Tony Abbott (Warringah, Liberal Party, Leader of the House) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

This government is committed to choice in health care. Initiatives such as the 30 per cent rebate, the increased rebate for older Australians, no gap and known gap arrangements, the Medicare levy surcharge and Lifetime Health Cover are important measures which the government has implemented to enhance choice, certainty and the value of private health care.

The government’s strong commitment to choice in health care ensures a viable and sustainable private health sector and, in turn, improves the capacity of the public hospital system. It also gives millions of Australians, often on low and fixed incomes, peace of mind. They know that when something serious happens to them they can face the trauma of hospital and medical care with the freedom to choose their doctors and places of treatment.

It is a matter of pride for the government that these measures have halted the slide in private health insurance membership. From just over 30 per cent seven years ago, private health insurance membership has stabilised at about 43 per cent of the Australian population. Private hospital admissions, mostly funded by private health insurance, now account for almost three-fifths of all surgical procedures. Medical practitioners who work in the private sector, again largely funded by private health insurance, earn a return on their efforts that makes them willing to do the sessional work in the public sector on which our public hospitals depend.

Still, there is the ongoing task of revitalising the private health sector. The next step is to help it adapt to the realities of early 21st century health care: a way of care that does not always centre on admission to hospital. Day procedures, outpatient services, hospital in the home, wellness and prevention are all part of the healthcare equation in a way that simply was not envisaged when the current regulatory regime was devised over half a century ago.

This package of bills, to come into effect from 1 April next year, will enact the reforms to private health insurance announced on 26 April 2006. These changes should translate into greater competition and improved services for consumers. The changes should also mean much clearer and simpler regulation for health insurers and service providers.

Private Health Insurance Bill 2006

The main bill, the Private Health Insurance Bill 2006, is a significant piece of legislation. It sets out a comprehensive regulatory framework for the private health insurance sector to replace the current regime, mainly set out in the National Health Act 1953, the Health Insurance Act 1973, and the Private Health Insurance Incentives Act 1998.

This bill contains important measures for consumers, including broader health cover, standard product information, a comparative website for consumers, and changes to Lifetime Health Cover for those with 10 years continuous cover.

By far the most significant new measure is the introduction of broader health cover. Hospital cover will expand to cover out-of-hospital services that substitute for or prevent hospital care. This is a groundbreaking change. Health insurers will now have the choice to offer it to the almost nine million Australians with hospital cover.

Broader health cover will apply to services that can safely be delivered outside a hospital and which substitute for or prevent hospital care. This will potentially include a wide range of services, such as dialysis and chemotherapy, allied health services and domestic nursing assistance.

Broader health cover will also allow health insurers to work with a wide range of service providers to develop more flexible and innovative products that reflect modern clinical practice and consumer expectations. Health insurers will be able to better assist consumers to manage and prevent acute and chronic conditions. Many people can benefit from tailored programs that support and sustain healthy lifestyles, services such as personalised health checks, dietary guidance, exercise supervision, and support to quit smoking.

Some things will not be covered under broader health cover, including:

• general practice services;
• specialist and physician consultations that attract a Medicare rebate; and
• the costs of normal residential accommodation in aged-care facilities.

Consumers can expect products that offer greater convenience and relevance to their needs all of the time, not just when they go to hospital. Broader health cover policies will be fully covered by the government’s private health insurance rebates.

The bill also ensures that the contracts that doctors have with insurers may not limit the clinical freedom of doctors to choose the most appropriate treatment for their patients.

Effective choice depends on information. Consumers will benefit from new requirements on insurers to produce standard information statements for their products. These information requirements will help consumers to compare health insurance policies and to understand their entitlements under them. This will assist consumers when they are shopping around for cover and, importantly, when they need to use their cover. With funding announced in this year’s budget, the Private Health Insurance Ombudsman is developing a website to present this information to further assist consumers with their private health choices.

As the government announced earlier this year, the ministerial role in reviewing private health insurers’ premium applications is being retained. This is an important consumer protection, as well as safeguarding the Australian people’s investment in the private health insurance rebate. As part of the annual premium application process, the government may give informal advice on the factors the minister will take into account in considering proposed premium increases.

