Commonwealth Numbered Regulations - Explanatory Statements

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NATIONAL HEALTH AMENDMENT REGULATIONS 2004 (NO. 1) 2004 NO. 185

EXPLANATORY STATEMENT

STATUTORY RULES 2004 NO. 185

Issued by the Authority of the Minister for Health and Ageing

National Health Act 1953

National Health Amendment Regulations 2004 (No. 1)

Subsection 140(1) of the National Health Act 1953 (the Act) provides, in part, 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 73BEA will be inserted into the Act by item 20 of Schedule 1 to the Health Legislation Amendment (Private Health Insurance Reform) Act 2004. Subsection 73BEA(1) of the Act provides that regulations must set out performance indicators to be used by the Minister in monitoring the operations of registered organizations. Section 67 of the Act provides that only registered organizations may conduct health insurance business.

Subsection 73BEA(2) of the Act provides that the performance indicators are to be framed:

(a)       to assist the Minister in detecting breaches of the Act;

(b)       to alert the Minister to any practice followed by a registered organization which may require investigation; and

(c)       to alert the Minister to any practice followed by one or more registered organizations that may be contrary to government health policy and therefore require a regulatory response.

The purpose of the Regulations is to amend the National Health Regulations 1954 by inserting performance indicators for the purpose of section 73BEA of the Act.

The Regulations establish five performance indicators in relation to the operations of registered organizations. The indicators are:

(a)       the number and kind of complaints made to the Private Health Insurance Ombudsman about registered organizations;

(b)       changes in the number of members insured in particular age groups;

(c)       changes in the number of episodes of treatment, and the average number of episodes of treatment, for particular age groups;

(d)       changes in the nature of the episodes of treatment for which benefits are paid in particular age groups; and

(e)       changes in the average amount of benefits paid for a member, or an episode of treatment, in particular age groups.

The performance indicators operate both in relation to the activities of individual registered organizations and in relation to the whole of the industry, and provide the Minister with an objective tool to assess whether regulatory action is required.

The Act does not specify any conditions that need to be met before the power to make the Regulations may be exercised.

Details of the Regulations are set out in the Attachment.

The Regulations commence on the commencement of item 20 of Schedule 1 to the Health Legislation Amendment (Private Health Insurance Reform) Act 2004, which has been proclaimed to commence on 1 July 2004.

Subsections 4(1) and 4(2A) of the Acts Interpretation Act 1901 read together, provide that regulations may be made between the passing and commencement of legislation upon which they rely for their authority, as long as such regulations do not commence before that legislation.

ATTACHMENT

DETAILS OF THE NATIONAL HEALTH AMENDMENT REGULATIONS 2004 (No. 1).

Regulation 1 names the regulations as the National Health Amendment Regulations 2004 (No. 1).

Regulation 2 provides for the regulations to commence on the commencement of item 20 of Schedule 1 to the Health Legislation Amendment (Private Health Insurance Reform) Act 2004, which has been proclaimed to commence on 1 July 2004.

Regulation 3 provides that Schedule 1 amends the National Health Regulations 1954.

Schedule 1 - Amendment

Item [1]

This item inserts a new Part 5B, regulation 37J into the National Health Regulations 1954. Regulation 37J sets out, for the purpose of section 73BEA of the Act, the performance indicators to be used by the Minister in monitoring the operations of registered organizations. The indicators are:

(a)       the number and kind of complaints made to the Private Health Insurance Ombudsman about registered organisations;

(b)       changes in the number of members insured in particular age groups;

(c)       changes in the number of episodes of treatment, and the average number of episodes of treatment, for particular age groups;

(d)       changes in the nature of the episodes of treatment for which benefits are paid in particular age groups;

(e)       changes in the average amount of benefits paid for a member, or an episode of treatment, in particular age groups.

Complaints to the Private Health Insurance Ombudsman

The number and kind of complaints made to the Private Health Insurance Ombudsman (the PHIO) about registered organizations is a quantitative and qualitative measure that assist the Minister, based on information received from the Private Health Insurance Ombudsman, to:

•       identify potential breaches of the legislative requirements of the Act, and in particular of community rating; and

•       identify trends and issues in the industry which may require investigation and a consideration of further action.

The performance indicator operates in conjunction with, and consistently with, the PHIO's role and responsibilities under Part VIC of the Act.

