2002

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

MEDICAL INDEMNITY BILL 2002

MEDICAL INDEMNITY (IBNR INDEMNITY) CONTRIBUTION BILL 2002

MEDICAL INDEMNITY (ENHANCED UMP INDEMNITY)
CONTRIBUTION BILL 2002

MEDICAL INDEMNITY (CONSEQUENTIAL AMENDMENTS) BILL 2002

EXPLANATORY MEMORANDUM

(Circulated by authority of the Minister for Health and Ageing, 
Senator the Hon. Kay Patterson)

Introduction

This package of Bills gives effect to a number of elements of the Government’s policy on medical indemnity announced by the Prime Minister on 23 October 2002.

The Bills together provide for:

•	Commonwealth payments in relation to claims forming part of the unfunded incurred but not reported (IBNR) liability of medical defence organisations (MDOs) as at 30 June 2002;
 
•	Commonwealth payments in relation to part of the cost of large claims against MDOs or medical indemnity insurers in relation to incidents notified after 1 January 2003;

•	Subsidies to assist medical practitioners in meeting the cost of indemnity coverage;

•	Payments by members of MDOs to the Commonwealth to cover the cost to the Commonwealth of payments in relation to unfunded incurred but not reported liabilities;

•	Payments by members of United Medical Protection Limited (UMP) to the Commonwealth to cover the cost to the Commonwealth of any payments under the deed of indemnity between the Commonwealth, UMP, Australasian Medical Insurance Limited (AMIL) and the provisional liquidator of UMP/AMIL.  

Those elements of the Government’s policy relating to the prudential regulation of MDOs will be the subject of another Bill.

MEDICAL INDEMNITY BILL 2002

OUTLINE

Part 1 – Preliminary

This Part sets out the objects of the legislation.  It also provides for the commencement of the Bill, defines terms used in the Bill and provides that the Bill extends to the external Territories.

Part 2 - Commonwealth payments

Division 1 of this Part provides for the IBNR indemnity scheme under which the Commonwealth will make payments to MDOs which had unfunded IBNRs as at 30 June 2002 in respect of claims relating to incidents which were part of the MDO’s unfunded IBNR liability.  

All MDOs that existed at 30 June 2002 will take part in the scheme unless the Minister, having regard to the extent of an MDO’s unfunded IBNR exposure as at 30 June 2002, determines that an MDO does not participate in the scheme.

An MDO or another insurer that makes a payment in respect of a claim relating to an incident which was part of the IBNR liability for a participating MDO may apply for a Commonwealth payment.  The proportion of the payment covered by the Commonwealth payment will vary according to the unfunded IBNR factor set by the Minister to reflect the proportion of a participating MDO’s IBNR liabilities which were unfunded.

Division 2 covers the high cost claim indemnity scheme.  Under this scheme the Commonwealth will pay a proportion (set in the Bill at 50% but subject to change by regulation) of amounts paid by MDOs or insurers in respect of medical indemnity claims over a defined threshold (set in the Bill at $2 million but subject to change by regulation).

Division 3 provides for the administration of both indemnity schemes, including how applications are made, payments by the HIC, requirements on persons to provide information and keep records, and repayment arrangements. 

Division 4 provides that the Minister may formulate a scheme to assist certain medical practitioners in meeting the costs of purchasing medical indemnity.

Division 5 covers offences against the Part, and Division 6 appropriates the Consolidated Revenue Fund to make payments under the Part. 

Division 7 covers existing reinsurance contract and is intended to assist MDOs to get both the full benefit of their reinsurance contracts and the full benefit of contributions from the Commonwealth towards the cost of claims covered by the IBNR scheme and the high cost claims scheme.

Part 3 – Contributions towards the cost of providing indemnities

Division 1 sets out who is liable to pay an IBNR indemnity contribution to cover the costs of Commonwealth payments under Division 1 of Part 1.  Broadly, all members of a participating MDO as at 30 June 2000 are required to make the contribution unless they have died, retired before 31 December 2000, were students at 30 June 2000, or have purchased alternative insurance covering them for incidents covered by the IBNR indemnity scheme.  

The rate of contribution is to be based on the indemnity premium or subscription paid by the member for a full year that began in the 2000-01 financial year.  It will be varied according to the results of an annual reassessment of the IBNR liability of each participating MDO, but the amount paid by a member will never increase over the amount paid in 2003-04.

The indemnity contribution is imposed as a tax through the Medical Indemnity (IBNR Indemnity) Contribution Bill 2002.

Division 2 sets out that members of UMP as at 1 July 2002 are liable to pay a contribution to cover the cost of the Commonwealth guarantee to the Provisional Liquidator of UMP/AMIL covering the period 1 July 2002 to 31 December 2003

The contribution is imposed as a tax through the Medical Indemnity (Enhanced UMP Indemnity) Contribution Bill 2002.

Division 3 provides for the administration of the contributions, including when payments must be made, and options for members to defer payment for twelve months, pay in instalments or make a lump sum payment.  It also covers refunds, recoveries, and information provision arrangements.

Division 4 covers offences against the Part.  

Part 4 - Miscellaneous

This Part provides for the administration of the Bill by the HIC the making of regulations under the Bill.  It also provides imposes secrecy requirements on officers administering the legislation, and provides that the Bill does not extend to State insurance within a State.

FINANCIAL IMPACT

The Commonwealth has already expensed the assumption of the IBNR liabilities in the Budget outcome for 2001-02.  The rate at which this expense will be met as cash payments is unknown, as is the rate of collections of contributions under Part 3 and the contribution legislation, as these depend on decisions on which MDOs will participate in the IBNR indemnity scheme.

The estimated annual expense in a full year under the high cost claims scheme and the subsidy arrangements are around $19 million and $35 million a year respectively, although both these estimates will be affected by the progress and nature of State tort law reform.

Regulation impact statement

Background

Medical indemnity cover has been offered to doctors in Australia for over 100 years through medical defence organisations (MDOs), which are mutual associations of doctors.  The indemnity cover provided by MDOs is discretionary rather than through a contract of insurance, and the MDOs are thus not subject to regulation under the Commonwealth’s insurance legislation.

There are currently seven MDOs operating in Australia.  The largest of these is United Medical Protection (UMP) which covers over 60 per cent of the medical profession of Australia – about 30,000 members. 

Problem

Two recent developments in the medical indemnity sector were placing in jeopardy the continued provision of medical services in the community:

•	The application in April 2002 by United Medical Protection to be placed under provisional liquidation, potentially leading to 60% of doctors in Australia not having indemnity cover;
 
•	Sustained large increases in subscriptions to medical defence organisations to the point that some doctors were paying over a third of their incomes for indemnity cover, and deciding to leave the profession altogether or cease certain high risk procedures such as deliveries.

There are also two systemic issues affecting the medical indemnity sector.  The first is that a number of MDOs have not made full provision for the liabilities arising from incurred but not reported (IBNR) claims.  This under-provisioning is a source of potential financial instability for the MDOs concerned.  

In the absence of Government action, these MDOs would have had an excess of liabilities over assets, and would have had to raise capital from their members over several years through successive “calls” on members – arrangements under which members pay an additional year’s subscription. 

The second systemic issue is that the uncertainty around large claims had led to commercial insurers either deciding not to enter the market or else deciding to leave the market, thus reducing competition.

