levy imposed on a supplementary
Reinsurance Trust Fund levy day is the rate determined in writing by the
Minister and that applies on that day.
Subclause 2 of this clause
provides that in determining the rate of the Reinsurance Trust Fund levy, the
Council, or in relation to the supplementary Reinsurance Trust Fund levy the
Minister, must follow the Ministerial principles made under subsection 73BC(5B)
of the National Health Act 1953.
Subclause 3 of this clause will
enable the Council or the Minister to set a zero rate for the Reinsurance Trust
Fund levy and supplementary levy if necessary.
A maximum rate has not
been set in the legislation for the Reinsurance Trust Fund levy or supplementary
Reinsurance Trust Fund levy. In determining rates the Council and the Minister
must follow the Ministerial principles made under subsection 73BC(5B) of the
National Health Act 1953.
Clause 8: Minister to obtain advice
from Council
Before the Minister may make a determination in relation
to a supplementary Reinsurance Trust Fund levy, the Minister must obtain and
take into account advice from Council in relation to the
following:
• whether to make a
determination;
• the day or days to be specified
as the supplementary Reinsurance Trust Fund levy day or days for a financial
year; and
• the rate that is to be specified as
the rate of the supplementary Reinsurance Trust Fund levy.
Clause 9: Validation of Reinsurance Trust Fund levy
This
clause validates all previous Reinsurance Trust Fund payments.
Clause 10: Validation of late payment penalty in respect of Reinsurance
Trust Fund levy
This clause validates all previous late payment penalties made in accordance
with subsection 73BC(9) of the National Health Act 1953.
This clause provides for the Governor-General to make regulations
prescribing matters:
§ required or permitted by this Act to be
prescribed; or
§ necessary or convenient to be prescribed
for carrying out or giving effect to this Act.
Subclause 2 of this clause
provides that prior to the Governor-General making regulations under the
previous subclause the Minister must take into consideration any relevant
recommendations made to the Minister by the Council.