In particular, section 82ZSDA provides for the PHIO to report to the Minister on the outcome of investigations of complaints and section 82ZTCA provides for the PHIO to report to the Minister on the outcome of an investigation of the practices and procedures of a particular registered organization.

In relation to the PHIO's report under both sections 82ZSDA and 82ZTCA, the PHIO may (and must, in the case of a completed investigation under section 82ZTA) make recommendations to the Minister:

•       concerning general changes in regulatory practice and/or industry practices relating to registered organizations generally; or

•       concerning possible means of dealing with specific problems arising in relation to the particular registered organization the subject of the investigation.

In addition, paragraph 82ZRC(ba) provides, in part, that the function of the PHIO is to publish in written form and on its website, as soon as practicable after the end of each financial year, a State of the Health Funds Report providing comparative information on the performance and service delivery of all registered organizations during that financial year.

Changes in the number of members insured in particular age groups

The changes in the number of members insured in particular age groups is a quantitative measure which enable the Minister to consider data in relation to changes in the number of members insured in specific age groups. The age groups are not be specified to ensure that the Minister has sufficient flexibility to consider a range of age cohorts. The indicator is primarily focused on identifying discrimination in relation to access to private health insurance, and assists the Minister to identify trends and issues requiring further investigation.

Changes in the number of episodes of treatment, and the average number of episodes of treatment, for particular age groups

The changes in the number of episodes of treatment, and the average number of episodes of treatment, for particular age groups is a quantitative measure that enable the Minister to consider data in relation to numbers of episodes of treatment provided to members insured in specific age groups. The age groups are not be specified to ensure that the Minister has sufficient flexibility to consider a range of age cohorts. The indicator is primarily focused on identifying discrimination in relation to particular episodes of treatment, and assists the Minister to identify trends and issues requiring further investigation.

Changes in the nature of the episodes of treatment for which benefits are paid in particular age groups

The changes in the nature of the episodes of treatment for which benefits are paid in particular age groups is a quantitative measure that enables the Minister to consider data in relation to the nature of episodes of treatment provided to members insured in specific age groups. The age groups are not be specified to ensure that the Minister has sufficient flexibility to consider a range of age cohorts. The indicator is primarily focused on identifying discrimination in relation to particular episodes of treatment or benefits paid for particular episodes of treatment, and assists the Minister to identify trends and issues requiring further investigation.

Changes in the average amount of benefits paid for a member, or an episode of treatment, in particular age groups

The changes in the average amount of benefits paid for a member, or an episode of treatment, in particular age groups is a quantitative measure that enables the Minister to consider data in relation to the average benefits paid for either a member, or a particular episode of treatment provided to members, insured in specific age groups. The age groups are not specified to ensure that the Minister has sufficient flexibility to consider a range of age cohorts. The indicator is primarily focused on identifying discrimination in relation to benefits paid on a dollar basis, and assists the Minister to identify trends and issues requiring further investigation.

As required by subsection 73BEA(3) of the Act, the Department of Health and Ageing will publish on its website guidance to the public on how it will interpret and apply the performance indicators.

COMMONWEALTH OF AUSTRALIA

CIRCULAR

Acute Care Division
Private Health Insurance Branch
Mail Drop Point 86
GPO Box 9848 Canberra ACT 2601

Commonwealth Department of Health and Ageing

Implementation of Health Legislation Amendment (Private Health Insurance Reform) Act 2004 and Performance Indicators

The purpose of this circular is to provide an update on the implementation of the Health Legislation Amendment (Private Health Insurance Reform) Act 2004 and broad guidance on the interpretation and application of the performance indicators.

1. Health Legislation Amendment (Private Health Insurance Reform) Act 2004

The Health Legislation Amendment (Private Health Insurance Reform) Act 2004 (the Reform Act) received Royal Assent on Friday 27 February 2004, being Act No. 1 of 2004. Elements of the Reform Act regarding changes to health fund regulation (Part 1 of Schedule 1 to the Act) will commence on 1 July 2004.

The Reform Act removes the requirement for health funds to submit non-premium related rule changes 60 days before the date of effect. Nevertheless, health funds will still be required to notify the Department (via the Rules Application Processing System (RAPS)) of changes to their rules before the change comes into effect. The Reform Act replaces the rules assessment/approval process with a system of performance indicator monitoring.