There were essentially two options open to the Government: take no action, and let market forces determine a solution; or intervene to address the IBNR issue, reduce uncertainty around large claims, and ensure that doctors could have access to affordable indemnity cover.

Not taking action in relation to UMP would lead to large numbers of doctors covered by UMP becoming uninsured and consequently withdrawing from providing medical services.  It would also result in many persons with successful claims against doctors arising from past incidents arising in the course of medical practice being unable to recover damages except from the doctor’s own assets.

A continued increase in indemnity costs for specialists such as obstetricians and neurosurgeons and for procedural GPs in rural areas would lead to doctors withdrawing from these areas of practice, placing at risk patients requiring these medical services.

These outcomes are not compatible with the Government’s commitment to the provision of medical services in the community through Medicare.

Objectives

The Government’s main objective is to support the continued provision of medical services to the community by ensuring that doctors can have access to affordable indemnity cover.  It also wishes to address the problem of financial instability arising from unfunded IBNRs. 

Proposed action

The Government proposes to:

•	meet the cost as it emerges of claims forming part of the IBNRs for those MDOs that had not made full provision for these claims at 30 June 2002, and recovering the costs of the payments it will make from doctors who were members of relevant MDOs; 

•	meet fifty per cent of the cost above $2 million to the limit of payments by an MDO or insurer of medical indemnity awards or settlements arising from claims notified after 1 January 2003;

•	subsidise the costs of medical indemnity for particular groups of doctors; and

•	recover the costs of payments if they arise under the extended guarantee to the Provisional Liquidator of UMP.  (Immediately after UMP went into provisional liquidation the Government gave a claims incurred guarantee to the Provisional Liquidator for the period 29 April to 30 June 2002.  It subsequently extended the guarantee on a claims made basis from 1 July to 31 December 2002, and has now extended the guarantee on the same basis for a further twelve months, subject to approval by the NSW Supreme Court.)

Affected parties

Affected parties include doctors, MDOs, patients with claims against doctors and patients more generally, and the Government.

Impact analysis

Meeting the cost of unfunded IBNRs as they emerge will remove the liability in relation to these costs from the balance sheets of MDOs that have not fully provided for these liabilities and ensure that these claims will be met as they emerge.

It is estimated that UMP has unfunded IBNRs of $460 million, and in the absence of the proposed legislation would have proceeded to full liquidation, leaving 60% of the medical workforce across Australia uninsured for past events.

Recovering the cost of IBNR payments from doctors will affect doctors’ incomes for a number of years, depending on the extent of the unfunded IBNR of the MDO they belong to. The legislation sets a cap on payments by doctors of 50% of the premium they paid in respect of a full year that began during the 2000-01 financial year. 

The Government intends that in net present value terms the membership of each affected MDO will be no better off or no worse off under the IBNR arrangements: the legislation simply provides for payments by doctors to be spread over a longer time frame and be more immediately affordable.  (The proposal to meet fifty per cent of the cost of claims over $2 million will reduce the amount of the IBNR liability to some extent for MDOs facing such claims, and means that doctors who are members of those MDOs will be better off.)

Meeting fifty per cent of the cost above $2 million of arising from claims notified after 1 January 2003 is intended to address the considerable uncertainty around very large settlements.  A number of general insurers have indicated that the uncertainty around very large claims is a substantial disincentive to market entry.  Co-insurance by the Government of these claims will remove an obstacle to market entry by general insurers and thus promote competition in the medical indemnity sector.  It will also exert downwards pressure on the costs of medical indemnity cover to doctors.

Subsidising the cost of medical indemnity cover for groups of doctors allows the Government to address affordability issues directly.

Recovering the costs of payments under the extended guarantee to the Provisional Liquidator of UMP  if any arise will impose a cost on doctors who are UMP members.  However, the UMP membership will have benefited substantially from the guarantee.  Without the guarantee the Provisional Liquidator would not have been able to renew memberships as they expired.  Nor would UMP have been able to make any payments in relation to defending cases or settled claims and judgments, and doctors would have been required to bear these costs from their own pockets as they emerged. 

In addition to benefiting MDOs and doctors, patients will also benefit from the legislation.  Patients will continue to have access to doctors in private practice who might otherwise have decided to withdraw from the profession or from providing particular high-risk procedures.  Patients with claims against doctors which form part of the IBNR tail can now be assured that they will receive damages if their claim is successful, even if the MDO has not fully funded its IBNR liability.

Consultation

The Government has consulted extensively with the MDO sector and the Insurance Council of Australia, consumer groups, and a range of doctor groups including the Australian Medical Association, the Rural Doctors’ Association of Australia, the Neurosurgical Society of Australasia, the National Association of Specialist Obstetricians and Gynaecologists and a number of medical Colleges in developing the policy reflected in the legislation.

Some doctor groups are arguing that they should not be required to pay for the IBNR liability until tort law reform measures have been fully implemented in all States and Territories.  While tort law reform may reduce the IBNR liability to some extent, it will not eliminate it, and MDOs with unfunded IBNRs will still be subject to undesirable financial instability. Other doctor groups, consumers and the MDO sector generally support the policy.

Conclusion 

The proposed measures address the potential impact of IBNRs on the viability of
funds, and will also improve the affordability of indemnity cover and encourage doctors to continue to provide medical services in the community. 

Implementation and review

The Health Insurance Commission will administer the legislation.  Payments in relation to claims forming part of the unfunded IBNR tail will begin from 1 January 2003, and payments in relation to claims over $2 million notified after that date will begin as soon as claims are settled or tried.  MDOs will be required to provide details of relevant claims to the HIC for reimbursement, but otherwise are required to continue to act in the ordinary course of business.

Payments by doctors to meet the cost of the IBNR payments will begin from the 2003-04 financial year.  The legislation requires an annual reassessment of the IBNR of each participating MDO to inform a decision whether to require continued payments by doctors.

The Government has undertaken to keep the medical indemnity sector under review.  It has also undertaken to ask the ACCC to monitor the costs of medical indemnity cover.

NOTES ON CLAUSES

Part 1 - Preliminary

Clause 1 Short title

This clause sets out the short title of the Bill

Clause 2 Commencement

This clause provides that the Bill commences, or is taken to commence on 1 January 2003.

Clause 3 Objects of this Act and the medical indemnity contribution legislation

Subclause (1) states that an object of the Bill is to contribute to the availability of medical services in Australia by providing assistance to support access by medical practitioners to medical indemnity arrangements.

Subclause (2) provides that the assistance takes the form of meeting part of the costs of large settlements or awards relating to incidents notified after 1 January 2003; providing subsidies to help some medical practitioners purchase indemnity; and meeting the cost of certain incurred but not reported (IBNR) liabilities of those medical defence organisations with unfunded liabilities as at 30 June 2002.

Subclause (3) states that the Commonwealth is also providing assistance to members and former members of UMP under the Medical Indemnity Agreement referred to in the Medical Indemnity Agreement (Financial Assistance – Binding Commonwealth Obligations) Bill 2002. 

Subclause (4) states that another object of the Bill (together with the other Bills in the package) is to allow the Commonwealth to recover the costs of the assistance relating to IBNRs from persons who were members of the relevant MDOs as at 30 June 2000 and the costs of certain parts of assistance provided under the Medical Indemnity Agreement.

Clause 4 Definitions

This clause defines terms used in the Bill, or indicates where else in the Bill terms are defined.

