IntroductionThe Indemnity Insurance Fund (the Fund) is an Australian Government initiative administered by the Department of Health designed to consolidate funds that provide Commonwealth support for medical indemnity and professional indemnity for midwives.
Fund objectives and prioritiesBroadly, the Fund’s primary objective is to streamline the administration of existing Government schemes with the following priorities:
- Promote stability of the medical indemnity insurance industry - to ensure the ongoing stability of the medical indemnity insurance industry, the department will continue to monitor the operations and activities of medical indemnity insurers;
- Keep premiums affordable for doctors - a stable and competitive medical indemnity industry assists in keeping medical indemnity premiums affordable for doctors;
- Ensure availability of professional indemnity insurance for eligible midwives – the Government has contracted an insurer, Medical Insurance Group Australia, to provide professional indemnity insurance to eligible midwives.
BackgroundThe Indemnity Insurance Fund was established in 2011 through the consolidation of a range of existing medical indemnity and professional indemnity for midwives programs.
The establishment of the Fund followed a strategic review of the administrative arrangements in the Health portfolio commissioned by the Government in 2010. The review identified an opportunity to improve the management of acute care programs through consolidating them into larger, flexible Funds, in order to cut red tape for grant holders, increase flexibility, and more efficiently provide evidence based funding for the delivery of health outcomes in the community. Further information about the strategic review and the establishment of the flexible Funds is available on the Department’s website.
The Fund includes the following schemes:
- Incurred-But-Not-Reported Scheme (IBNR)
- Premium Support Scheme (PSS)
- High Cost Claims Scheme (HCCS)
- Exceptional Claims Scheme (ECS)
- Run-off Cover Scheme (ROCS)
- Midwife Professional Indemnity (Commonwealth Contribution) Scheme
- Midwife Professional Indemnity Run-off Cover Scheme
1.1 Roles and responsibilities
MinisterThe Minister for Health (the Minister) is responsible for reviewing/setting priorities for the Fund. These priorities will at all times reflect the aims and objectives of the Fund, but may change over time to address emerging issues that will support more effective indemnity insurance schemes.
The final decision about the approval of a grant will be made by the Minister or agency Chief Executive (including a Chief Executive delegate).
Department of HealthThe Department is responsible for the policy development and administrative oversight of the indemnity insurance schemes.
Department of Human ServicesThe Department of Humans Services is responsible for the payment and audit of funds expended under the indemnity insurance schemes.
Medical Indemnity InsurersEither through contracts with the Commonwealth or under specific legislation, medical indemnity insurers are able to access specific administered funds provided by special appropriations for each of the indemnity insurance schemes.
1.2 Fund TimeframeThe Fund is an ongoing initiative available from 1 July 2011.
1.3 Fund valueThe total value of funds available under the Fund is $427 million over 2012-13 to 2015-16.
2. EligibilityEligible medical indemnity insurers can access the Fund through the various indemnity insurance schemes as prescribed by the relevant legislation.
3. ProbityIn administering the Fund, the Commonwealth (as represented by the Department of Health and Medicare Australia) ensures that appropriate levels of probity are maintained. All records of the Commonwealth and those created on behalf of the Commonwealth in relation to insureds by contracted insurers are subject to appropriate auditing and program monitoring.
4. Fund Application ProcessesMedical indemnity insurers make electronic applications for funding through the Department of Human Services.
Fund Under expenditureAnnual funding estimates for each scheme are provided by the Australian Government Actuary. Due to the long tail nature of indemnity insurance, any unexpended funds roll over into a scheme’s ongoing liability.
5. Conditions of FundingFunds are provided from special appropriations to medical indemnity insurers either under contract or through relevant legislation.
6. Procurement activitiesFunds appropriated for the purpose of the Indemnity Insurance Fund may also be used for the procurement of work directly related to the purpose of the Fund e.g. scheme administration. Such procurements will be undertaken in accordance with the requirements of the Commonwealth Procurement Rules and will be for purposes that are consistent with the aims, objectives and priorities of the Fund.
7. Glossary of TermsInsured - means a person, being an eligible medical practitioner or an eligible midwife, who holds a current medical indemnity or midwife professional indemnity policy.
PriorityPromote stability of the medical indemnity insurance industry
ActivitiesTo ensure the ongoing stability of the medical indemnity insurance industry, the department will continue to monitor the operations and activities of medical indemnity insurers. Medical indemnity insurance is a specialised form of cover that provides surety to medical practitioners and their patients in the event of an adverse incident. Affordable and stable medical indemnity insurance translates to stable fees for patients, and allows the medical workforce to focus on the delivery of high quality medical services.
The Australian Government funds a range of activities to support the medical indemnity industry, including indemnity for high cost claims, exceptional claims, and incurred but not-reported claims. These activities ensure the stability of medical indemnity insurance by minimising the impact that large and exceptional claims have on insurers and their ability to continue to provide affordable medical indemnity cover for doctors.
In 2013-14, the department will continue to administer these activities with the assistance of Medicare Australia and contracted medical indemnity insurers. Using the data provided through the Medical Indemnity National Collection and published in reports by the Australian Institute of Health and Welfare, the department will continue to monitor the effectiveness of these activities and provide evidence-based policy advice to the Government.
PriorityKeep premiums affordable for doctors.
ActivitiesA stable and competitive medical indemnity industry assists in keeping medical indemnity premiums affordable for doctors. Premium support assists specialists whose medical indemnity premiums are relatively high in proportion to their level of clinical and actuarial risk. The subsidies available through premium support reduce the need for these high risk specialties to pass on the cost of their higher premiums to their patients. Premium support is demand driven, with subsidies paid in response to applications from eligible doctors. Therefore, actual funding may vary from estimates over the forward years. However, a decrease in the number of doctors requiring premium support would indicate that medical indemnity premiums are becoming more affordable.
Other medical indemnity activities administered by the department, such as those covering high cost claims and run-off cover, contribute to meeting the cost of eligible claims when they are lodged by medical indemnity insurers. Expense and liability estimates for these activities are provided annually by the Australian Government Actuary. In 2013-14, the department will continue to administer these activities with the assistance of Medicare Australia and contracted medical indemnity insurers. The department will also regularly monitor the industry and liaise with medical indemnity insurers about their cost structures.
PriorityEnsure availability of professional indemnity insurance for eligible midwives.
ActivitiesWomen and their families now have greater choice in maternity care through access to midwifery services subsidised by the Government through the Medicare Benefits Schedule and Pharmaceutical Benefits Scheme.
From 1 July 2010, all health professionals needed to have professional indemnity insurance to meet the requirements of the Council of Australian Governments National Registration and Accreditation Scheme for health practitioners. The Australian Government has contracted an insurer, Medical Insurance Group Australia, to provide professional indemnity insurance to eligible midwives.
Other insurers are currently reluctant to offer a professional indemnity insurance product for privately practising midwives due to the very small potential premium pool (which tends to make it an unviable commercial proposition) and the lack of accurate and up-to-date data on claims in Australia.
Professional indemnity support for midwives was introduced on 1 July 2010, and is demand driven; responding to claims when they are lodged by the insurer. For claims over $100,000, the Government will pay 80 per cent of the amount exceeding $100,000, and pay 100 per cent of the amount exceeding $2 million. Through a run off cover scheme, the Government will pay 100 per cent of each claim that is notified after a midwife leaves the workforce or retires. In 2013-14, the department will work with Medicare Australia to administer professional indemnity insurance for midwives.
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