Note: Terms used in these Rules have the same meaning as in the Act—see section 13 of the Legislative Instruments Act 2003. These terms include:
appointed actuary
approved form
assets
capital adequacy direction
capital adequacy standard
Council
cover
for profit insurer
health care provider
health benefits fund
health‑related business
net asset position
policy group
policy holder
private health insurer
officer \[of a private health insurer\]
referable
risk equalisation levy
Risk Equalisation Trust Fund
rules \[of an insurer\]
solvency direction
solvency standard
terminating management
In these Rules:
Act means the Private Health Insurance Act 2007.
approved loss absorbing subordinated debt of a health benefits fund, means a security or other debt instrument, which has been approved by the Council under rule 3A.
Australian Accounting Standards means the accounting standards issued by the Australian Accounting Standards Board.
authorised deposit‑taking institution means a body corporate in relation to which an authority under subsection 9(3) of the Banking Act 1959 is in force.
billed risk equalisation trust fund liability means the amount of risk equalisation trust fund payments, on the relevant day, for which an invoice from the Council has been received by the insurer but that have not yet been paid by the insurer.
borrowings of a health benefits fund are borrowings which would be permitted under Rule 5 of these Rules.
capital adequacy maximum default loss amount of a health benefits fund, has the meaning given by clause 13 of Schedule 3.
capital adequacy standard means the capital adequacy standard, referred to in Part 6, and as set out in Schedule 3 of these Rules.
capital adequacy supervisory adjustment amount of a health benefits fund, has the meaning given by clause 12 of Schedule 3.
cash has the meaning given in Australian Accounting Standards Standard 107.6.
cash management amount of a health benefits fund, has the meaning given by clause 5 of Schedule 2.
central estimate means an estimate of the mean of the range of possible outcomes of any calculation required under either the solvency standard or the capital adequacy standard.
constructive obligation has the meaning given in the liability adequacy test in Australian Accounting Standard Board Standard 137.
financial interdependency in relation to a group of related counterparties, means a circumstance in which the financial soundness of one counterparty in the group may affect the financial soundness of another counterparty in the group.
future claims liability of a health benefits fund, is the amount calculated, at a 75% probability of adequacy, in accordance with the following calculation:
(a) the sum of:
(i) future cash flows from future claims under current policies; and
(ii) the additional risk margin; and
(iii) the sum of related intangible assets and related deferred acquisition costs;
where all elements of the future claims liability calculation are defined in a manner consistent with the definitions contained in the liability adequacy test set out in the Australian Accounting Standard Board Standard 1023, except that discounting is not applied and the constructive obligation component is not included.
future claims liability amount of a health benefits fund, has the meaning given in clause 7 of Schedule 3.
group of related counterparties means two or more counterparties which are related parties, or are linked by either of the following:
(a) financial interdependency; or
(b) any other connection or relationship that might expose the counterparties in the group to a single risk.
health business revenue estimate of a health benefits fund, is its premium income estimate plus a central estimate of the gross revenue that it will earn in relation to its health related business in the 12 months after the relevant day, less any premium ceded to reinsurers in relation to health‑related business within that 12 month period.
liquidity management plan of a health benefits fund, has the meaning given in subclause 4(3) of Schedule 2.
maximum default loss means the largest uncompensated loss of the health benefits fund arising from any loss, other than losses arising from assets held with an Australian Government counterparty or deposits held with an authorised deposit‑taking institution, in relation to:
(a) any asset or any group of related assets of the health benefits fund; and
(b) any individual counterparty or group of related counterparties.
operational risk amount of a health benefits fund, has the meaning given by clause 11 of Schedule 3.
other liabilities amount of a health benefits fund, has the meaning given in clause 9 of Schedule 3.
outstanding claims liability has the meaning given by the Australian Accounting Standard Board Standard 1023, where:
(a) the risk margin applied produces a 75% probability of adequacy; and
(b) discounting is not applied; and
(c) any outstanding claims liabilities from health related business are incorporated; and
(d) receipts from the risk equalisation trust fund are incorporated.
outstanding claims liability amount of a health benefits fund, has the meaning given in clause 6 of Schedule 3.
premium income estimate of a health benefits fund, is the central estimate of the amount of health insurance business premium income that it will earn in the 12 months after the relevant day, where the premium increase assumption is the lesser of:
(a) the central estimate of the amount of revenue the private health insurer’s health benefits fund will earn in the 12 months after the relevant day; and
(b) the amount determined in accordance with the methodology published by the Council, as amended from time to time.
previously approved subordinated debt of a health benefits fund, means debt of a kind previously approved by the Council, as subordinated debt, for the purposes of the solvency standard or the capital adequacy standard established by these rules, as in force as immediately prior to 31 March 2014.
probability of adequacy means the percentile required to meet individual elements of either the solvency standard or the capital adequacy standard.
prudent liabilities amount, of a health benefits fund, has the meaning given by clause 5 of Schedule 3.