Clause 5 Medical Defence Organisation (MDO)

This clause defines a medical defence organisation (MDO) in one of three ways.

Subclause (2) defines an MDO as (subject to regulations under subclause (5)) a body corporate which existed on 30 June 2002 and in the ordinary course of its business indemnifies members in respect of incidents that occur in the course of their medical practice.

Subclause (3) provides that (subject to regulations under subclause (5)) the seven organisations currently operating as MDOs are MDOs for the purposes of the Bill.

Subclause (4) and subclause (5) provide that the regulations may provide for specified bodies corporate to be and not to be MDOs for the purpose of the Bill.

Clause 6 Member of an MDO

This clause provides that a person is a member of an MDO under the constitution of an MDO, no matter how their membership is described.

Clause 7 Incident-occurring based cover

This clause defines incident-occurring based cover with an MDO on 30 June 2002 as an arrangement between a person and an MDO in existence on 30 June 2002 under which the MDO in the ordinary course of its business would have been able to indemnify the person in relation to an incident even if the person was no longer a member of the MDO when the claim was made.

Subclause (2) provides that the definition is still satisfied even if the period during which a claim can be made is limited (as it is for arrangements known as extended reporting benefit cover).

Subclause (3) clarifies that arrangements may be incident-based occurring cover even if they are called claims incurred cover, extended reporting benefit cover, or death, disability or retirement cover.

Clause 8 IBNR exposure of an MDO

This clause defines the IBNR exposure of an MDO at a particular time as the amount that the MDO is likely to have to pay in respect of claims relating to incidents occurring before 30 June 2002 covered by incident-occurring based cover, in the course of the practice of a medical profession by a person who was a member of the MDO, which had not been notified to the MDO at 30 June 2002.  

Clause 9 External Territories

This clause provides that the Bill extends to the external Territories.

Part 2 - Commonwealth payments

Division 1 - The IBNR (incurred but not reported) indemnity scheme

Clause 10 Guide to the IBNR indemnity provisions

This clause sets out where in the Division particular provisions may be found.

Clause 11 Participating MDO

Subclause (1) clause provides that an MDO is a participating MDO under the Bill unless the MDO was not in existence on 30 June 2002 or the Minister determines (under Clause 12) that the MDO is not a participating MDO.

Subclause (2) provides that if the Minister determines the MDO is not a participating MDO the MDO is taken never to have been a participating MDO.

Clause 12 Minister may determine that MDO not a participating MDO

Subclause (1) provides that the Minister may make a determination that an MDO is not a participating MDO.   

Subclause (2) requires the Minister in making a determination to have regard to whether the MDO had an unfunded IBNR exposure on 30 June 2002 (taking into account the consolidated financial position of the MDO and any controlled entities) and any other matter the Minister considers relevant.

Subclause (3) requires the Minister before making a determination to consider a report from the Actuary on the matter.

Subclause (4) requires the Minister to give a copy of the determination to the MDO within 28 days after the day it is made.

Subclause (5) provides that a determination under subclause (1) is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901. 

Clause 13 Process for determining whether a determination should be made under section 12

Subclauses (1) and (2) require the Actuary, taking into account information obtained by the HIC from the MDO, to provide the Minister with a written report of whether the Actuary considered that the MDO had an unfunded IBNR exposure on 30 June 2002.

Subclauses (3), (4), (5), and (6) provide for the HIC, if it believes on reasonable grounds that the MDO is capable of providing relevant information, to seek relevant information from the  MDO under a written notice (specifying a day at least 28 days after the notice is given to comply and stating that a failure to comply with the request is an offence) and give that information to the Actuary. The notice may require the information to be verified by statutory declaration.

Clause 14 Incidents covered by the IBNR indemnity scheme

This clause provides that an incident is covered by the scheme if it took place before 30 June 2002 in the course of the practice of a medical profession by a person who was a member of a participating MDO at the time of the incident and also had incident-occurring based cover with the MDO on 30 June 2002, but was not notified to the MDO before 30 June 2002.

Clause 15 IBNR indemnity may be payable under either section 16 or 17

This clause provides that the Commonwealth may make a payment under either clause 16 or clause 17, may make a payment to an MDO or insurer under external administration, and precludes an MDO or insurer that has received a payment under clause 17 cannot receive a payment under clause 16 in relation to the same claim.

Clause 16 IBNR indemnity for payment made by MDO or insurer

Subclause (1) provides that an IBNR indemnity is payable if:

paragraph (a):  the MDO or insurer makes a payment in respect of a claim against or by a person (the practitioner); and

paragraph (b): the claim relates to an incident covered by the IBNR scheme (or a series of incidents, one of which is covered by the scheme); and

paragraph (c): the practitioner was a member of a participating MDO when the incident occurred; and

paragraph (d): if an MDO makes the payment, it does so consistent with it constitution and in the ordinary course of business; and

paragraphs (e): if an insurer makes the payment, it does so consistent with the terms of the insurance contract and in the ordinary course of its business; and

paragraph (f): the MDO or insurer applies to the HIC under clause 36.

Subclause (2) expressly provides that the indemnity payable is subject to the provisions of subclauses (5) and (6) and 15(3) and clauses 19 and 20.

Subclause (3) clarifies that the MDO indemnity is payable to the MDO or insurer regardless of the basis on which the payment is made, even if it is made under claims-made cover.

Subclause (4) clarifies that the MDO indemnity is still available if the MDO making the payment is not a participating MDO.

Subclause (5) provides that if the payment is made by a participating MDO, the IBNR indemnity is only available if the MDO either makes the payment or could have made the payment on the basis of incident-occurring based cover the practitioner had with the MDO for the incident on 30 June 2002. 

Subclause (6) provides that if the indemnity is not paid to a participating MDO, the indemnity is only payable if the participating MDO could have made the payment in relation to he claim under its constitution and in the ordinary course of its business under incident-occurring cover held by the defendant on 30 June 2002. 

Clause 17 IBNR indemnity for MDO or insurer in external administration 

This clause is based on Clause 16, but sets out the special arrangements for IBNR indemnity payments to MDOs or insurers in external administration.

It adds to subclause 17(1) at paragraph (d) the test that the liability of the MDO or insurer must be (or would be) provable in winding up.  It also adds subclause (7) providing that the IBNR indemnity is paid on trust for the benefit for the person to whom the MDO or insurer is liable.

Clause 18 Clarification of circumstances in which IBNR indemnity payable

This clause provides that an IBNR indemnity is still payable even if the MDO or insurer is covered by reinsurance for the payment; the incident took place outside Australia; or the payment was made before the commencement of the Act.

This reflects the Government’s intent to relieve MDOs that have not fully funded their IBNRs of the liability that has not been funded, even if the liability is covered by reinsurance, relates to events outside Australia or is discharged between 30 June 2002 and the commencement of the Act.

Clause 19 Exceptions

This clause provides that an IBNR indemnity is not payable:

paragraph (a): for incidents occurring in the course of treating a public patient in a public hospital. (The State and Territory Governments generally provide an indemnity in respect of such incidents.);

paragraph (b): if the HIC has determined under clause 53 that the person against whom the claim is made had comprehensive insurance cover for all incidents covered by the INBR indemnity scheme;

paragraph (c): if the payment is from one insurer to another; or

paragraph (d): if the payment is prescribed by regulations.