The government previously announced that it would legislate to provide annualised health insurance contracts, so that a member would not face more than one rate adjustment in any one premium year. However, after extensive consultation with industry and employers handling salary deductions for private health insurance, the government has decided not to proceed with this measure on the grounds of expense and efficiency.

Indeed, the government is pleased that the industry has been behaving responsibly in regard to helping its members through rate changes. We are happy that funds have honoured prepaid contributions applying after a rate change, and in lieu of legislation we expect this responsible self-regulation to continue.

This bill also includes changes to Lifetime Health Cover. People who have retained their private hospital insurance continuously for more than 10 years will no longer be subject to Lifetime Health Cover penalties. This recognises and rewards people who have made the effort to maintain their cover over time, having first joined after the age of 30. They have made the effort and they deserve credit for their commitment and loyalty.

Efficiently run health funds mean lower overheads and lower pressure on premiums. This bill includes significant regulatory reforms which aim to make private health clearer and simpler.

The first such measure changes the focus of regulation from insurers to products. Under the existing arrangements, product regulation is achieved through an arcane set of conditions of registration imposed on insurers. Currently insurers are subject under the National Health Act to no fewer than 48 conditions of registration, and could be deregistered for breaching any of them. This is as clumsy as it is onerous.

By regulating products not providers the government wants to open the door more widely to new entrants into the private health insurance industry and the possibility of existing health insurers adapting their businesses to current market conditions and consumer demands.

The bill also includes offence provisions for breaching the new product standards. The penalties are the maximum allowable. It will be open to a court to impose a lesser penalty depending on the magnitude of the offence.

Chief executive officers and directors can be held personally liable only if they do not exercise due diligence in putting in place systems to ensure that insurers comply with the product standards. The government’s intent is to align health insurer director and chief executive obligations with general corporate governance expectations. The directors of insurers, except as mentioned, will not be personally liable for any breach of the new act by insurers. The corporation, not the individual board members and chief executives, will be held accountable instead.

Accountability for poor governance and decision making is more properly a matter for the Corporations Law, for members where the fund is a mutual corporation and, in the case of any future for-profit insurers, shareholders. It should also be noted that the majority of the offence provisions in the bill currently exist in health insurance legislation. The few new offence provisions, while industry specific, have been framed to maximise consistency with existing Commonwealth law.

The second significant regulatory measure is the clarification of the operating rules relating to health benefits funds. While insurers are required to have health benefits funds under the existing arrangements, there are no clear requirements on the conduct of such funds.

The bill sets out a framework for the establishment, operation, merger and termination of these funds. This will require that the assets of the health benefits fund only be used to meet the liabilities arising from the health insurance business or any health related business. Insurers registered to operate on a for-profit basis may withdraw money for other purposes if the capital adequacy and solvency standards are not breached.

The new health benefits funds provisions will improve prudential oversight and protection of the public interest. They will also make it easier to restructure or amalgamate insurance businesses. And by drawing a clear line between the wider business of the insurer and the business of the fund, the bill will also make it easier for new entrants to access the market.

The bill also clarifies aspects of the role of the Private Health Insurance Administration Council, PHIAC, in supervising insurers and their health benefits funds. The current ability for PHIAC to set capital adequacy and solvency standards will be maintained, together with the ability to direct insurers to take action to meet the standards. The bill will also allow PHIAC to set prudential standards for insurers.

The bill allows for subordinate legislation known as the Private Health Insurance Rules to be made by legislative instruments. The rules will:

• continue current default benefit arrangements;
• maintain front end deductible limits for hospital products; and
• restrict eligibility for the private health insurance rebates to people who are eligible for Medicare.

The bill also includes a number of smaller but significant measures that simplify and reduce regulation, including the simplification of the Lifetime Health Cover rules and the rewriting of the rules around waiting periods and portability requirements.

The government has made an undertaking to the industry to review the operation of the legislation as industry develops to meet its requirements over the next few years.

The government has worked cooperatively and constructively with the private health sector in developing this legislation. I have also given an undertaking that I will consider further input over the summer recess and am prepared to introduce government amendments to give effect to refinements that are consistent with the government’s policy objectives.

Finally, I should also place on the record the government’s thanks to the team of officers in my department who have worked long and hard to develop this highly complex legislation in a matter of months.

I commend the bill to the House.

Debate (on motion by Mr Edwards) adjourned.