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MEDICAL INDEMNITY REGULATIONS 2003 2003 NO. 208
EXPLANATORY STATEMENTStatutory Rules 2003 No. 208
Medical Indemnity Regulations 2003
The government announced the new framework on medical indemnity on 23 October 2002. The purpose of this new framework is to address rising medical indemnity insurance premiums and ensure a viable and ongoing medical indemnity insurance market. The new framework was enacted by the Parliament in 2002 under the Medical Indemnity Act 2002 ("the Act"). The Incurred But Not Reported Liabilities (IBNR) Scheme ("the IBNR Scheme") is one of the elements of this framework.
Under the IBNR Scheme, the government is funding the IBNR liabilities for those Medical Defence Organisations (MDOs) that have not set aside money to cover these liabilities, and recouping the cost of that funding through contributions by their members payable over an extended period. The IBNR Scheme therefore consists of two parts:
• the Commonwealth providing funding for MDO IBNR liabilities that are unfunded as at 30 June 2002; and
• the cost of funding those liabilities being recouped through contributions from those who, on 30 June 2000, were members of an MDO participating in the IBNR Scheme.
The IBNR Scheme is being administered by the Health Insurance Commission.
These regulations give effect to a number of aspects of the Incurred But Not Reported Liabilities (IBNR) Scheme ("the IBNR Scheme"). In particular, the regulations prescribe the rate of penalties for late payment to be imposed on medical defence organisations (under section 27 of the Act) and on their members (under section 65); specify methods of payment under section 66; and specify a number of circumstances in which a member would be exempt from an IBNR contribution under subsection 52(4).
Exemption from IBNR contributions
Section 52 of the Act provides for a range of specific exemptions from an IBNR indemnity contribution. In addition to these exemptions, subsection 52(4) of the Act provides for regulations "that provide that a person is exempt from IBNR contribution in circumstances specified in the regulations."
The Minister for Health and Ageing has made a determination of which MDOs are to not participate in the IBNR Scheme. Following this determination, United Medical Protection, the Medical Defence Association of Victoria (MDAV) and the Medical Defence Association of South Australia (MDASA) are participating in the IBNR Scheme. However, in recognition that MDAV and MDASA are managing their financial exposure prudently through a funding plan developed with their actuarial advisers, the Minister for Health and Ageing has not determined an 'IBNR factor' in relation to MDAV and MDASA.
This regulation therefore includes an exemption relating to those medical practitioners that were, on 30 June 2000, members of MDAV and MDASA.
Some specialist practitioners have moved into the public sector on a full-time basis and have relinquished their right to practice in the private sector since 30 June 2000. Some of these doctors are likely to be required to make an IBNR contribution due to their having been members of United Medical Protection on 30 June 2000.
This regulation provides for an exemption from an IBNR indemnity contribution in a relevant contribution year for a public sector specialist who:
• on 1 May 2002 was, and on the imposition day for the relevant contribution is, employed as a public sector specialist; and
• on 30 June 2000, was engaged in private practice in the medical profession in the same specialty in which the person is a public sector specialist; and
• during the period 1 May 2002 to the imposition day for the relevant contribution year (inclusive):
• under the employment arrangement with the public sector employer did not have a right to engage in private practice in a medical profession, except in respect of pre-booked patients treated prior to 31 December 2002; and
• has not received income as a medical practitioner, other than in his or her capacity as a public sector specialist, except in respect of pre-booked patients treated prior to 31 December 2002.
Under the Act, a person may be exempt from an IBNR indemnity contribution if the HIC determines that the person, on 30 June 2003 had comprehensive insurance cover from a medical indemnity insurer not related to a medical defence organisation for all incidents covered by the IBNR indemnity scheme.
Two medical defence organisations provided full retroactive cover to a small number of doctors on a discretionary basis before 30 June 2003. The regulation allows these doctors to be exempt from an IBNR indemnity contribution if:
• on 30 June 2003 the person had an insurance arrangement or arrangements with one of more medical indemnity provider (the current medical indemnity provider); and
• the arrangement or arrangements indemnified the person in relation to claims against or by the person in relation to all the incidents that:
• occurred in the course of, or in connection with, the practice of a medical profession by the person and are covered by the IBNR indemnity scheme;
• on 30 June 2000, were indemnified by the former medical indemnity provider; and
• the arrangement is, or arrangements are, by 30 June 2004 in the form of a contract of insurance; and
• the current medical indemnity provider has remained and will continue to remain liable to indemnify the person for claims against and by the person in relation to all those incidents; or
• the person is indemnified by a Commonwealth, State of Territory agency for claims covered by the IBNR scheme.
In recognition of their reduced incomes, doctors who retire from the medical profession will be exempted from the IBNR contribution. This regulation provides for an exemption for those doctors if:
• The person turned 65 years of age before the beginning of, or during, the contribution year; and
• For the contribution year beginning 1 July 2003, the person's medical income does not exceed $5000 for the period 1 January 2004 to 30 June 2004; or
• For a contribution year beginning after 1 July 2003, the person's medical income did not exceed $5000 during the contribution year.
Repayments of amounts paid under the IBNR Scheme
Section 24 provides an obligation on a medical defence organisation (MDO) or insurer to repay money to the Commonwealth in certain circumstances. Section 27 of the Act provides for a penalty to be imposed on a person if they have not paid a required amount before it becomes due and payable.
Subsection 27(2) refers to the calculation of a late payment penalty that is to be calculated at the 'prescribed rate'. In addition, section 65 of the Act provides for regulations prescribing penalties for late payment of IBNR contributions by members of participating MDOs.
These regulations prescribe the rate of a late payment penalty at the General Interest Charge (GIC) as it is set from time to time by the Australian Taxation Office (ATO).
Methods of making payments to the Commonwealth
Section 66 of the Act provides that regulations may specify the methods for paying an amount of a medical indemnity contribution, lump sum payment or late payment penalty.
The regulation specifies the methods of payment for a lump sum or annual contribution payment as:
• Bpay;
• direct debt;
• cheque payments; and
• credit card.
For instalment payments, the regulations specifies the following methods:
• Bpay;
• direct debit; and
• credit card.
If each instalment is to be paid more frequently than every 3 months, the regulations specify that this is to be by direct debit.