The consultation paper also includes draft legislation for the proposed Standards.

The proposed Standards would introduce a risk-based capital regime aimed at ensuring that:

• Capital Adequacy Standard: each health benefits fund conducted by an insurer has sufficient assets to ensure the continuing financial soundness of the fund’s balance sheet, taking into account business plans and the potential of adverse profitability outcomes and catastrophic losses in the asset portfolio; and
• Solvency Standard: each health benefits fund conducted by an insurer has sufficient assets of a sufficient quality to ensure that obligations to, and reasonable expectations of, policyholders and creditors can be met under adverse cash outflow circumstances.

Under the proposed Standards, each health benefits fund would be required to comply with four separate asset tests:

• Capital Adequacy Standard: a quantum of assets test and a concentration of assets test
• Solvency Standard: liquidity test and a concentration of liquid assets test.

In 2011-12, the issues that caused higher levels of complaints to PHIO were oral information (advice given to members in retail branches or over the telephone); restrictions and exclusions on hospital policies and pre-existing condition waiting periods. There was a decline in complaints about payment delays, premium increases and fund rule changes.

Regulatory data about the funds is contained in PHIAC's Annual Report on Operations for 2011-2012

The Acts reduce from 1 July 2012 the amount of private health insurance rebate an eligible person with a complying private health insurance policy is entitled to when that person has income for surcharge purposes above the relevant Medicare levy surcharge threshold.

For example, in the 2012-13 financial year, in relation to premiums and amounts in respect of premiums paid on and after 1 July 2012:
• singles and couples/families who are in tier 1 will receive a 20 per cent private health insurance rebate if they are aged up to 65 years (25 per cent if they are 65 years or over, and 30 per cent if they are aged 70 years or over);
• singles and couples/families who are in tier 2 will receive a 10 per cent private health insurance rebate if they are aged up to 65 years (15 per cent if they are 65 years or over, and 20 per cent if they are aged 70 years or over); and
• singles and couples/families who are in tier 3 will not receive any private health insurance rebate, regardless of age.

The threshold tiers for the 2012-13 financial year are expected to be:
• Tier 1 — income for surcharge purposes from $84,001 per annum to $97,000 per annum inclusive for singles, or from $168,001 per annum to $194,000 per annum inclusive for couples/families;
• Tier 2 — income for surcharge purposes from $97,001 per annum to $130,000 per annum inclusive for singles, or from $194,001 per annum to $260,000 per annum inclusive for couples/families; and
• Tier 3 — income for surcharge purposes from $130,001 and over per annum for singles, or from $260,001 and over
per annum inclusive for couples/families.

The couples/families thresholds will be double the relevant singles thresholds. For families with children, the thresholds are increased by $1,500 for each child after the first.

The Ombudsman comments that "the issues in 2010-11 where there was an increase in complaints include level of cover, fund rule changes and general service issues. The increase in complaints about these issues is not across all insurers, but is generally confined to two or three of the larger insurers, who made changes to their products last year that affected large numbers of members."

The Report makes recommendations and contains case studies relating to communicating changes in hospital cover.

Your complaints handling procedures should set out in writing:

(a) the procedures and policies for:

• receiving complaints;
• investigating complaints;
• responding to complaints within appropriate time limits;
• recording information about complaints;
• identifying and recording systemic issues;

(b) the types of remedies available for resolving complaints; and

(c) internal structures and reporting requirements for complaint handling.

You should provide a copy of the procedures to all relevant staff. A simple and easy-to-use guide to the procedures should also be made available to consumers, either on request or when they want to make a complaint. The information should be placed on your website.

Langes+ have experience in designing complaints and dispute resolution procedures.

If passed, the private health insurance rebate will be income tested from 1 January 2012.

The ATO has produced a useful summary table here.

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