The onus is on health funds to ensure that all rule changes and new products comply with the National Health Act 1953. Health funds will need to consider obtaining independent legal advice on the introduction of new products and changes to existing products.

Health funds that propose to make a rule change that is, or could be, detrimental to the interests of all or any of its contributors must, before the rule change comes into effect, take all reasonable steps to ensure that affected contributors are informed of the change in terms that can reasonably be expected to be understood.

Rule changes that have been submitted to the Department on RAPS prior to 1 July 2004 will be assessed by the Department even though their date of effect may be after 1 July 2004.

The Reform Act does not affect the requirements relating to proposed rule changes regarding premiums or other statutory requirements such as the approval of Gap Cover Schemes.

2. Performance Indicators

A regime using performance indicators to monitor performance replaces the previous rules assessment process. The Act also provides a clear and flexible regulatory framework providing for enforcement and remedies, including enforceable undertakings, directions, additional conditions of registration, Federal Court orders and the removal of the option for funds to offer the 30% Rebate as a premium reduction.

Introduction of Performance Indicators

From 1 July 2004, subsection 73BEA(1) of the National Health Act 1953 provides that regulations must set out performance indicators to be used by the Minister of Health and Ageing in monitoring the operations of registered organisations for compliance with the National Health Act 1953 and Government health policy.

From 1 July 2004, subsection 73BEA(2) of the National Health Act 1953 provides that the performance indicators are to be framed:

•       To assist the Minister in detecting breaches of the Act;

•       To alert the Minister to any practice followed by a registered organisation which may require investigation; and

•       To alert the Minister to any practice followed by one or more registered organisations that may be contrary to government health policy and therefore require a regulatory response.

Subsection 73BEA(3) provides that the Department must publish on its website guidance to the public on how the Department will interpret and apply the performance indicators. This circular is intended to meet this requirement.

The Performance Indicators

The performance indicators, which have been developed in consultation with representatives of industry, the Private Health Insurance Ombudsman (PHIO), and the Private Health Insurance Administration Council (PHIAC) are as follows:

(a)       the number and kind of complaints made to the Private Health Insurance Ombudsman about registered organisations;

(b)       changes in the number of members insured in particular age groups;

(c)       changes in the number of episodes of treatment, and the average number of episodes of treatment for particular age groups;

(d)       changes in the nature of the episodes of treatment for which benefits are paid in particular age groups;

(e)       changes in the average amount of benefits paid for a member, or an episode of treatment, in particular age groups.

Interpretation and Application of Performance Indicators

The performance indicators will operate both at a whole of industry level and in relation to the activities of individual organisations.

Baseline Data

The baseline figure for all the indicators will be end of year data for the 2003 - 2004 financial year as well as quarterly figures for the same period.

(a) Complaints to the Private Health Insurance Ombudsman

The number and kind of complaints made to the Private Health Insurance Ombudsman (PHIO) about registered organisations is ,a quantitative and qualitative measure that assists the Minister to:

•       identify potential breaches of the legislative requirements of the Act, and in particular of community rating; and

•       identify trends and issues in the industry which may require investigation and a consideration of further action.

This performance indicator will operate in conjunction with, and consistently with, the PHIO's role and responsibilities under Part VIC of the National Health Act 1953.

In particular, the PHIO has responsibilities under sections 82ZSDA and 82ZTCA of the National Health Act 1953, which provide for the PHIO to report to the Minister on the outcome of investigations of complaints (section 82ZSDA) and on the outcome of an investigation of the practices and procedures of a particular registered organisation (section 82ZTCA).

In relation to the PHIO's report under both sections 82ZSDA and 82ZTCA of the National Health Act 1953, the PHIO may (and must, in the case of a completed investigation under section 82ZTA of the National Health Act 1953) make recommendations to the Minister:

•       concerning general changes in regulatory practice and/or industry practices relating to registered organisations generally; or

•       concerning possible means of dealing with specific problems arising in relation to the particular registered organisation the subject of the investigation.

In addition, the PHIO has the role of publishing in written form, on its website, as soon as practicable after the end of each financial year, a State of the Health Funds Report providing comparative information on the performance and service delivery of all registered organisations during that financial year: paragraph 82ZRC(ba) of the National Health Act 1953.