Clause 20 Payment partly related to treatment of public patient in public hospital

This clause provides that if an MDO or insurer makes or is liable to make a payment in relation to a series of related incidents some of which occurred in the course of treating a public patient in a public hospital, the payment is to be disregarded to the extent to which it relates to or is reasonably attributable to the incident or incidents that occurred in the course of treating a public patient in a public hospital.  Any amount paid or payable to the MDO or insurer in relation to the payment is also to be disregarded to the extent to which it relates to or is reasonably attributable to the incident or incidents that occurred in the course of treating a public patient in a public hospital.

Clause 21 Amount of the IBNR indemnity

This clause provides that the amount payable by the Commonwealth is worked out by applying the relevant participating MDO's unfunded IBNR factor (as determined under clause 22) to the adjusted amount paid by the MDO or insurer.

Subclause (2) defines the adjusted amount as the amount paid by the MDO or insurer less any amounts paid, or payable and quantifiable at the time the IBNR indemnity is determined, to the MDO or insurer in respect of the payment it makes.

Subclause (3) provides that amounts to be deducted include any high cost claim indemnity payable under the Bill, any amount payable under a right of subrogation, and any amount prescribed by the regulations.

Subclause (4) provides that amounts not to be deducted include insurer to insurer payments and any amount prescribed by the regulations.  

Clause 22 Minister to determine unfunded IBNR factor for a participating MDO

Subclause (1) provides that the unfunded IBNR factor for a participating MDO is 0 unless the Minister has determined in writing another factor, which must be between 0 and 1. 

Subclause (2) provides that the Minister may not vary or revoke a determination made under subclause (1).
 
Subclause (3) requires the Minister in making a determination to have regard to the extent to which the MDO on 30 June 2002 had insufficient readily available assets to cover its IBNR exposure and any other matters the Minister considers relevant.  In making a determination the Minister is to have regard to the consolidated financial position of the MDO and any controlled entities.

Subclause (4) requires the Minister before making a determination to consider a report from the Actuary on the matter.

Subclause (5) requires the Minister to give a copy of the determination to the MDO within 28 days after the day it is made.

Subclause (6) provides that a determination under subclause (1) is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901. 

Clause 23 Process for determining unfunded IBNR factor under section 22

Subclauses (1) and (2) require the Actuary, taking into account information obtained by the HIC from the MDO, to provide the Minister with a written report on what the Actuary considers should be set as the unfunded IBNR factor for the particpating MDO. 

Subclauses (3), (4), (5), and (6) provide for the HIC, if it believes on reasonable grounds that the MDO is capable of providing relevant information, to seek relevant information from the  MDO under a written notice (specifying a day at least 28 days after the notice is given to comply and stating that a failure to comply with the request is an offence) and give that information to the Actuary.  The notice may require the information to be verified by statutory declaration.

Clause 24 Recovery if certain amounts paid to MDO or insurer after IBNR indemnity paid

This clause provides that if an amount (other than an insurer to insurer payment) is paid to the MDO or insurer in relation to a payment for which a Commonwealth indemnity payment was made, the MDO or insurer must repay to the Commonwealth the amount of the payment received multiplied by the relevant participating MDO’s unfunded IBNR factor.

Subclauses (4) and (5) provide that the amount to be repaid is a debt due to the Commonwealth and may be recovered by action by the HIC in a court of competent jurisdiction, by deduction from another indemnity amount payable to the MDO or insurer, or by action under clause 42. The amount recovered must not exceed the amount overpaid.

Clause 25 MDO or insurer to inform HIC of certain amounts

This clause provides that if a payment of a type set out in clause 24 is made to an MDO or insurer the MDO or insurer must notify the HIC in writing within 28 days of the payment.

Clause 26 HIC to notify MDO or insurer of repayable amount

This clause provides for the HIC to notify the MDO or insurer of the repayable amount under clause 24, the date by which it must be repaid (being at least 28 days after the notice is given) and the late payment penalties under clause 27.

Clause 27 Penalty imposed if an amount is repaid late

Subclauses (1) and (2) impose a late payment penalty calculated at the prescribed rate of interest on any amount repayable under clause 24 and not repaid by the day required under clause 26.

Subclause (3) allows the HIC to remit a late payment penalty in whole or in part, and subclause (4) provides for a review by the AAT of a decision by the HIC not to remit a late payment penalty or to remit only part of a late payment penalty.

Division 2 - High cost claim indemnity scheme 

Clause 28 Guide to the high cost claim indemnity provisions

This clause sets out where in the Division particular provisions may be found.

Clause 29 High cost claim threshold

This clause provides that the high cost claims threshold is $2 million or such other amount as is prescribed by regulations, and that regulations specifying an amount of more than $2 million must give at least 12 months notice.

Clause 30 Circumstances in which high cost claim indemnity payable

Subclause (1) provides that (subject to clause 31) a high cost claim indemnity is payable to an MDO or insurer:

in respect of a claim arising from an incident occurring in Australia (or in an external Territory) in the course of the practice by a person (the practitioner) of a medical profession notified to the MDO or insurer after 1 January 2003 and before the date prescribed in regulations as the end of the scheme (paragraphs (a) to (d)); and 

the MDO or insurer has a qualifying payment (as defined in subclause (2)) and the amount of the qualifying payment or the sum of the qualifying payments exceeds the high cost claim threshold set under clause 29 (paragraphs (e) and (f).

The claim or incident may have been made or occurred before the commencement of the Bill.

Subclause (2) provides that an MDO or insurer has a qualifying payment if:

paragraph (a): it pays an amount in relation to the claim or is liable to pay an amount under a written agreement or court order or judgment not subject to appeal, or if it is under external administration would be liable to pay a provable amount; and

paragraph (b): the MDO or insurer pays or is liable to pay under an insurance contract or other indemnity arrangement with the practitioner; and 

paragraph (c): the MDO or insurer pays or is liable to pay the amount in the ordinary course of business, or if it is under external administration would be able to pay the amount in the ordinary course of business if it were not under external administration. 

Subclause (3) provides that regulations prescribing the date for the end of the scheme must give at least 12 months notice.

Subclause (4) sets out the circumstances in which a judgment or order is subject to appeal.

Subclause (5) provides that indemnity amounts paid to an MDO or insurer under external administration are paid on trust for the benefit of the person the MDO or insurer is liable to pay.

Clause 31 Aggregating amounts paid or payable by an MDO and an insurer

This clause provides that if separate amounts are paid in relation to a claim by an insurer and an MDO they are taken to have been paid by an MDO for the purpose of calculating the high cost claims indemnity if the insurer elects in writing to have an amount it pays treated in this way.

Clause 32 Exceptions

This clause provides that an indemnity is not payable in relation to incidents occurring in the course of treating a public patient in a public hospital, or in relation to a claim prescribed in regulations or in relation to an incident prescribed in regulations.

Clause 33 Payment partly related to treatment of public patient in public hospital

This clause provides that if an MDO or insurer makes or is liable to make a payment in relation to a series of related incidents some of which occurred in the course of treating a public patient in a public hospital, the payment is to be disregarded to the extent to which it relates to or is reasonably attributable to the incident or incidents that occurred in the course of treating a public patient in a public hospital.  

Clause 34 Amount of high cost claim indemnity

This clause sets the amount of the high cost claim indemnity as 50% (or such other percentage as is prescribed by regulations) of the amount by which the qualifying payment of an MDO or insurer (or the sum of qualifying payments) exceed the high cost claims threshold.

