Compliance: Regulatory Activities
To ensure that the health benefits funds conducted by insurers are well-run and financially sound, PHIAC maintains a strong and visible presence in the industry. This is done through a rolling program of fund reviews, quarterly reviews of key insurer financial data and statistics, face-to-face meetings and regular compliance checks. This ensures PHIAC has an up-to-date understanding of the industry and of individual private health insurers. This results in PHIAC having a sound evidence base for its regulatory activities.
PHIAC’s Core Functions include:
- Administration of the Risk Equalisation Trust Fund
- Registration of new private health insurers
- Information collection to obtain from each private health insurer regular reports about the insurer’s operations, including reports supported by actuarial certification
- Ensuring industry compliance by developing standards such as solvency and capital adequacy. See all existing Standards.
- Taking enforcement actions to encourage or compel compliance with Council supervised obligations.
- Enforcement actions includes appointing inspections, external managers, issuing notices, accepting undertakings, giving directions. See the list of Council Powers.
- Advising the minister about the financial operations and affairs of private health insurers
- Cooperating with other regulatory agencies on matters affecting the insurers or the industry
PHIAC Regulatory Plan
PHIAC’s Annual Regulatory Plan provides insurers, other stakeholders and the public with information about recent changes to private health insurance regulation and proposed activity that may lead to future changes in private health insurance regulation.
As an Australian Government agency with responsibility for business regulation, PHIAC publishes an annual regulatory plan which outlines:
- changes to private health insurance regulation which have occurred since the beginning of the previous financial year; and
- activities planned in the current financial year which could lead to changes in private health insurance regulation.
Cost Recovery Impact Statements
Under the Australian Government Cost Recovery Guidelines government agencies with revenues exceeding $5 million per annum are required to undertake a periodic review of their cost recovery arrangements.
The Private Health Insurance Administration Council last published a review of its cost recovery arrangements in 2009 following a significant increase to its regulatory functions arising out of legislative amendment and the Global Financial Crisis.
A 2012 review of PHIAC’s funding and charging arrangements found that the Council Administration Levy remains the most appropriate method of recovering PHIAC’s operational costs, ensures certainty and equity within the industry, without limiting or compromising the operational ability of PHIAC.
PHIAC is currently developing a CRIS to assess the impact on the Parliament, the private health insurance industry and consumers, of a minor increase ($364,000) to the general administrative costs of PHIAC in 2013-14, arising primarily from a further increase to the organisation’s regulatory functions, with PHIAC now the primary source of advice to the Minister for Health on premium applications.
This CRIS will fulfil an ongoing commitment by PHIAC to transparently account for all variances to its budgeted financial expenditures to the Parliament, the industry and consumers of private health insurance, and the agency’s ongoing compliance with the Guidelines.
The Private Health Insurance Act 2007 empowers to Council to issue directions. These directions are regulatory tools which PHIAC uses to protect the interests of consumers and the prudential safety of insurers. The Council may issue a Direction to:
- prevent or address a contravention of a Council’s supervised obligation (Section 200-1 of the Act)
- comply with a prudential standard (Section 163-15 of the Act)
- comply with the capital adequacy standard (Section 143-20 of the Act)
- comply with the solvency standard (Section 140-20 of the Act).
The content of each Council direction is tailored to address specific issues. For example, a solvency or capital adequacy direction may impose additional financial obligations on an insurer. Additional details regarding Council Direction powers are available in the Standard Operating Procedure Giving a Council Direction.
Council Directions relating to Section 200-1 of the Act must be published on PHIAC’s website. Currently, no direction relating to the Section 200-1 of the Act has been issued by the Council.
Standard Operating Procedures (SOPs)
PHIAC issues Standard Operating Procedures (SOPs) to give insurers and consumers a better understanding of the Council’s options for monitoring and where necessary intervening in the affairs of the insurer. Current SOPs include:
- SOP1: Accepting a written undertaking given by a private health insurer
- SOP2: Giving a Council Direction
- SOP3: Information Acquisition Powers
- SOP4: Appointing an Inspector to a Private health Insurer