Commonwealth Numbered Regulations - Explanatory Statements

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NATIONAL HEALTH AMENDMENT REGULATIONS 2003 (NO. 1) 2003 NO. 330

Subsection 140(1) of the National Health Act 1953 (the Act) provides that the Governor-General may make regulations, not inconsistent with the Act, prescribing all matters which by the Act are required or permitted to be prescribed, or which are necessary or convenient to be prescribed for carrying out or giving effect to the Act.

Section 67 of the Act provides that "health insurance business" can only be carried out by registered health benefits organisations (health funds). Paragraph (e) of the definition of health insurance business in subsection 67(4) of the Act enables the making of regulations prescribing business carried out by a health fund that is not to be treated as health insurance business.

Regulation 48 of the National Health Regulations 1954 (the Principal Regulations) prescribes kinds of business for the purposes of paragraph (e) of the definition of health insurance business in subsection 67(4) of the Act. However, business prescribed in subregulation 48 (1) of the Principal Regulations may be conducted by health funds as well as other insurers. Under the Principal Regulations, if provided by a health fund, the business remains within the purview of the Act, if provided by another organisation it is outside the scope of the Act.

The Principal Regulations enable full coverage of areas of insurance which are not considered to be strictly within the scope of health insurance business. Enabling a range of insurers to cover these areas increases competition and consumer choice. The risk is also spread beyond the health funds into general insurance, thereby reducing the potential impact of high claims in one industry.

The purpose of the Regulations is to allow both health funds and general insurers to provide insurance cover for goods and services provided to Australians and other eligible persons on board cruise ships in Australian waters. General insurers are currently prevented from covering medical expenses in Australia, which precludes cover for out-of-hospital medical expenses in travel insurance sold to people taking cruises in Australian waters. Private health insurance funds are currently allowed to provide cover in their ancillary tables for services that do not attract the Medicare rebate, including out-of-hospital medical expenses. However, ancillary tables are usually limited in scope and benefits and are generally capped. Therefore, even if a person on board a cruise ship in Australian waters has private health insurance, they can face large uninsured expenses. By allowing both health funds and general insurers to provide insurance cover to eligible persons on board cruise ships in Australian waters, the Regulations increase competition among insurers and provide a greater choice of products for consumers. They also encourage an improved level of coverage for out-of-hospital medical expenses that do not attract the Medicare rebate.

The Regulations amend subregulation 48(1) of the Principal Regulations to prescribe the business of providing insurance cover for goods and services provided to Australians and other eligible persons on board cruise ships in Australian waters as a business which is not included in the definition of "health insurance business", for insurers other than health funds. If a passenger holds both travel insurance (via a general insurer), and health insurance (via a health fund), the passenger must make the first claim against the general insurer. This is a consequence of health fund rules in relation to the payment of benefits.

The Act specifies no conditions that need to be met before the power to make the proposed Regulations may be exercised.

Details of the proposed Regulations are set out in the Attachment.

The Regulations commenced on gazettal.

ATTACHMENT

NATIONAL HEALTH AMENDMENT REGULATIONS 2003 (No. 1).

Details of the Regulations are as follows:

Regulation 1 provides that the name of the Regulations is the National Health Amendment Regulations 2003 (No. 1).

Regulation 2 provides that the Regulations commenced on the date of gazettal.

Regulation 3 provides that the National Health Regulations 1954 are to be amended by the provisions in Schedule 1 of the Regulations.

Schedule 1

Item 1

This amendment removes a reference in current subregulation 48(1)(a)(ii)(B) to enable the inclusion of the amendment in item 2 below.

Item 2

This amendment inserts a new provision into regulation 48 that enables both health funds and other insurers to provide insurance for Australians and other eligible persons on cruise ships in Australian waters.

Health funds providing this insurance remain bound by the National Health Act 1953. General insurers providing this insurance would not be regulated under the National Health Act 1953.

Section 67 of the National Health Act 1953 (the Act) provides that a person other than a registered health benefits organisation shall not carry on health insurance business.

Health insurance business is the business of undertaking liability, by way of insurance, for costs incurred for the provision in Australia of hospital treatment or an ancillary health benefit, but does not include accident and sickness insurance business, liability insurance business, or business of a kind prescribed.

Regulation 48 of the National Health Regulations 1954 prescribes the business that is not considered health insurance business, such as the provision of insurance to cover costs for medical treatment received by people who are temporarily in Australia, or undertaking charity work, or engaging in a sporting activity.

Passengers travelling on cruise ships within Australian waters may require medical treatment on board the ship.

Cruise ship passengers can take out travel insurance with a general insurer that usually will provide cover for medical costs. However, section 67 of the Act prevents this type of insurance from covering medical costs incurred by Australian passengers while the ship is in Australian waters, as this is regarded as health insurance business which can only be conducted by a registered health benefits organisation.

Many of the doctors working on cruise ships are not registered in Australia, as the ships maybe operated by international companies and can cruise in international waters as well as Australian waters. Therefore a Medicare benefit is not payable for services provided by these doctors.

Passengers who take out travel insurance with a general insurer may be under the misapprehension that medical costs incurred while in Australian waters are legally able to be covered by the insurance policy. Others, who may be aware that the medical costs component of their travel insurance does not necessarily cover treatment in Australian waters, may erroneously believe that their private health insurance or Medicare will cover the costs.

Registered health benefits organisations may only pay for such medical services via ancillary health benefits (as distinct from applicable benefits arrangements - hospital insurance).