Subclause (2) provides that regulation lowering the percentage or increasing the threshold must give at least 12 months notice of the change.

Division 3 - Administration of the indemnity schemes 

Clause 35 Guide to the Division

This clause sets out where in the Division particular provisions may be found.

Clause 36 Applications for an indemnity scheme payment

This clause provides that an application by an MDO or insurer for a Commonwealth payment must be made after the unfunded IBNR factor for the relevant participating MDO has been determined by the Minister under clause 22.  The application must be in writing using a form approved by the HIC and accompanied by documents and other information required by the form.

Clause 37 Payment date for indemnity scheme payment

This clause requires the HIC to make a payment that is payable to an MDO or insurer before the end of the month of the year that follows the month in which the MDO or insurer applied for the payment or, if the HIC requested information from a person under clause 38, the end of the month of the year that follows the month in which the information in the requests is provided to the HIC. 

Clause 38 HIC may request information

This clause provides that if the HIC believes on reasonable grounds that a person is capable of giving information relevant to determining whether a Commonwealth payment is due, and if so how much, it may request the person to provide the information (including records or copies of records maintained under clause 39 or 40). The request must be in writing, state what information is required, specify a day at least 28 days after the notice is given to comply and state that a failure to comply with the request is an offence. The notice may require the information to be verified by statutory declaration.

Clause 39 MDOs and insurers to keep relevant records

This clause requires an MDO or insurer that applies for a payment under clause 36 to maintain relevant records, including on matters determined by the HIC. 

Subclause (2) requires the records to be maintained for five years after which ever is the later of the day on which the records were made or the day this legislation commences.

Subclause (3) provides that a determination by the HIC must be published in the Gazette at least 14 days before the determination is to take effect.

Subclause (4) states that the clause is not to have required a person to do anything before the commencement of the Bill.

Clause 40 Participating MDOs to keep additional records

This clause requires a participating MDO to keep records relevant to determining who the participating members of the MDO are and what its IBNR exposure is, and any other matter determined by the HIC.

Subclause (2) requires the records to be maintained for five years after which ever is the later of the day on which the records were made on the day this legislation commences.

Subclause (3) provides that a determination by the HIC must be published in the Gazette at least 14 days before the determination is to take effect.

Subclause (4) states that the clause is not to have required a person to do anything before the commencement of the Bill.

Clause 41 Recovery of overpayments

This clause defines an amount overpaid as either an amount paid by way of indemnity to an MDO or an insurer when an indemnity was not payable, or an amount paid that was greater than the indemnity that was payable, and provides that the amount overpaid is a debt due to the Commonwealth.

Subclause (4) provides that the amount overpaid may be recovered by action against the MDO or insurer in a court of competent jurisdiction, by deduction from the amount of another Commonwealth payment to the MDO or insurer under the legislation or under clause 42.  It also states that the amount recovered must not exceed the amount overpaid.

Clause 42 HIC may collect money from a person who owes money to a person

This clause provides for the recovery of a debt to the Commonwealth under clause 41 through garnishee action.

Subclause (2) provides for the HIC to direct a third party who owes or may owe money to an MDO or insurer to pay some or all of the money to the Commonwealth.  The HIC must also provide a copy of the direction to the MDO or insurer.

Subclause (3) provides that the direction cannot require an amount to be paid to the Commonwealth before it becomes owing to the MDO or insurer.

Subclauses (4), (5) and (6) provide that it is an offence of strict liability for the third party to fail to comply with the direction unless they comply with the direction so far as they are able to.

Subclause (7) provides that a court may order a person convicted of an offence under subclause (4) to pay the Commonwealth an amount up to the amount involved in the failure to comply as well as imposing a penalty.

Subclause (8) indemnifies the third party for any payment made under the clause.

Subclauses (9) and (10) require the HIC to give immediate notice to the third party if the debt due to the Commonwealth is fully or partly discharged before the third party has made a payment.  If the debt is partly discharged, the HIC must vary the direction under subclause (2).

Subclause (11) defines the circumstances in which a third party is taken to owe money to an MDO or insurer.

Division 4 – Medical indemnity premium subsidy scheme

Clause 43 Minister may formulate subsidy scheme

This clause provides that the Minister may formulate a scheme for making payments to medical practitioners to assist them in meeting the costs of purchasing medical indemnity. The scheme is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901.

Clause 44 HIC may request information 

This clause provides that if the HIC believes on reasonable grounds that a person is capable of giving information relevant to determining whether a subsidy payment is due to a practitioner under the scheme in clause 43, and if so how much, it may request the person to provide the information. The request must be in writing, state what information is required, specify a day at least 28 days after the notice is given to comply and state that a failure to comply with the request is an offence. The notice may require the information to be verified by statutory declaration.

Division 5 - Offences

Clause 45 Failing to give information

This clause provides that a person who fails to comply with a request under subclauses 13(3), 23(3), 38(1) or 44(1) commits an offence of strict liability.  A person is excused from complying with the request if to do so would tend to incriminate them or expose them to a penalty. 

Clause 46 Failing to notify

This clause provides that a person who fails to notify the HIC within a particular period under clause 25 commits an offence of strict liability.

Clause 47 Failing to keep and retain records

This clause provides that a person who fails to keep and maintain records as required by clauses 39 or 40 commits an offence of strict liability.

Division 6 – Finance

Clause 48 Appropriation

This clause provides that the Consolidated Revenue Fund is appropriated for the purpose of paying IBNR indemnities under Division 1, high cost claim indemnities under Division 2, and premium subsidies under Division 4 of Part 2.

Division 7 – Reinsurance contracts

Clause 49 Indemnity scheme payments disregarded for purposes of reinsurance contracts

Subclause (1) provides that a contract of insurance between two insurers governed by the laws of a State or Territory has effect as if the contract provided that indemnity payments and MDOs’ and insurers’ rights to indemnity payments were to be disregarded for the purposes of the contract, and in particular in working out amounts payable under the contract by the insurer providing the insurance. 

Subclause (2) provides that subclause (1) applies to a contract entered into on or after the commencement of the Bill. 

Subclause (3) provides that subclause (1) applies to a contract entered into before the commencement of the Bill. 

Part 3 – Contributions towards the cost of providing indemnities

Division 1 – IBNR (incurred but not reported) indemnity contribution

Clause 50 Guide to the IBNR indemnity contribution provisions

This clause sets out where in the Division particular provisions may be found.

Clause 51 Who is liable to pay the IBNR indemnity contribution

This clause provides that a person is liable to pay the IBNR indemnity contribution for a financial year that is a contribution year if they are a participating member of a participating MDO for which the financial year is a contribution year, were ordinarily resident in Australia or an external Territory on 30 June 2000, and are not exempt under clause 52.

Clause 52 Exemptions

This clause provides that persons may be exempted from the contribution.

Subclause (2) sets out the circumstances in which persons are exempt from the IBNR indemnity contribution for a contribution year, including that:

paragraph (a): the person died before the imposition day in that contribution year;

paragraph (b): the person has not practised a medical profession in Australia for reward since 31 December 2001;

paragraph (c): the person’s medical income for the 2001-02 financial year and the financial year before the contribution year were both less than $5,000; 

paragraph (d): the person was not a medical practitioner or health professional at any time before 30 June 2000 (that is to say, they were a student) and is not a person specified in regulations made for the purpose of this paragraph; 

paragraph (e): the person made a lump sum under clause 64 before the contribution day;

paragraph (f): the HIC has determined under clause 53 that the person has comprehensive insurance cover for all incidents covered by the IBNR indemnity scheme.

