Medical Indemnity (Run-off Cover Claims and Administration) Protocol 2006 (No. 2)
Medical Indemnity Act 2002
I, TONY ABBOTT, Minister for Health and Ageing, determine this Protocol under section 34ZN of the Medical Indemnity Act 2002.
Dated 23/11/ 2006
Tony Abbott
Minister for Health and Ageing
Part 1 Preliminary
1 Name of Protocol
This Protocol is the Medical Indemnity (Run-off Cover Claims and Administration) Protocol 2006 (No. 2).
2 Commencement
(1) This Protocol commences on the day after it is registered.
(2) This Protocol may apply to costs incurred by a medical indemnity provider prior to the date the Protocol commences.
3 Definitions
(1) In this Protocol:
Act means the Medical Indemnity Act 2002.
eligible run-off claim has the same meaning as is set out in section 34ZB of the Act.
medical indemnity provider means:
(a) an MDO; or
(b) a medical indemnity insurer.
Prudential Supervision and Product Standards Act means the Medical Indemnity (Prudential Supervision and Product Standards) Act 2003.
(2) A reference to costs incurred or a medical indemnity provider having incurred costs refers to costs that the medical indemnity provider has paid or has a legal liability to pay.
(3) A reference to legal, administrative or other costs does not include legal costs, administrative costs or other costs incurred by a medical indemnity provider in complying with a request by the Medicare Australia CEO under sections 34ZO, 38 or 71 of the Act.
Note: The words and expressions used in this Protocol have the meaning given in the Act. For example:
claim
contribution year
high cost claim indemnity
MDO
medical indemnity cover
medical indemnity insurer
Medicare Australia CEO
run-off cover indemnity
Part 2 Payment of claim handling fees in respect of eligible run-off claims (under paragraph 34ZN(1)(a) of the Act)
4 Claim handling fees
Where a medical indemnity provider is managing an eligible run-off claim, it may apply to the Medicare Australia CEO for a claim handling fee in respect of that claim.
5 When a claim handling fee is payable
(1) A claim handling fee is payable to a medical indemnity provider in respect of an eligible run-off claim if:
(a) the medical indemnity provider has handled or is handling an eligible run-off claim; and
(b) a run-off cover indemnity is payable by the Medicare Australia CEO in respect of that eligible run-off claim; and
(c) the medical indemnity provider has not already been paid a claim handling fee by the Medicare Australia CEO in respect of that run-off cover indemnity; and
(d) the medical indemnity provider applies to the Medicare Australia CEO for payment of the claim handling fee in accordance with section 8 of this Protocol.
(2) More than one claim handling fee may be payable, under this section, to a medical indemnity provider in respect of an eligible run-off claim.
6 Amount of claim handling fee payable
(1) A claim handling fee that is payable under section 5 of this Protocol is calculated in accordance with this section.
(2) Where the costs incurred by the medical indemnity provider are run-off cover indemnity costs, including legal, administrative or other costs directly attributable to the eligible run-off claim, the amount of the Claim Handling Fee Payable (CHFP) payable is calculated using the following formula:
CHFP
=
5
x
RoCI
100
Where:
RoCI is the amount of a Run-off Cover Indemnity that is payable by the Medicare Australia CEO in response to an application for payment from a medical indemnity provider. (The run-off cover indemnity may include any legal, administrative or other payments made by the medical indemnity provider that are directly attributable to any negotiations, arbitration or proceedings in relation to the eligible run-off claim and that are payable by the Medicare Australia CEO).
Note: Subsection 4(3) of the Act sets out the scope of a payment made 'in relation to a claim against a person' and also a payment 'made in relation to a claim by a person'.
(3) Where the costs incurred by the medical indemnity provider in relation to the claim are both run-off cover indemnity costs and high cost claim indemnity costs the amount of the Claim Handling Fee Payable (CHFP) payable is calculated using the following formula:
CHFP
=
5
x
( RoCI + HCCI )
100
Where:
RoCI is the amount of a Run-off Cover Indemnity that is payable by the Medicare Australia CEO in response to an application for payment from a medical indemnity provider. (The run-off cover indemnity may include any legal, administrative or other payments made by the medical indemnity provider that are directly attributable to any negotiations, arbitration or proceedings in relation to the eligible run-off claim and that are payable by the Medicare Australia CEO).