Input data

Input data for this performance indicator will include:

•       complete financial year figures;

•       quarterly figures; and

•       yearly figures rolling by quarter.

In general, the Department will look at outlying values and in particular will assess:

•       whether a health fund has a significant or unusually high increase in the number of complaints between years or quarters; and/or

•       whether a health fund has a significant or unusually high change in the type of complaints between years or quarters.

Where the assessment by the Department identifies an issue either in relation to a particular health fund, or for the broader industry, the Department may seek an explanation from one or more health funds under section 73BEB of the National Health Act 1953. If the Minister is not satisfied, further action may be taken under the regulatory framework for enforcement and remedies.

(b) Changes in the number of members insured in particular age groups

The change in the number of members insured in particular age groups is a quantitative measure. The age groups have been left open to ensure that the Minister has sufficient flexibility to consider a range of age cohorts. The measure is primarily focused on identifying discrimination in relation to access to private health insurance.

The performance indicator will assist the Minister to identify trends and issues requiring further action.

Input data

Input data for this performance indicator will include:

•       year on year figures; and

•       quarterly figures.

In general, the Department will look at outlying values. Where the Department identifies an issue either in relation to a particular health fund or for the broader industry the Department may seek an explanation from one or more health funds under section 73BEB of the National Health Act 1953. If the Minister is not satisfied, further action may be taken under the regulatory framework for enforcement and remedies.

(c) Changes in the number of episodes of treatment, and the average number of episodes of treatment, for particular age groups

The changes in the number of episodes of treatment and the average number of episodes of treatment for particular age groups, is a quantitative measure. The age groups have been left open to ensure that the Minister has sufficient flexibility to consider a range of age cohorts. The measure is primarily focused on identifying discrimination in relation to particular episodes of treatment.

The performance indicator will assist the Minister to identify trends and issues requiring further action.

Input data

Input data for this performance indicator will include:

•       year on year figures; and

•       quarterly figures.

In general, the Department will look at outlying values. Where the Department identifies an issue either in relation to a particular health fund or for the broader industry the Department may seek an explanation from one or more health funds under section 73BEB of the National Health Act 1953. If the Minister is not satisfied, further action may be taken under the regulatory framework for enforcement and remedies.

(d) Changes in the nature of the episodes of treatment for which benefits are paid in particular age groups

The changes in the nature of the episodes of treatment for which benefits are paid in particular age groups, is a quantitative measure. The age groups have been left open to ensure that the Minister has sufficient flexibility to consider a range of age cohorts. The measure is primarily focused on identifying discrimination in relation to particular episodes of treatment, or benefits paid for particular episodes of treatment.

The performance indicator will assist the Minister to identify trends and issues requiring further action.

Input data

Input data for this performance indicator will include:

•       year on year figures; and

•       quarterly figures.

In general, the Department will look at outlying values. Where the Department identifies an issue either in relation to a particular health fund or for the broader industry the Department may seek an explanation from one or more health funds under section 73BEB of the National Health Act 1953. If the Minister is not satisfied, further action may be taken under the regulatory framework for enforcement and remedies.

(e) Changes in the average amount of benefits paid for a member, or an episode of treatment, in particular age groups

The changes in the average amount of benefits paid for a member, or an episode of treatment, in particular age groups is a quantitative measure that enables the Minister to consider data in relation to the average benefits paid for either a member, or a particular episode of treatment provided to members, insured in specific age groups. The age groups have been left open to ensure that the Minister has sufficient flexibility to consider a range of age cohorts. The measure is primarily focused on identifying discrimination in relation to benefits paid on a dollar basis.

The performance indicator will assist the Minister to identify trends and issues requiring further action.

Input data

Input data for this performance indicator will include:

•       year on year figures; and

•       quarterly figures.

In general, the Department will look at outlying values. Where the Department identifies an issue either in relation to a particular health fund or for the broader industry the Department may seek an explanation from one or more health funds under section 73BEB of the National Health Act 1953. If the Minister is not satisfied, further action may be taken under the regulatory framework for enforcement and remedies.