Subclause (3) defines a person’s medical income for the purpose of paragraph (2)(c) as either the sum of medicare benefits payable in respect of professional services rendered by or on behalf of the person, in the case of a medical practitioner; or the sum of the amounts payable in respect of health care related services provided by or on behalf of the person, in the case of a health professional.

Subclauses (4) and (5) provides that regulations may provide that a person is exempt from the IBNR indemnity contribution either generally or for a particular contribution year of a participating MDO.

Clause 53 Comprehensive insurance cover determination

This clause provides that the HIC may determine in writing that a person has comprehensive cover for all incidents covered by the IBNR indemnity scheme if satisfied:

paragraphs 2(a) and 2(b): that the person on 30 June 2002 has an insurance contract or contracts that indemnified them in respect of all incidents covered by the IBNR indemnity scheme; and

paragraph 2(c): that the insurer or insurers were authorised to carry on insurance business in Australia under the Insurance Act 1973 or were approved by the HIC for the purpose of this paragraph, and were not a related body corporate of a particpating MDO; and

paragraph 2(d): that the insurer or insurers will continue to remain liable to indemnify the person without any further premium payment.

Clause 54 Annual subscription for base year

Subclause (1) notes that under the Medical Indemnity (IBNR Indemnity) Contribution Bill 2002 the indemnity contribution imposed on a participating member of a participating MDO depends on the amount of the member's annual subscription for the base year.

Subclause (2) excludes from the member's annual subscription for the base year fees paid for joining or rejoining an MDO, amounts paid in response to a call, and other prescribed amounts.

Subclause (3) defines the base year for a member.  It provides that if an amount was payable by a member for membership of a participating MDO for a full year that began during the 2000-01 financial year, that full year is the base year.  If no such amount was payable in the 2000-01 financial year, then the base year is the most recent preceding full year for which an amount was payable.  If no such amount was payable, then the base year is taken to be the most recent period that started before 1 July 2000 and for which an amount was payable by the member for membership of the participating MDO.

Clause 55 Object of this Subdivision

This clause states that the object of Subdivision D – Annual reassessment of participating MDO’s IBNR exposure is to allow the Minister to reassess a participating MDO’s IBNR exposure annually so that the rate of the contribution imposed on participating members or the number of years for which the contribution is imposed can be adjusted if necessary to reflect the extent of the Commonwealth’s liability for IBNR indemnity payments in relation to the MDO.

Clause 56 Process for annually reassessing IBNR exposure

Subclauses (1) and (2) require the Actuary, taking into account information obtained by the HIC from the MDO, to provide the Minister with a written report that states the Actuary’s assessment of the IBNR exposure as at the end of the financial year immediately before the start of a contribution year for each participating MDO. 

Subclauses (3), (4), (5) and (6) provide for the HIC, if it believes on reasonable grounds that the MDO is capable of providing information relevant to assessing the IBNR exposure, to seek relevant information from the MDO under a written notice and provide the information to the Actuary. The request must be in writing, state what information is required, specify a day at least 28 days after the notice is given to comply and state that a failure to comply with the request is an offence. The notice may require the information to be verified by statutory declaration.

Division 2 – Enhanced UMP indemnity contribution

Clause 57 Guide to the enhanced UMP indemnity contribution provisions

This clause sets out where in the Division particular provisions may be found.

Clause 58 Who is liable to pay the enhanced UMP indemnity contribution

This clause provides that a person is liable to pay an enhanced UMP indemnity contribution for a financial year that is a contribution year if they were a member of UMP on 1 July 2002 and were ordinarily resident in Australia or an external Territory on that day and are not exempt under clause 59.

Clause 59 Exemptions

This clause provides that a person is exempt from an enhanced UMP indemnity contribution for a financial year that is a contribution year if they died before the imposition day or made a lump sum payment under clause 64 before the imposition day or are exempt in circumstances specified in the regulations.   The regulations may provide that a person is exempt from the enhanced UMP indemnity contribution either generally or for a particular contribution year.

Division 3 – Administration of the medical indemnity contributions

Clause 60 Guide to this Division

This clause sets out where in the Division particular provisions may be found.

Clause 61 When medical indemnity contribution must be paid

This clause provides that, subject to clauses 62, 63 and 64, contributions are due and payable to the HIC on or before 1 November in a contribution year, or such other day as is specified in the regulations.

Clause 62 Deferral of payment day for certain contribution

This clause allows a person liable to pay contributions to apply to the HIC in writing before the contribution for a year becomes payable to defer the payment day for that year.

Under subclause (3) the HIC may approve the application if satisfied that the person meets the conditions specified in the regulations and a deferral has not already been approved.  

If approved the payment becomes due under subclause (4) on 1 November (or such other day as is specified in the regulations) in the financial year following the last contribution year for the relevant MDO.  

Subclause (5) requires the HIC to notify the person whether their application has been approved, specify the deferred payment date, and inform the person of the effect of subclause (7).

Subclause (6) provides for review by the AAT of a decision by the HIC not to approve an application under this clause.  

Subclause (7) provides that if the person dies before the deferred payment day the amount deferred becomes payable to the HIC immediately after the person’s death.

Clause 63 Medical indemnity contribution may be paid by instalments

This clause allows a person liable to pay a medical indemnity contribution to apply to the HIC in writing before the contribution for a year becomes payable to pay the contribution by instalments over a period ending not later than twelve months after the day on which the contribution would otherwise have been payable, providing that the amount of the contribution is $1,000 or more.

Subclause (3) requires the HIC to notify the person whether their application has been approved, specify the period over which instalments are to be paid and the amount and date of each instalment, and inform the person of the effect of subclause (4).

Subclause (4) provides that if an instalment is not paid on the due date, the whole of the unpaid amount of the contribution becomes payable at that time.

Subclause (5) provides for review by the AAT of a decision by the HIC not to approve an application under this clause.  

Clause 64 Discount for lump sum payment of medical indemnity contribution

This clause allows a person liable to pay a medical indemnity contribution to elect in writing to pay a lump sum before the amount of contribution becomes payable.

If an election is made, subclause (3) requires the HIC to notify the person of the amount of the lump sum worked out under subclause (4) and the payment day.

Subclauses (4), (5) and (6) set out the formula to be used in calculating the lump sum as the product of the outstanding payment amount and the discount factor.  The outstanding payment amount is the current contribution liability multiplied by the number of remaining provisional contribution years, plus any deferred contribution liability.  The discount factor is one, less the discount rate multiplied by the number of remaining provisional contribution years less one.  The discount rate is set at 0.025 but may be varied by regulation.

Subclause (7) provides that the provisional contribution years for a participating MDO are the first financial year that is a contribution year for medical indemnity contributions of that kind and the next nine financial years, unless the regulations under subclause (8) specify the provisional contribution years.

Clause 65 Late payment penalty

This clause provides that if an amount of contribution (including a lump sum under clause 64) payable by a person remains wholly or partly unpaid after it becomes due for payment the person is liable to pay a late payment penalty calculated at the prescribed rate on the unpaid amount from the date the contribution was due for payment until the day the unpaid contribution and the late payment penalty are paid in full.

