www.marsh.com.au

International Health Cover& Recent Changes in Legislation

2008

John Loechel, Senior Vice President,International HealthMarsh Pty Ltd.

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Overview

Marsh International Health

The Private Health Insurance Act – 2007

What are the Insurers doing?

How could my Non-residents be affected?

What steps should I take?

Marsh International Health.

Credentials

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Marsh International Health

Part of Marsh, the world leader in delivering risk and insurance

services and solutions

Marsh International Health provides sophisticated solutions for

Corporations with international employees or assignees.

Cover employees in over 100 countries

Design International Health Solutions for :

Mining & Energy Airlines Banking

Tertiary Education Legal Firms Chemicals & Scientific

Property Management Engineering Manufacturing

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Political, Environmental and Natural Disasters

Marsh International Health

Expat Insurance

Top-up Workers Compensation for

Expatriates

Death & CapitalBenefits

Weekly Benefits

Kidnap & Ransom

USA Claims Facility

Claims Management

Corporate Health

Corporate Travel &

STFS Cover

Terrorism Cover

“457” Inpat Medical Insurance

War Cover

Private Health Insurance Act -2007 – A Snapshot

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Private Health Insurance Act – 2007 – A Snapshot

Enacted on 1st April 2007…..Takes full effect on 1st July 2008

Changed the way Private Health Insurers (PHI’s) can provide cover & transact

Business in the future

Prior to 1/7/2007, there was some doubt whether Private health Insurers could write

Overseas Visitor’s Health Covers (OSVHC’s) for 457 Visa holders.

Also some concern if an overseas visitor was refused insurance under a Complying

Health Insurance Product (or “CHIP”) , it may be a breach of Community Rating rules.

The new Act tried to clear up confusion, but has caused issues in the industry.

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Private Health Insurance Act – 2007 – A Snapshot

After 1/7/2007, the Act confirmed Health Funds could write OSVHC but

under the class of Insurance known as “Health Related Business”.

( General Insurers can also write this cover for 457 Visa Holders)

From 1 April 2007, Australian Health Funds could insure an overseas visitor

under a non-community rated Policy… ie a non Complying Health Insurance

Product.

However after 1 July 2008, this will cease to be “Health Insurance Business”

The Insurer will have the option whether to place in “Health Benefits Fund”

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Private Health Insurance Act – 2007 – A Snapshot

If placed in Health Benefits Fund - controlled by PHIAC

If placed outside Health Benefits Fund - controlled by APRA

After 1 July 2008, even if the OSVHC cover is placed within the Health

Benefits Fund, but still may not be a CHIP policy.

As well as Australian citizens, Non-residents on 457 Visas can take out a

CHIP product.

(The Act is silent on this and there is still some difference of opinion)

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Private Health Insurance Act – 2007 – A Snapshot

What is a CHIP Policy?

A CHIP policy

- Is not subject to GST,

- Is community rated

- Does not cover Outpatients (GP’s etc.) as covered by Medicare.

Members of a CHIP policy who are eligible for Medicare:

- Will earn the 30% rebate …..No rebate if not from RHCA country.

- Will have Medicare Levy Surcharge exemption.

BUT of no real value to a non-RHCA employee if no GP cover

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Private Health Insurance Act – 2007 – A Snapshot

Note: There are no major changes to MLS rules.

- For MLS exemption a Chip Policy will still be required after 1/7/2008

- All the previous rules still apply

If not a CHIP Policy….

- Will be subject to GST

- Won’t be community rated

- Won’t provide Medicare Levy Surcharge exemption

BUT of no real value for an employee from an RHCA country if no MLS

exemption

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Private Health Insurance Act – 2007 – A Snapshot

Reciprocal Health Care Agreements (RHCA)

Agreement Countries:

UK, Ireland, Malta, Norway, Sweden, Finland, New Zealand, Netherlands,

Italy.

Provides varying levels of Medicare eligibility in Australia.

Non-Resident from RHCA country is subject to Medicare Levy.

If employee earns over $50,000 (single) or $100,000 (couples combined

income), the Medicare Levy Surcharge taxed.

What are Private Health Funds doing?

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What are Private Health Funds doing?

All funds with OSVHC are currently reviewing how they do business

Most have not advertised their intentions.

However one fund, Australian Health Management (AHM) has taken

decisive action.

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What are Private Health Funds doing?

Most of the General Insurers with Expatriate & Non-resident policies in

Australia have an arrangement with Australian Health Management.

This arrangement provides:

- Continuity of private health insurance cover,

- Lifetime Health Cover CAE protection (Australian expats)

- Medicare Levy Exemption (for one Insurer).

It also allows claims to be paid in Australia for Australians on temporary

return as provided under the Health Act ( eg Hospital Gap Cover).

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What are Private Health Funds doing?

In January 2008, AHM advised all relevant General Insurers & Brokers, that

effective from 1 July 2008, this arrangement will cease.

What are the Potential Exposures to 457’s?

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Exposures to 457’s

If General Insurers do not replace this arrangement,

- Waiting Periods can apply when taking out Australian Health cover after

applying for Permanent Residency status.

- Medicare Levy Surcharge costs may apply (RHCA countries only).

OSVHC’s provided by Private Health Insurers may also change by 1/7/2008 and

cause the same result

- Membership in a non-Chip OSVHC does not necessarily qualify to waive

Waiting Periods, nor does it qualify for MLS exemption.

What are General Insurers doing?

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What are General Insurers doing?

This situation is new and still very fluid…..no definite industry direction yet.

The General Insurers in Australia with an arrangement with AHM are

investigating whether AHM can withdraw midway through a Policy term.

They are all in discussion with AHM at present.

One Insurer has indicated they will definitely negotiate with another Health

Fund to replace this arrangement before 1 July 2008.

Websites are changing without notice, changing their benefits (eg IMAN ).

What steps should I take?

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What steps should I take?

First establish exactly what cover you wish to provide, or are required to

provide under your Sponsorship Agreement,..What is your HR Policy?

For Example:

- General Insurers provide broader worldwide cover

- Australian Private Health Insurers provide less cover limited to Australia

(but may have lower premium structures)

Establish whether your Non-residents have an exposure to any of these

issues….they may not.

Refer to relevant Government Private Health or ATO websites for clarification

if action is required.

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What steps should I take?

Refer to your Tax Advisor regarding any potential MLS liability if appropriate.

If you deal direct with an Insurer, establish exactly what they are going to do

after 1st July 2008.

Finally , discuss with your Insurance Broker…

- Are they aware of the changes?

- What action have they taken to deal with any potential exposures?

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In Summary

The Private Health Act 2007 sought to clear up confusion but has not

succeeded.

The Act takes full effect from 1 July 2008

There is no definite announcements yet from Australian Health Insurers

regarding action

AHM will withdraw from its arrangements with General Insurers from 1/7/2008

You need to monitor your Insurers to confirm whether these changes will

have any effect on your Non-Residents.

Thank You for Listening……

Any Questions?

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