Regulatory framework for enforcement and remedies

From 1 July 2004 the Minister will have a range of powers enabling a proportional and measured response to breaches of the National Health Act 1953 and the performance of health funds. Options open to the Minister include:

•       seeking an explanation (section 73BEB);

•       conducting an investigation (section 73BED);

•       seeking an enforceable undertaking (section 73BEH);

•       issuing a direction (section 73BEJ);

•       imposing a further condition of registration (section 73);

•       preventing a health fund from offering the 30% Rebate as a premium reduction (section 73BEL); and

•       applying to the Federal Court for a court order (section 73BEM and 73BEN).

The Government accords high priority to working co-operatively with the private health insurance industry to promote mutually agreed outcomes. It is important that the regulation of the industry supports a viable private health insurance industry which consumers consider value for money.

It is noted that if a non-compliance issue involves breach of the principles of community rating and the health fund is not prepared to comply with remedial action, the Minister has available the option of taking from the fund its ability to offer the 30% Rebate as a premium reduction. Fund members retain access to the rebate through the taxation system or by applying to the Health Insurance Commission.

If you have any queries in relation to this Circular, please contact Mr Neil Smith, Director, Legislation and Legal Policy on (02) 6289 9434.

If you require further information please telephone: (02) 6289 9853/24 hr answering machine or E-Mail the enquiry to PrivateHealth@health.gov.au

Internet: http://www.health.gov.au/privatehealth/providers/circulars02-03/index.htm

Private Health Industry Branch
June 2004

Attachment F

Acute Care Division

Private Health Insurance Branch

Short Summary of Performance Indicators

The proposed regulations set out five performance indicators in relation to the operations of registered organizations:

(a)       the number and kind of complaints made to the Private Health Insurance Ombudsman about registered organizations;

(b)       changes in the number of members insured in particular age groups;

(c)       changes in the number of episodes of treatment, and the average number of episodes of treatment, for particular age groups;

(d)       changes in the nature of the episodes of treatment for which benefits are paid in particular age groups;

(e)       changes in the average amount of benefits paid for a member, or an episode of treatment, in particular age groups.

The performance indicators will operate both in relation to the activities of individual registered organizations and in relation to the whole of the industry.

(1) Complaints to the Private Health Insurance Ombudsman

The number and kind of complaints made to the Private Health Insurance Ombudsman (the PHIO) about registered organizations is a quantitative and qualitative measure that assists the Minister, based on information received from the Private Health Insurance Ombudsman to:

•       identify potential breaches of the legislative requirements of the Act, and in particular of community rating; and

•       identify trends and issues in the industry which may require investigation and a consideration of further action.

The performance indicator will operate in conjunction with, and consistently with, the PHIO's role and responsibilities under Part VIC of the Act.

(2) Changes in the number of members insured in particular age groups

The changes in the number of members insured in particular age groups is a quantitative measure which enables the Minister to consider data in relation to changes in the number of members insured in specific age groups. The age groups have been left open to ensure that the Minister has sufficient flexibility to consider a range of age cohorts. The measure is primarily focused on identifying discrimination in relation to access to private health insurance.

Changes in the number of episodes of treatment, and the average number of episodes of treatment, for particular age groups

The changes in the number of episodes of treatment, and the average number of episodes of treatment, for particular age groups is a quantitative measure that enables the Minister to consider data in relation to numbers of episodes of treatment provided to members insured in specific age groups. The age groups have been left open to ensure that the Minister has sufficient flexibility to consider a range of age cohorts. The measure is primarily focused on identifying discrimination in relation to particular episodes of treatment.

Changes in the nature of the episodes of treatment for which benefits are paid in particular age groups

The changes in the nature of the episodes of treatment for which benefits are paid in particular age groups is a quantitative measure that enables the Minister to consider data in relation to the nature of episodes of treatment provided to members insured in specific age groups. The age groups have been left open to ensure that the Minister has sufficient flexibility to consider a range of age cohorts. The measure is primarily focused on identifying discrimination in relation to particular episodes of treatment or benefits paid for particular episodes of treatment.

Changes in the average amount of benefits paid for a member, or an episode of treatment, in particular age groups

The changes in the average amount of benefits paid for a member, or an episode of treatment, in particular age groups is a quantitative measure that enables the Minister to consider data in relation to the average benefits paid for either a member, or a particular episode of treatment provided to members, insured in specific age groups. The age groups have been left open to ensure that the Minister has sufficient flexibility to consider a range of age cohorts. The measure is primarily focused on identifying discrimination in relation to benefits paid on a dollar basis.


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