Subclause (3) provides that late payment penalty is not payable for periods after a person’s death.

Subclause (4) allows the HIC to remit a late payment penalty in whole or in part, and subclause (5) provides for a review by the AAT of a decision by the HIC not to remit a late payment penalty or to remit only part of a late payment penalty.

Clause 66 Method of paying certain amounts

This clause provides that a medical indemnity contribution, a lump sum payable under clause 64 and a late payment penalty payable under clause 65 must be paid to the HIC.  The regulations may specify methods for paying these amounts.

Clause 67 Refund of overpaid amounts

Subclauses (1) and (2) provide that if a person overpays an amount of medical indemnity contribution or a late payment penalty in relation to a contribution year the overpaid amount must be refunded unless the person elects in writing to offset the overpaid amount against an amount they are required to pay in the next contribution year.

Subclause (3) provides that it a person overpays a lump sum payable under clause 64 the amount overpaid must be refunded to the person.

Subclause (4) appropriates the Consolidated Revenue Fund for the purpose of providing a refund under this clause.

Clause 68 Recovery of contribution debt

This clause provides that an amount of medical indemnity contribution under the Bill, a lump sum payment under clause 64 and a late payment penalty under clause 65 are debts due to the Commonwealth and may be recovered by the HIC in a court of competent jurisdiction.

Clause 69 HIC may collect money from a person who owes money to a person

This clause provides for the recovery of a debt to the Commonwealth under clause 68 through garnishee action.

Subclause (2) provides for the HIC to direct a third party who owes or may owe money to a person who has a debt to the Commonwealth under clause 68 to pay some or all of the money to the Commonwealth.  The HIC must also provide a copy of the direction to the person.

Subclause (3) provides that the direction cannot require an amount to be paid to the Commonwealth before it becomes owing to the person.

Subclauses (4), (5) and (6) provide that it is an offence of strict liability for the third party to fail to comply with the direction unless they comply with the direction so far as they are able to.

Subclause (7) provides that a court may order a person convicted of an offence under subclause (4) to pay the Commonwealth an amount up to the amount involved in the failure to comply.

Subclause (8) indemnifies the third party for any payment made under the clause.

Subclauses (9) and (10) require the HIC to give immediate notice to the third party if the debt due to the Commonwealth is fully or partly discharged before the third party has made a payment.  If the debt is partly discharged, the HIC must vary the direction under subclause (2).

Subclause (11) defines the circumstances in which a third party is taken to owe money to a person.

Clause 70 Evidentiary certificates

This clause allows the HIC to issue a written certificate that a person is liable to pay a medical indemnity contribution and setting out the particulars of that contribution, and provides that the certificate is prima facie evidence of the matters in the certificate in any civil proceedings under this Bill.

Subclause (3) provides that a document purporting to be a certificate must be taken to be a certificate and to have been properly issued unless the contrary is established.

Subclauses (4) and (5) allow the HIC to issue a certified copy of a certificate and provide that it is to be treated as if it were the original.

Clause 71 HIC may request information 

This clause provides that if the HIC believes on reasonable grounds that a person is capable of giving information relevant to determining whether a person is liable to pay a medical indemnity contribution, and if so how much, it may request the person to provide the information. The request must be in writing, state what information is required, specify a day at least 28 days after the notice is given to comply and state that a failure to comply with the request is an offence. The notice may require the information to be verified by statutory declaration.

Clause 72 HIC must be notified of a change in circumstances etc.

This clause provides that a person who is exempt from the payment of a medical indemnity contribution because of particular circumstances must notify the HIC in writing within 28 days of the occurrence of a change in circumstances affecting their exemption. 

Division 4 – Offences

Clause 73 Failing to give information

This clause provides that a person who fails to comply with a request under subclauses 56(4) or 71(1) commits an offence of strict liability.  A person is excused from complying with the request if to do so would tend to incriminate them or expose them to a penalty. 

Clause 74 Failing to notify

This clause provides that a person who fails to notify the HIC within a particular period under clause 72 commits an offence of strict liability.

Part 4 – Miscellaneous

Clause 75 General administration of this Act and medical indemnity contribution legislation

This clause provides that the HIC has the general administration of this Bill and the medical indemnity contribution legislation.

Clause 76 Additional functions of the HIC

This clause provides that the HIC has such functions, additional to those under the Health Insurance Commission Act 1973, as are conferred on it under this Bill and the medical indemnity contribution legislation. 

Clause 77 Officers to observe secrecy

Subclause (1) defines various terms used in the clause.  It defines protected information as information obtained by a person to whom the clause applies (being a person who is or was an officer) in the course of their duties or the exercise of their powers and functions under the medical indemnity legislation that relates to a person’s affairs; and a protected document as a document that contains protected information.

Subclause (2) provides that a person to whom the clause applies commits an offence if they copy, disclose or produce protected information or a protected document to another person other than in the performance of their duties or the exercise of their powers and functions or to enable another person to perform functions under the medical indemnity legislation.  

Subclause (3) provides that, despite subclause (2), the Secretary or the Managing Director of the HIC may divulge protected information to a person if the Minister certifies that it is necessary in the public interest, and may divulge protected information to a person who the Minister believes is expressly or impliedly authorised to obtain it by the person to whom the information relates.

Subclause (4) provides that, despite subclause (2), the Secretary or the Managing Director of the HIC may divulge protected information of a kind prescribed in regulations to a person or authority prescribed in regulations.

Subclause (5) provides that any person or authority, or person or employee under the control of a person or authority, who receives information under subclauses (3) and (4) is subject to subclause (2).

Subclause (6) provides that the clause does not prohibit divulging or communicating to a person information that relates to them.   

Clause 78 Act not to apply in relation to State insurance within a State

This clause provides that the Bill does not extend to State insurance within a State.

Clause 79 Regulations

This clause allows the Governor General to make regulations prescribing matters required or permitted to be prescribed under the Bill or necessary or convenient to be prescribed for carrying out or giving effect to the Bill, including prescribing penalties not exceeding 10 penalty units for offences against the regulations.

MEDICAL INDEMNITY (IBNR INDEMNITY) CONTRIBUTION BILL 2002

This Bill imposes the IBNR indemnity contribution as a tax.

NOTES ON CLAUSES

Clause 1 Short title

This clause sets out the short title of the Bill

Clause 2 Commencement

This clause provides that the Bill commences, or is taken to commence on 1 January 2003.

Clause 3 Definitions

This clause defines terms used in the Bill, or indicates where else in the Bill terms are defined.

Clause 4 Imposition of IBNR indemnity contribution

This clause imposes the IBNR indemnity contribution as a tax on participating members of a participating MDO on the imposition day for each contribution year.

Clause 5 Contribution years and imposition days

This clause provides that each financial year that starts on or after 1 July 2003 is a contribution year for a participating MDO unless the regulations provide that a year is the last contribution year for a participating MDO.  It also provides that the imposition day for a contribution year is 1 August unless another day is set by regulations.

Clause 6 Amount of IBNR indemnity contribution

This clause provides that the amount of IBNR indemnity contribution is the applicable percentage of a participating member’s annual subscription to a participating MDO for the base year.  The applicable percentage is 50%, or such lower percentage as is prescribed by regulation in relation to the MDO for the contribution year.  The regulations may specify different percentages for different years for different MDOs, but may not specify a percentage for a contribution year for an MDO that is higher than the percentage applicable in the first contribution year.