Note: Subsection 4(3) of the Act sets out the scope of a payment made 'in relation to a claim against a person' and also a payment 'made in relation to a claim by a person'.
HCCI is the amount of High Cost Claim Indemnity by which the run-off cover indemnity has been reduced in accordance with section 34ZH of the Act.
Part 3 Payment of ongoing administration costs (under paragraph 34ZN(1)(c) of the Act)
7 When a payment in respect of ongoing administration costs is payable
(1) From the end of the first contribution year commencing on or after 1 July 2006, a payment under this Protocol is payable to a medical indemnity insurer where the insurer:
(a) has provided information to the Medicare Australia CEO attributing run-off cover payments in accordance with section 34ZT of the Act in respect of the immediate past contribution year; and
(b) has certified, in writing to the Medicare Australia CEO, that it has provided the information listed in paragraph 26D(2)(b) of the Prudential Supervision and Product Standards Act to the Medicare Australia CEO in respect of practitioners for whom the medical indemnity cover was provided in the immediate past contribution year; and
(c) has certified, in writing to the Medicare Australia CEO, that it has complied with its obligations under Division 2A of Part 3 of the Prudential Supervision and Product Standards Act (other than section 26D) in respect of the immediate past contribution year; and
(d) has incurred legal, administrative or other costs (whether on its own behalf or otherwise); and
(e) incurred those costs in respect of administering a system or part of a system for the provision of medical indemnity cover for the sole purpose of complying with Division 2A of Part 3 of the Prudential Supervision and Product Standards Act; and
(f) those costs are costs which have been incurred in the ordinary course of business; and
(g) the medical indemnity insurer has not already received the payment from the Medicare Australia CEO that was payable in respect of those costs; and
(h) the medical indemnity insurer has applied to the Medicare Australia CEO after the end of the contribution year and in accordance with section 8 of this Protocol for payment in respect of those costs.
(2) The amount of the ongoing administration costs payable to a medical indemnity insurer in respect of the first contribution year commencing on or after 1 July 2006 is calculated using the following formula:
APP x ATNP = the ongoing administration cost
APP means the Amount Per Practitioner which, for the first contribution year commencing on or after 1 July 2006, is $16.00.
ATNP means the Annual Total Number of Practitioners for whom the insurer provided medical indemnity cover in respect of which a run-off cover support payment was payable in that contribution year. If the ATNP for a medical indemnity insurer is less than 1,000 then, for the purposes of the calculation under this subsection, the ATNP is taken to be 1,000.
Note 1: The amounts calculated using the formula do not include GST.
Note 2: Part 5 (Transitional and Savings) of this Protocol sets out the transitional arrangements in respect of ongoing administration costs payable to a medical indemnity insurer with a contribution year which started on 1 January 2006.
(3) The amount of the ongoing administration costs payable to a medical indemnity insurer in respect of each contribution year commencing on or after 1 July 2007 is calculated using the following formula:
APP x ATNP = the ongoing administration cost
APP means the Amount Per Practitioner calculated using the following formula:
APP = Previous year's APP x 1.025
ATNP means the Annual Total Number of Practitioners for whom the insurer provided medical indemnity cover in respect of which a run-off cover support payment was payable in that contribution year. If the ATNP for a medical indemnity insurer is less than 1,000 then, for the purposes of the calculation under this subsection, the ATNP is taken to be 1,000.
Previous year's APP means the Amount Per Practitioner which was used in the calculation of the ongoing administration cost payable to the medical indemnity insurer in respect of the immediately preceding contribution year. The Amount Per Practitioner in respect of the contribution year immediately preceding the contribution year commencing on or after 1 July 2007 is $16.00.
Note 1: Subsection 7(2) deals with the Amount Per Practitioner used in the calculation of the ongoing administration cost payable to the medical indemnity insurer in respect of the contribution year commencing on or after 1 July 2006..
Part 4 General
8 Application for payment
An application by a medical indemnity provider for a payment under this Protocol must:
(a) be made in writing using a form approved by the Medicare Australia CEO; and
(b) be accompanied by the documents and other information required by the form approved by the Medicare Australia CEO.
