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2019-2020-2021
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
PRIVATE HEALTH INSURANCE AMENDMENT
(INCOME THRESHOLDS) BILL 2021
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Health and Aged Care,
the Hon Greg Hunt MP)
PRIVATE HEALTH INSURANCE AMENDMENT (INCOME THRESHOLDS)
BILL 2021
OUTLINE
The Private Health Insurance Act 2007 (the Act) is the main law that sets out the
requirements for private health insurance (PHI) and health insurers.
The Act makes provision in relation to the setting and annual indexing of PHI income
thresholds (the income thresholds).
The income thresholds are used to determine government-funded PHI rebate amounts
that may apply for consumers with eligible PHI cover, and Medicare Levy Surcharge
(MLS) income thresholds and rates.
The MLS is levied on Australian taxpayers who do not have private patient hospital
cover; and earn above a certain income. The PHI rebate is an amount the Government
contributes towards the cost of Singles and Family PHI premiums. The rebate and
MLS are income tested.
The Act describes how annual indexation of PHI income thresholds are calculated
using an indexation factor. Additionally it specifies the PHI income thresholds for
Singles and Family status. The Act also specifies the formula (Indexation factor) for
applying indexation across the income thresholds each financial year.
The Act provides for the annual indexation of the income tiers to be determined by
changes in average weekly ordinary time earnings (AWOTE) each financial year.
The AWOTE is an Australian Bureau of Statistics (ABS) measure of earnings by
Australians from ordinary time worked each week.
The Private Health Insurance Amendment (Income Thresholds) Bill 2021 (the Bill)
continues the current pause on the annual indexation of income thresholds for another
two years, allowing for annual indexation thereafter.
The Bill amends section 22-35, section 22-40, and section 22-45 of Subdivision 22ï€-B
(the Subdivision) of the Act to extend the indexation pause on PHI income thresholds
for a further two years and concurrently amend the indexation reference year to apply
annual indexation from 1 July 2023.
Section 22-45 of the Subdivision provides for the annual indexation of the PHI singles
tier 1, tier 2 and tier 3 income thresholds. Indexation of the PHI singles thresholds
flows through to the corresponding PHI family thresholds (section 22ï€-40 of the
Subdivision).
These PHI thresholds are used to calculate PHI rebates on qualifying PHI policies for
single persons and families. The PHI rebate is income tested. If a person or a family's
income is higher than the relevant income threshold, a rebate may not be applicable.
These rebate entitlement depends on a person or a family's status on 30 June for the
relevant financial year. The PHI thresholds apply depending on whether a single
income or a family income status. These tiers and thresholds are provided for under
Subdivision 22-B--Private health insurance tier.
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Financial Impact Statement
The Australian Government is investing $30.6 million over 4 years to continue to
make private health insurance simpler and more affordable for Australians.
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Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011
PRIVATE HEALTH INSURANCE AMENDMENT (INCOME THRESHOLDS)
BILL 2021
Overview of the Bill
The Private Health Insurance Amendment (Income Thresholds) Bill 2021 (the Bill)
continues the pause of the annual indexation of private health insurance (PHI) income
thresholds for another two years, and adjusts the formula for recommencement of
indexation at the current income thresholds following the end of the pause.
The Private Health Insurance Act 2007 (the Act) is the main law that sets out the
requirements for PHI and health insurers. The Act allows for the setting and annual
indexing of income thresholds. The income thresholds determine rebate amounts that
may apply for consumers with eligible PHI cover (the PHI rebate), and the Medicare
Levy Surcharge (MLS) income thresholds and rates.
Indexation of income thresholds
Annual indexation of income thresholds is provided for under Subdivision 22ï€-B
(the Subdivision) of the Act. The thresholds for annual indexation of Singles and
Family thresholds and the details of indexation are specified under Subsection 22ï€-35,
22ï€-40, and 22ï€-45 provisions respectively.
The Bill continues the pause of the annual indexation of income thresholds for another
two years, and adjusts the formula for recommencement of indexation. The
Government has announced that the continuation of the pause will provide an
opportunity to undertake a detailed study of settings of the PHI rebate and the MLS.