Clause 7 Regulations

This clause allows the Governor General to make regulations prescribing matters required or permitted to be prescribed under the Bill or necessary or convenient to be prescribed for carrying out or giving effect to the Bill.

MEDICAL INDEMNITY (ENHANCED UMP INDEMNITY) CONTRIBUTION BILL 2002

This Bill imposes the enhanced UMP indemnity contribution as a tax.

NOTES ON CLAUSES

Clause 1 Short title

This clause sets out the short title of the Bill

Clause 2 Commencement

This clause provides that the Bill commences, or is taken to commence on 1 January 2003.

Clause 3 Definitions

This clause defines terms used in the Bill, or indicates where else in the Bill terms are defined.

Clause 4 Imposition of enhanced UMP indemnity contribution

This clause imposes the enhanced UMP indemnity contribution as a tax on the imposition day for each contribution year on each person who was a member of UMP on 1 July 2002.

Clause 5 Contribution years and imposition days

Subclauses (1) and (2) provide that the Minister may declare in writing that a financial year is the first contribution year only if the Commonwealth pays an amount under a Medical Indemnity Agreement within the meaning of the Medical Indemnity Agreement (Financial Assistance – Binding Commonwealth Obligations) Bill 2002. 

Subclause (3) provides that a declaration by the Minister is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901.

Subclause (4) provides that each financial year following the first contribution year is a contribution year, unless regulations under subclause (5) provide that a financial year is the last contribution year.

Subclause (6) provides that the imposition day for a contribution year is 1 August unless another day is set by regulations

Clause 6 Amount of enhanced IBNR indemnity contribution

Subclause (1) provides that, subject to regulations under subclause (3), the amount of enhanced UMP indemnity contribution imposed on a person for a contribution year is the sum of Commonwealth payments of relevant amounts for the previous financial year under subclause (2) divided by the number of people who were members of UMP on 1 July 2002.

Subclause (2) provides that relevant amounts are amounts paid by the Commonwealth under a Medical Indemnity Agreement in relation to claims notified before 29 April 2002 and finalised after 30 June 2002 and claims notified on or after 1 July 2002 (other than claims in relation to incidents that occurred between 29 April 2002 and 30 June 2002).

Subclauses (3) and (4) provides that the regulations may provide that the amount of enhanced UMP indemnity contribution imposed for a contribution year on persons specified in the regulations is the amount specified in or worked out in accordance with the regulations, as long as that amount is less than the amount payable under subclause (1).

Clause 7 Regulations

This clause allows the Governor General to make regulations prescribing matters required or permitted to be prescribed under the Bill or necessary or convenient to be prescribed for carrying out or giving effect to the Bill.

MEDICAL INDEMNITY (CONSEQUENTIAL AMENDMENTS) BILL 2002

This Bill amends the secrecy provisions of the Health Insurance Act 1973 and the National Health Act 1953 to include reference to the medical indemnity legislation.  It also amends definitions of offences in the Health Insurance Commission Act 1973 to allow the HIC  to investigate offences against the medical indemnity legislation, and requires the HIC to include in its Annual Report material on the operations of the medical indemnity legislation.

NOTES ON CLAUSES

Clause 1 Short title

This clause sets out the short title of the Bill.

Clause 2 Commencement

This clause provides that the Bill commences, or is taken to commence on 1 January 2003.

Clause 3 Schedule(s) 

This clause provides that each Act that is specified in a Schedule to the Bill is amended or repealed as set out in the Schedule concerned, and that other items in a Schedule have effect according to their terms. 

Schedule 1 – Amendments 

Health Insurance Act 1973

Item 1 Subsection 130(1)

This item amends the secrecy provisions of the Health Insurance Act 1973 to provide that a person, except in the performance of duties or the exercise of powers and functions under the medical indemnity legislation, shall not record or communicate to any person information about the affairs of another person acquired in the performance of duties or the exercise of powers and functions under the legislation.

Item 2 Subsection 130(25)

This item adds a definition of medical indemnity legislation (being the Medical Indemnity Bill 2002, Medical Indemnity (IBNR Indemnity) Contribution Bill 2002 and the Medical Indemnity (Enhanced Ump Indemnity) Contribution Bill 2002) to the definitions subsection of the secrecy provision in the principal Act.

Health Insurance Commission Act 1973

Item 3 After Paragraph 3A(1)(ba)

This item adds an offence against the Medical Indemnity Bill 2002 to the list of offences under subsection 3A(1) of the principal Act.

Item 4 Paragraph 3A(1)(c) 

This item changes the definition of an offence under paragraph 3A(1)(c) against the Crimes Act 1914 and the Criminal Code to include an offence referred to in the Medical Indemnity Bill 2002.

Item 5 After paragraph 3A(2)(b)

This item adds an offence against the Medical Indemnity Bill 2002 to the list of offences under subsection 3A(2) of the principal Act.

Item 6 Paragraph 3A(2)(c)

This item changes the definition of an offence under paragraph 3A(2)(c) against sections 6, 7 and 7A of the principal Act and paragraph 86(1)(a) of the Crimes Act 1914 to include an offence referred to in the Medical Indemnity Bill 2002.

Item 7 Paragraph 3A(2)(d)

This item changes the definition of an offence under paragraph 3A(1)(d) the Criminal Code to include an offence relating to an indemnity scheme payment.

Item 8 After Paragraph 3A(2A)(c)

This item adds an offence against the Medical Indemnity Bill 2002 to the list of offences under subsection 3A(2A) of the principal Act.

Item 9 Paragraph 3A(2A)(d)

This item changes the definition of an offence under paragraph 3A(2A)(d) against sections 6, 7 and 7A of the principal Act and paragraph 86(1)(a) of the Crimes Act 1914 to include an offence referred to in the Medical Indemnity Bill 2002.

Item 10 Paragraph 3A(2A)(e)

This item changes the definition of an offence under paragraph 3A(2A)(e) against the Criminal Code to include an offence relating to an indemnity scheme payment.

Item 11 Subsection 3A(3)

This item broadens the definitions subsection to apply to the whole of subsections 3A(2) and 3A(2A).

Item 12 Subsection 3A(3)

This item defines indemnity scheme payment as having the same meaning as in the Medical Indemnity Bill 2002. 

Item 13 At the end of Section 42

This item requires the HIC to include in its annual report information about the operation of the Medical Indemnity Bill 2002, Medical Indemnity (IBNR Indemnity) Contribution Bill 2002 and the Medical Indemnity (Enhanced Ump Indemnity) Contribution Bill 2002.

National Health Act 1953

Item 14 Subsection 135A(1)

This item amends the secrecy provisions of the National Health Act 1953 to provide that a person, except in the performance of duties or the exercise of powers and functions under the medical indemnity legislation, shall not record or communicate to any person information about the affairs of another person acquired in the performance of duties or the exercise of powers and functions under the legislation.

Item 15 Subsection 135A(24)

This item adds a definition of medical indemnity legislation (being the Medical Indemnity Bill 2002, Medical Indemnity (IBNR Indemnity) Contribution Bill 2002 and the Medical Indemnity (Enhanced Ump Indemnity) Contribution Bill 2002) to the definitions subsection of the secrecy provision in the principal Act.