Regulations means any regulations made under the Act.
related party has the meaning given by the Australian Accounting Standards Board Standard 124.
relevant day means the day on which the calculation is based for the purposes of assessing compliance with the solvency standard or the capital adequacy standard, as the case may be.
risk equalisation trust fund accrued liability amount of a health benefits fund, has the meaning given in clause 8 of Schedule 3.
Rules means the Rules made under the Act including these Rules.
single equivalent units (SEUs) has the meaning given in Part 1, Rule 4 of the Private Health Insurance (Risk Equalisation Policy) Rules 2007.
size margin of a health benefits fund, is the lesser of:
(a) the margin based on the number of SEUs of the health benefits fund as calculated by the following formula:
0.75 × (SEUs) ^ ‑0.16; and
(b) 0.25.
solvency standard means a solvency standard, as referred to in Part 6, and set out in Schedule 2 of these Rules.
solvency supervisory adjustment amount of a health benefits fund, has the meaning given by subclause 6(2) of Schedule 2.
stress test amount of a health benefits fund, has the meaning given by subclause 10(1) of Schedule 3.
stressed net cash outflow amount of a health benefits fund means the
98th percentile estimate of the net cash outflows for a 30 day period from the relevant day, where:
(a) net cash outflow means the cash outflows from the health benefits fund less cash inflows to the health benefits fund; and
(b) cash outflows are limited to cash payments required to meet all liabilities that are, or might become, referable to the health benefits fund; and
(c) cash inflows represent cash receipts arising from:
(i) premiums payable under policies of insurance that are referable to the fund; and
(ii) income from the investment of assets of the fund held on the relevant day including amounts receivable on maturity and excluding revenues from the sale of assets, except where a binding agreement for the sale has been entered into prior to the relevant day; and
(iii) any other money due to be received by the insurer in connection with its conduct of the business of the fund.
stressed investment income estimate of a health benefits fund, has the meaning given by subclause 10(3) of Schedule 3.
stressed net margin estimate of a health benefits fund, has the meaning given by subclause 10(2) of Schedule 3.
stressed other income estimate of a health benefits fund, has the meaning given by subclause 10(4) of Schedule 3.
subordinated debt means the sum of any previously approved subordinated debt and any approved loss absorbing subordinated debt.
unbilled calculated deficit means the central estimate of the sum of all the amounts calculated for each risk equalisation jurisdiction, and under the following conditions:
(a) in accordance with Part 2, Rule 11(1)(e) of the Private Health Insurance (Risk Equalisation Policy) Rules 2007;
(b) over the period up to the relevant day;
(c) where the risk equalisation trust fund payments or receipts have accrued but have not yet been paid; and
(d) where an invoice, notice or receipt from the Council has not yet been received by the private health insurer, for that period.
unbilled gross deficit means the central estimate of the sum of the eligible benefits notionally allocated to the aged‑based pool and the high cost claimants pool, calculated for each risk equalisation jurisdiction, and under the following conditions:
(a) in accordance with Part 2, Rule 11(1)(a) of the Private Health Insurance (Risk Equalisation Policy) Rules 2007;
(b) over the period up to the relevant day;
(c) where the risk equalisation trust fund payments or receipts have accrued but have not yet been paid; and
(d) where an invoice, notice or receipt from the Council has not yet been received by the private health insurer, for that period.
uncompensated loss means the likely net loss after insurance, derivative, recoveries, and compensation.
unexpired risk liability has the meaning given in the liability adequacy test in the relevant Australian Accounting Standards Board Standard 1023.
xth percentile means the percentile with which the:
(a) net margin for the health insurance business; and
(b) investment income; and
(c) health related business income and all other income, less associated expenses;
must be measured at, in order to achieve a second percentile profit margin, incorporating allowance for correlation between (a), (b) and (c).