With the pause, rebate income thresholds remain at $90,000 for the base single policy
and at $180,000 for the base family policy. Base income threshold (under which a
taxpayer is not liable to pay the MLS) remains at $90,000 for singles and at $180,000
for families.
Specifically the Bill seeks to amend the Act to:
ï‚· pause indexation for a further two financial years
ï‚· recommence annual indexation thereafter
ï‚· recommence indexation using current income thresholds
ï‚· repeal consequential redundant Subdivision 22ï€-B provisions.
Human rights implications
The right to health
The Bill engages article 12(1) of the International Covenant on Economic, Social and
Cultural Rights - the right to health. Article 12 refers to the right to the enjoyment of
the highest attainable standard of physical and mental health. The United Nations
Committee on Economic, Social and Cultural Rights (the Committee) has stated that
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health is a 'fundamental human right indispensable for the exercise of other human
rights', and that the right to health is not to be understood as a right to be healthy, but
rather entails a right to a system of health protection which provides equality of
opportunity for people to enjoy the highest attainable level of health.
The Committee notes 'the highest attainable standard of health' takes into account
both the condition of the individual and the country's available resources. The right
may be understood as a right of access to a variety of public health and health-care
facilities, goods, services, and programs.
Private health insurance regulation assists with the advancement of these human rights
by promoting the individual's access to health services. Private health insurance
regulation aims to encourage insurers and providers of private health services to
provide value for money to consumers, to improve information provided to consumers
of private health services to allow consumers to make more informed choices when
purchasing services and requires insurers not to differentiate the premiums they
charge according to individual health characteristics such as poor health.
This Bill is designed to support the sustainability of private health insurance and
accordingly is intended to promote individual's access to health services.
Conclusion
The Bill is compatible with human rights because it promotes the right to health.
The Hon Greg Hunt MP, Minister for Health and Aged Care
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PRIVATE HEALTH INSURANCE AMENDMENT (INCOME THRESHOLDS)
BILL 2021
NOTES ON CLAUSES
Clause 1 - Short Title
This clause provides that the Bill once enacted may be cited as the Private Health
Insurance Amendment (Income Thresholds) Act 2021
Clause 2 - Commencement
The whole of the Bill commences on 1 July 2021.
Clause 3 - Schedule
This clause provides that the Subdivision of the Act that is specified in the Schedule
to this Bill is amended or repealed as set out in the applicable items in the Schedule
concerned, and any other item has effect according to its terms. This is a technical
provision which gives operational effect to the amendments contained in the
Schedule.
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SCHEDULE 1 -- AMENDMENTS
Current income thresholds
Annual indexation of income threshold amounts is provided for under Subdivision
22ï€-B of the Act (the Subdivision). The threshold amounts for annual indexation for
Singles and Family status are specified under subsection 22ï€-35 and subsection 22ï€-40
respectively of the Subdivision. The Subdivision also sets out the particulars of the
indexation factor and how it is applied, within subsection 22ï€-45 provisions.
Threshold provisions for the MLS are set out in the Medicare Levy Act 1986 and the
A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999. These
Acts rely on the income thresholds set out in the Act. Subsequently no amendments to
these Acts are required in order to pause and recommence indexation of the MLS
income thresholds.
The current income thresholds for singles tier 1, tier 2, and tier 3 income status is
$90,000, $105,000 and $140,000 respectively. The current income thresholds for
family tier 1, tier 2, and tier 3 income status is $180,000, $210,000 and $280,000
respectively.
Indexation pauses
In 2014, the Government made a decision to pause the indexation for two years.
In 2016 the Government extended the pause until 1 July 2021. The indexation pauses
are provided for under subsection 22ï€-45(3A) of the Subdivision.
The Bill amends the Act to pause annual indexing of the income thresholds for
another two financial years commencing 1 July 2021, with annual indexation
recommencing from 1 July 2023.
Indexation of income thresholds
Currently indexation of the income thresholds is detailed under subsection 22ï€-45 of
the Subdivision. Subsection 22-45(2) describes how the threshold amount is indexed
annually. Subsections 22-45(4) and 22-45(5) provides for the formula (Indexation
factor) for applying indexation across the income thresholds each financial year.
