Commonwealth Numbered Regulations - Explanatory Statements

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MEDICAL INDEMNITY (IBNR INDEMNITY) CONTRIBUTION REGULATIONS 2004 2004 NO. 9

Section 7 of the Medical Indemnity (IBNR Indemnity) Contribution Act 2002 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

The purpose of the Regulations is to provide for:

•       The repeal of the Medical Indemnity (IBNR Indemnity) Contribution Regulations 2003, which are replaced by these Regulations;

•       the imposition day for the contribution year beginning 1 July 2003 to be 1 May 2004, for the purposes of the Incurred But Not Reported Liabilities (IBNR) indemnity contribution; and

•       the final contribution year for United Medical Protection Limited (UMP) to be the financial year starting on 1 July 2008.

The Australian Government intervened in the medical indemnity market following the application by UMP to be placed under provisional liquidation in April 2002. On 30 April 2002, the Government provided a guarantee to allow members of UMP to continue practising whilst longer-term solutions were developed. UMP came out of provisional liquidation on
14 November 2003.

On 17 December 2003, the Government announced a range of additional measures to address the affordability of medical indemnity costs for doctors. This followed the Report of the Medical Indemnity Policy Review Panel. One of the new measures announced was the replacement of the IBNR levy with UMP support arrangements.

Under the new arrangements, doctors who were members of UMP in 2000 and who have gross Medicare billable incomes above $5000 a year will pay whichever is the least of: the original IBNR annual levy, 2 per cent of gross Medicare billable income, or $5000. This amount will be added to the doctor's standard insurance premium and will attract premium support. (Under the new Premium Support Scheme, all doctors will be eligible for an 80% rebate of the component of their medical indemnity costs that exceed 7.5% of their gross private medical income.) Doctors who had been members of UMP for a year in 2000 will pay UMP support for one year; doctors who had been UMP members for two years will pay UMP support for two years and so on up to a maximum of six years.

Subsection 5(2) of the Act provides for a financial year specified in the regulations to be the last contribution year for a participating medical defence organisation (MDO).

Subparagraph 5(3)(a) of the Act provides for the imposition day in relation to the contribution year commencing 1 July 2003 to be 1 March 2004, or "such other day as is specified in the regulations as the imposition day for the contribution year." The imposition day is the day for a contribution year on which information is to be provided to doctors involved in the IBNR Scheme as to their contributions for that contribution year.

Moving the imposition day to 1 May 2004 allows for the new measures described above to be legislated and implemented. Making the final contribution year for UMP 1 July 2008 implements the announced policy intention of limiting the number of contribution years to six years. The Government had previously announced other changes to the IBNR Scheme, including an 18 month moratorium on the IBNR levy, meaning that the imposition day had to be changed to allow time for the policy changes to be implemented.