Summary
- The primary purpose of holding Lifetime Health Cover (LHC) information remains current throughout that individual’s lifetime, because the primary purpose of collecting the information is to ensure that a person is correctly charged their LHC loading (if applicable) throughout their lifetime.
- Insurers providing private health insurance need to keep the information required for calculating the LHC loading throughout the lifetime of a person, in order to meet their obligations under the Private Health Insurance Act 2007 (PHI Act).
- The department is currently considering:
- what would amount to reasonable certainty that a person was no longer alive in the case where an insurer does not have evidence of whether a person is alive or dead
- what retention requirements would be reasonable for the information on transfer certificates that is not LHC information.
The purpose of collecting LHC information
The primary purpose of insurers collecting the information relevant to a person’s LHC loading (LHC information) is to ensure that a person is correctly charged their LHC loading (if applicable) throughout their lifetime. A private health insurer may be required under the PHI Act to find and disclose this information at any point during the life of an individual. This means that the purpose of collection remains current throughout the lifetime of the individual.
Obligations in relation to LHC information
Provisions of the PHI Act, and of Rules made under the PHI Act, are enforceable obligations (Part 5-2 of the PHI Act).
Insurers are required to use LHC information
Private health insurers have obligations under the PHI Act to use LHC information. In particular, they must:
- increase the amount of premiums for hospital cover by reference to the age of the individual when they first obtained hospital cover (section 34-1)
- increase the amount of premiums for hospital cover by reference to the periods during the individual’s life (after they reach their lifetime health cover base day) in which they ceased to have hospital cover (section 34-5)
- stop increasing the amount of premiums for hospital cover in respect of an individual who has had their premiums increased for a continuous period of 10 years (subject to some exceptions) (section 34-10(1))
- restart increasing the amount of premiums for hospital cover where an individual after the end of the ten-year continuous period, ceases to have hospital cover and later takes out hospital cover again (subject to particular exceptions) (section 34-10(3)).
Insurers are required to be able to disclose LHC information
Private health insurers have obligations under the Private Health Insurance (Lifetime Health Cover) Rules 2017 (LHC Rules) to disclose LHC information. In particular, they:
- must, at the request of a policy holder, within 14 days, provide information about the LHC increases made in respect of that policy holder’s premiums
- may provide information about LHC increases to another insurer with the consent of the relevant policy holder or former policy holder
- must accept an annual statement issued by a private health insurer providing hospital cover at a particular period as conclusive evidence that the relevant person had hospital cover during that period.
Consumer rights
A person may obtain and cease hospital cover and change insurers at any time throughout their lifetime. There is no obligation for individuals to maintain records relevant to calculating LHC loading throughout their lifetime. However, there is a potentially significant financial burden for the consumer if the LHC loading is incorrectly applied because of the absence of correct and complete information in relation to their history of holding hospital cover.
Insurers need to hold information to use and disclose it
Information is required for insurers to comply with their obligations in the PHI Act and the LHC Rules to:
- correctly increase (or stop increasing) premiums
- respond to requests for information about a policy holder (or former policy holder).
Insurers therefore need to hold the information that demonstrates the time in which an individual first obtained hospital cover, and the following periods in their life in which they did and did not have hospital cover.
Recommended retention period for LHC information
Lifetime health cover information is required to calculate an individual’s health insurance payments. Once a person has died, this purpose is no longer relevant. Therefore, if an insurer has evidence of the death of a person, then they are no longer required to retain the LHC information for that individual under the PHI Act.
If an insurer does not have evidence of whether a person is alive or dead, then it is expected that the insurer will retain the information until there is reasonable certainty that the person is no longer alive. The department is still considering what would amount to reasonable certainty and would be interested in input from stakeholders on this question. The department previously issued Circular HBF621/PH374, which stated that it is expected that health funds will be required to maintain their records for 100 years.
Retention is consistent with privacy obligations
Insurers, as organisations, must comply with the Australian Privacy Principles (APPs) in the Privacy Act 1988 (Privacy Act). The APP Guidelines state (11.23) that an APP entity will not need to destroy or de-identify personal information it holds if the information is still necessary for the primary purpose of collection or for a secondary purpose for which it may be used or disclosed under APP 6.
As the primary purpose of collecting LHC information is to ensure that a person is correctly charged their LHC loading (if applicable) throughout their lifetime, then the primary purpose of holding the information remains current throughout that individual’s lifetime.
Maintain information securely and protect it from misuse
Insurers are required under the Privacy Act and APP 11 to take reasonable steps to protect personal information they hold from misuse, interference and loss, as well as unauthorised access, modification or disclosure.
Insurers need to preserve LHC information and be able to recall it as required for the lifetime of the individual. However, the information:
- does not need to be stored in a place where it is immediately accessible to the insurer
- does not need to be continuously accessible via an online network.
One approach to complying with APP 11 would be to electronically or physically archive the information in a secure backup service from which it can be retrieved as required.
Retention of other information contained on transfer certificates
LHC information is required to be included on transfer certificates. However, the lifetime retention required for LHC information is unlikely to apply to the other information on transfer certificates. The department is currently considering what retention requirements would be reasonable for the information on transfer certificates that is not LHC information.