Ancillary health benefits generally have limitations on benefits payable. Waiting periods may also apply in relation to the ability to claim benefits in the first year. Therefore, a passenger may have to take out the ancillary health cover some time before embarking on the cruise. The level of benefit payable, and waiting periods applying to particular services, are commercial decisions made by individual insurers. Furthermore, ancillary health benefits are prohibited from covering services for which a Medicare benefit is payable - (section 126 of the Health Insurance Act 1973).

There is a possibility that an Australian passenger who receives medical treatment while on board a cruise ship in Australian waters could incur significant costs for that treatment. They would be unable to obtain a Medicare benefit if treatment was provided by a doctor not registered in Australia. They would not be able to claim against their travel insurance because this insurance cannot cover medical costs in Australia. Even in cases where a Medicare benefit was payable because the doctor was registered in Australia, the passenger could face considerable out-of-pocket expenses, depending on the doctor's fee. Passengers with ancillary cover provided by a registered health benefits organisation may be able to claim against their policy, but the level of benefit may be capped.

Currently, there is anecdotal evidence suggesting that some Australians may be travelling on cruise ships in Australian waters:

1.       without adequate private health insurance;

2.       with travel insurance provided by a general insurer which could not actually pay out for medical expenses without infringing section 67 of the National Health Act 1953; or

3.       without insurance of any description.

There is anecdotal evidence also that some general insurers may be paying out for medical costs incurred by passengers on cruise ships in Australian waters, in contravention of section 67 of the Act.

It is considered that there is no good reason for prohibiting general or private health insurers from providing insurance in this situation.

The desired objective of the action is to ensure that Australian passengers on cruise ships are able to obtain adequate insurance to cover the cost of any medical treatment provided while on board.

Option 1 - maintain current arrangements and encourage registered health benefits organisations to offer cover under ancillary tables.

Option 2 -prohibit private health insurance and enable general insurers to be the sole provider.

Option 3 -enable general and private health insurers to provide appropriate insurance.

Impact analysis

People primarily affected by the situation are:

•       Australians travelling on cruise ships in Australian waters;

•       private health insurers providing ancillary health benefits; and

•       general insurers who offer travel insurance.

In addition, the cruise ship operators or travel agents may be affected if they are left with bad debts, and the registered health benefits organisations and the Government may be affected if passengers with private health insurance raise questions about the benefit of private health insurance.

Advantages

•       Registered health benefits organisations would retain the advantage of being the sole providers of cover for medical costs incurred on cruise ships in Australian waters.

Disadvantages

•       The likelihood for passengers to misunderstand the limitations of their private health or travel insurance would remain.

•       Passengers may decide that ancillary cover is not appropriate as they would not serve the waiting periods before embarking on their cruise, or because limitations on benefits applied.

•       Registered health benefits organisations may or may not develop ancillary health benefits products that are appropriately adapted to the market, this being a commercial decision. General insurers would be prohibited.

•       Cruise ship operators and travel agents may be left with unmet medical liabilities where passengers are unable to pay.

•       The registered health benefits organisations and the Government may be perceived as part of the problem by passengers who incur costs.

•       Insurance payments of any kind would not be allowed for services provided on a cruise ship for which a Medicare benefit is payable.

Advantages

•       There may be a reduced risk of unmet medical liabilities for cruise ship operators and travel agents.

•       There could be an increase in consumer certainty in relation to travel insurance.

Disadvantages

•       General insurers may or may not develop products that are appropriately adapted to the market, this being a commercial decision.

•       Passengers with private health insurance could be uncertain about the level of their cover for medical costs on board cruise ships, at least in the short term.

•       The Department would have to increase compliance activities to advise industry and consumers of the situation and increase the monitoring of health fund compliance. Registered health benefits organisations would have to increase their monitoring of claims to ensure that that did not contravene the prohibition.

•       Insurance payments of any kind would not be allowed for services provided on a cruise ship for which a Medicare benefit is payable.

Where a passenger has both travel insurance and ancillary health cover, they would be required to have initial recourse to their travel insurance. If the expenses exceed the limit set under the travel insurance policy, a claim could be made against the ancillary product.

Advantages

•       General insurers would be able to offer cover for medical costs under travel insurance and registered health benefits organisations would be able to offer cover under ancillary products.

•       Both parties would have the opportunity to make a commercial decision as to how to approach and address the market.

•       Consumers may have increased choice and better product design. Consumers would have increased certainty as to the efficacy of their insurance.

•       Registered health benefits organisations may experience a reduction in claims, as passengers with both ancillary cover and travel insurance would be required to call on their travel insurance in the first instance.

•       There may be a reduced risk of unmet medical liabilities for cruise ship operators and travel agents.

•       The level of compliance burden on industry and the Department would be reduced.

•       A market of unknown size would be opened up for general insurers.

Disadvantages

•       Registered health benefits organisations would no longer be the only providers of cover for medical costs incurred on cruise ships in Australian waters.

•       Insurance payments of any kind would not be allowed for services provided on a cruise ship for which a Medicare benefit is payable.

Informal discussions have been held with the Australian Health Insurance Association and a general insurer, with both indicating in-principle support for the proposal.

Option 3, enabling general insurers and registered health benefits organisations provide insurance for Australian passengers in cruise ships in Australian waters is the preferred option.

This solution would be acceptable to all parties, offering adequate protection and choice to consumers while removing an unnecessary and unintended compliance burden from general insurers through possible infringement of section 67 of the Act. It could be implemented by amending Regulation 48 to exclude this type of insurance from the definition of health insurance business in section 67 of the Act.

It is expected that this will be implemented via regulations amending regulation 48 of the National Health Regulations 1954, prior to the end of 2003.

The Department in consultation with the industry will review the arrangements after they have been in operation for 12 months.