9 Payment date
(1) Subject to subsection (2), the Medicare Australia CEO must pay a payment under this Protocol before the end of the month immediately following the month in which the medical indemnity provider applied to the Medicare Australia CEO for the payment.
(2) If a medical indemnity provider applies for a payment under this Protocol; and
(a) the medical indemnity provider has not complied with the requirements of the application form; or
(b) the Medicare Australia CEO has requested further information under section 34ZO of the Act in relation to the application and the medical indemnity provider has not given the Medicare Australia CEO the information that was requested under section 34ZO of the Act in relation to the application for payment;
the payment date for the payment must be before the end of the month immediately following the month in which the medical indemnity provider complies with the requirements of the application form or provides the information requested by the Medicare Australia CEO under section 34ZO of the Act, as the case may be.
10 Recovery of overpayments
(1) This section applies if an amount is paid by way of a payment under this Protocol to a medical indemnity provider and:
(a) the amount of the payment under this Protocol is not payable; or
(b) the amount paid is greater than the amount of the payment under this Protocol that was payable.
(2) The amount overpaid is:
(a) the whole of the amount paid if paragraph (1)(a) applies; or
(b) the difference between the amount that was paid and the amount that was payable if paragraph (1)(b) applies.
(3) The amount overpaid is a debt due to the Commonwealth by the medical indemnity provider.
(4) The amount overpaid may be recovered:
(a) by action by the Medicare Australia CEO against the medical indemnity provider in a court of competent jurisdiction; or
(b) by deduction from any future amount payable to the medical indemnity provider under this Protocol.
Part 5 Transitional and Saving Provisions
11 Application of section 6 of the Medical Indemnity (Run-off Cover Claims and Administration) Protocol 2006
(1) This section applies to medical indemnity insurers with a contribution year commencing on 1 January 2006.
(2) Section 6 of the Medical Indemnity (Run-off Cover Claims and Administration) Protocol 2006 applies in respect of ongoing administration fees payable to medical indemnity insurers for the part of the contribution year commencing 1 January 2006 and ending on 30 June 2006.
Note: The Medical Indemnity (Run-off Cover Claims and Administration) Protocol 2006 was registered on 20 June 2006.
12 Transitional arrangement for the period 1 July 2006 to 30 December 2006 in respect of ongoing administration costs payable to a medical indemnity insurer that has a contribution year commencing on 1 January 2006
(1) For a medical indemnity insurer that has a contribution year commencing on 1 January 2006, a payment under this Protocol is payable to that medical indemnity insurer where the medical indemnity insurer:
(a) has provided the information to the Medicare Australia CEO attributing run-off cover payments in accordance with section 34ZT of the Act in respect of the contribution year commencing 1 January 2006; and
(b) has certified, in writing to the Medicare Australia CEO, that it has provided the information listed in paragraph 26D(2)(b) of the Prudential Supervision and Product Standards Act to the Medicare Australia CEO in respect of practitioners for whom the medical indemnity cover was provided in the immediate past contribution year; and
(c) has certified, in writing to the Medicare Australia CEO, that it has complied with its obligations under Division 2A of Part 3 of the Prudential Supervision and Product Standards Act (other than section 26D) in respect of the immediate past contribution year; and
(d) has incurred legal, administrative or other costs (whether on its own behalf or otherwise); and
(e) incurred those costs in respect of administering a system or part of a system for the provision of medical indemnity cover for the sole purpose of complying with Division 2A of Part 3 of the Prudential Supervision and Product Standards Act; and
(f) those costs are costs which have been incurred in the ordinary course of business; and
(g) has not already been paid by the Medicare Australia CEO in respect of those costs; and
(h) the medical indemnity insurer has applied to the Medicare Australia CEO after the end of the contribution year and in accordance with section 8 of this Protocol for payment in respect of those costs.
(2) The amount of the ongoing administration costs payable to a medical indemnity insurer in respect of the contribution year commencing 1 January 2006 is calculated using the following formula:
$16.00 x 50% x ATNP = the ongoing administration cost
ATNP means the Annual Total Number of Practitioners for whom the insurer provided medical indemnity cover in respect of which a run-off cover support payment was payable in that contribution year.