The Bill amends the indexation factor's financial year references to reflect current
income thresholds for indexing. Annual indexation of the income thresholds will
recommence on 1 July 2023.
Bill amendments
Pausing income tiers for another two years means $90,000 remains the base tier
income threshold for MLS liability for a singles policy, and $180,000 remains the
base tier income threshold for MLS liability for a family policy for the period from 1
July 2021 to 30 June 2023.
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Private Health Insurance Act 2007
Item 1 Section 22-35
This item repeals the singles tier 1, 2, and 3 threshold provisions, substituting for
provisions that specify $90,000, $105,000, and 140,000 as the relevant thresholds in
2021-22 and 2022-23 financial years as the amounts for subsequent indexing.
Indexation of the singles thresholds flows through to the corresponding private health
insurance family thresholds (see section 22-40 of the Act).
Item 2 Subsection 22-40(4) (example)
This item substitutes the example of the family tier 2 threshold formula with the
formula example applicable for the 2021-22 and 2022-23 financial year. This reflects
the amendments made by Item 1. This is a consequential amendment.
Item 3 Subsection 22-45(1)
This item repeals the relevant indexation provision, substituting for a provision that
specifies that indexation of private health insurance singles thresholds relates for the
2023-24 financial year and later financial years thereafter. This provides for the
recommencement of indexation following the two year pause on indexation.
Item 4 Paragraph 22-45(2)(a)
This item repeals the indexation provision, substituting for a provision that specifies
the indexation factor as set out in 22-45(4) is applied to the amount for indexing.
This is a consequential amendment to Item 7.
Item 5 Subsection 22-45(2) (examples 1 and 2)
This item substitutes the examples of rounding of private health insurance singles
thresholds based on the nearest multiple of $1,000, substituting the amounts to be
indexed with the thresholds applicable for the 2021-22 and 2022-23 financial years.
This reflects the amendments made by Item 1. This is a consequential amendment.
Item 6 Subsections 22-45(3), (3A) and (3B)
Subsection 22-45(3) provides that the amounts mentioned in section 22-35 (the
private health insurance single thresholds) and flows through to corresponding private
health insurance family thresholds (see section 22-40) are not indexed if the
indexation factor mentioned in subsection (4) and (5) is 1 or less. Item 6 replaces
22-45(3), to provide provisions for not indexing the amount for a financial year if the
amount worked out under subsection 22-45(2) for the financial year is less than the
amount applicable under subsection 22-35 or this section for the previous financial
year. This amendment adjusts the indexation method so that income thresholds do not
go below amounts calculated from any previous financial year.
Subsection 22-45(3A) provides for the pausing of indexation for all financial years
from 2015-16 to 2020-21 financial year. Item 6 removes subsection 3A as it is a
consequential amendment to Items 1 and 3 which specifies the relevant thresholds for
financial years 2021-22 and 2022-23 (Item 1) and indexing for the 2023-24 financial
year, and later financial years (Item 3).
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Subsection 22-45(3B) provides for the provision for if the amount is not indexed for a
financial year because of the operation of subsection 22-45(3A), the amount for the
financial year is the amount for the most recent financial year for which the amount
was indexed. Item 6 replaces subsection 22-45(3B) with a new subsection 22-45(3A).
This is a consequential amendment to reference the new subsection 22-45(3).
Item 7 Subsection 22-45(4)
This item repeals the indexation factor, substituting for a factor to ensure indexation is
based on the Index Number for the quarter ending 31 Dec 2021. This aligns with the
amendments made by Item 3. This is a consequential amendment.
Item 8 Subsection 22-45(5)
This item repeals a redundant subsection. This reflects amendments made by Item 3.
This is a consequential amendment.
Item 9 Subsection 22-45(6)
This item repeals a redundant subsection. This reflects amendments made by Item 5
with respect examples of rounding of relevant threshold amounts. This is a
consequential amendment.
Item 10 Application
This item reflects that the amendments in relation to Items 1 to 9 apply in relation to
the 2021-22 financial year and later financial years.
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