PRIVATE HEALTH INSURANCE
ADMINISTRATION COUNCIL
PHIAC
Agency Resources and
Planned Performance
543
544
Private Health Insurance
Administration Council
Health and Ageing Portfolio Agency
Section 1: Agency Overview and Resources
1.1:
Strategic Direction Statement .................................................................. 546
1.2:
Agency Resource Statement ................................................................... 546
1.3:
Budget Measures ..................................................................................... 548
Section 2: Outcomes and Planned Performance
2.1:
Outcomes and Performance Information ................................................. 548
PHIAC
Section 3: Explanatory Tables and Budgeted Financial Statements
3.1:
Explanatory Tables................................................................................... 553
3.2:
Budgeted Financial Statements ............................................................... 554
545
PHIAC - Agency Budget Statements – Budgeted Financial Statements
Section 1: Agency Overview and Resources
1.1
Strategic Direction Statement
The Australian Government, through the Private Health Insurance Administration
Council (PHIAC), aims to protect the interests of consumers through prudential
and administrative regulation of the private health insurance industry. PHIAC
administers the registration of private health insurers, is responsible for regulating
the prudential performance of the insurers, and advises the Minister for Health
about the insurers’ financial operations and affairs.
The Private Health Insurance (Council Administration Levy) Act 2003 requires the
Australian Government to impose an administration levy on private health
insurers for the general operating costs of PHIAC. The role and functions of
PHIAC are set out in the Private Health Insurance Act 2007 (PHI Act). PHIAC is
prescribed as a Commonwealth authority under the Commonwealth Authorities and
Companies Act 1997.
1.2
Agency Resources
Table 1.2.1 shows the total resources from all origins. The table summarises how
resources will be applied by outcome and by Departmental classifications.
546
PHIAC - Agency Budget Statements – Agency Overview and Resources
Table 1.2.1: PHIAC Resource Statement – Budget Estimates for 2013-14 as at Budget
May 2013
Estimate of
prior year
amounts
available in
2013-14
$'000
5,674
Proposed
at Budget
Total
estimate
Estimated
available
appropriation
2013-14
$'000
-
2013-14
$'000
5,674
2012-13
$'000
5,824
-
-
-
-
-
-
-
-
-
-
-
-
Amounts from the Portfolio
Department
Amounts from other agencies
Total payments
-
-
-
-
Total funds from Government
-
-
-
-
-
470,534
470,534
420,195
-
6,590
477,124
6,590
477,124
6,226
426,421
-
477,124
(477,124)
-
477,124
(477,124)
-
426,421
(426,421)
-
-
292
100
392
292
100
392
303
104
407
5,674
477,516
483,190
432,652
Opening balance/reserves at bank
FUNDS FROM GOVERNMENT
Ordinary annual services¹
Outcome 1
Total ordinary annual services
Other services2
Non-operating
Total other services
Total annual appropriations
Payments from related entities
3
Private Health Insurance Act 2007 - s30710 Private Health Insurance (Risk
Equalisation Trust Fund) Levy Act 2003
Private Health Insurance Act 2007 - s30710 Private Health Insurance (Council
Administration Levy) Act 2003
Total special appropriations
FUNDS FROM INDUSTRY4
Levies
less amounts paid to the CRF
Total industry funds
FUNDS FROM OTHER SOURCES
Interest
Sale of goods and services
Other
Total other sources
Total net resourcing for PHIAC
Notes:
All figures are GST exclusive.
The PHIAC is not directly appropriated as it is a CAC Act body. Appropriations are made to the Department of Health
and Ageing which are then paid to PHIAC.
1
Appropriation Bill (No.1) 2013-14.
2
Appropriation Bill (No.2) 2013-14.
3
Funding provided by a Government body that is not specified within the annual appropriation bills as a payment
to the CAC Act body.
4
PHIAC receives levies from industry under the Private Health Insurance (Risk Equalisation Levy) Act 2003 and Private
Health Insurance (Council Administration Levy) Act 2003 and are remitted to the Department of Health and Ageing
(being the Portfolio Department) for return to the Official Public Account. Funds returned to industry for risk
equalisation are then appropriated under the Private Health Insurance Act 2007, again via the Department of Health
and Ageing, for redistribution to industry. Funds raised under the Council Administration Levy Act are
appropriated under the Private Health Insurance Act 2007 to meet general administrative costs of PHIAC.
547
PHIAC
Special appropriations
PHIAC - Agency Budget Statements – Budgeted Financial Statements
1.3
Budget Measures
Section 1.3 is not applicable to PHIAC in 2013-14.
Section 2: Outcomes and Planned Performance
2.1
Outcomes and Performance Information
Outcome 1 - Prudential safety and competitiveness of the private health insurance
industry in the interests of consumers, including through efficient
industry regulation
Outcome Strategy
The Australian Government, through PHIAC, aims to protect and maintain a
viable, prudentially sound, and competitive private health insurance industry.
PHIAC provides reliable and timely private health insurance information to the
industry, consumers and the Government. It also manages the Risk Equalisation
Trust Fund. The Trust Fund supports ‘community rating’ of private health
insurance premiums by sharing the cost of older contributors (55 years of age and
over) and the chronically ill (defined as those with high cost claims, reaching above
a certain threshold). PHIAC also maintains prudential and capital standards for the
private health insurance industry, and provides direction to the industry on
compliance with these standards.
PHIAC will continue to monitor the private health insurance industry and develop
rules, where necessary, to protect consumer interests by ensuring insurers are well
run and prudentially sound. This will include the availability of reliable and
transparent information on private health insurance. Challenges that may affect
the work of PHIAC are the fragility that remains in global markets and preserving
consumer confidence in private health insurance. PHIAC will address these
challenges by closely monitoring the fiscal and underlying prudential position
of insurers (principally through the process of mandatory quarterly reporting)
and will continue its program of targeted reviews of insurers to ensure that
the information provided by PHIAC is accurate and timely and that there is
compliance with statutory requirements. At the same time, PHIAC will continue
its work to ensure that actuarial advice provided to the funds, particularly as part
of the annual Financial Condition Report, is accurate and appropriately targeted to
meet the needs of individual insurers and their boards.
548
PHIAC - Agency Budget Statements – Agency Overview and Resources
PHIAC Budgeted Expenses and Resources
Table 2.1.1 provides an overview of the total expenses for PHIAC by Program.
Table 2.1.1: Budgeted Expenses and Resources for PHIAC
2012-13
2013-14
2014-15
Estimated
Budget Forward
actual
year 1
$'000
$'000
$'000
Program 1.1: Private health insurance prudential regulation and risk
equalisation trust management
Administered expenses
Revenue from Government
Amounts from the Portfolio
Department
420,195
70,534
525,225
Revenues from independent
sources
64
67
71
Departmental expenses
Revenue from Government
Amounts from the Portfolio
Department
2015-16
Forward
year 2
$'000
2016-17
Forward
year 3
$'000
584,268
647,663
81
95
6,590
6,972
7,236
7,453
343
(25)
325
(1)
327
(1)
329
(1)
331
(1)
426,803
477,515
532,594
591,913
655,541
Total expenses for Outcome 1
426,803
477,515
532,594
591,913
655,541
Average staffing level (number)
2012-13
34
2013-14
35
Operating deficit (surplus)
Total for Program 1.1
PHIAC
6,226
Revenues from independent
sources
549
PHIAC - Agency Budget Statements – Budgeted Financial Statements
Program 1.1: Private health insurance prudential regulation and
risk equalisation trust management
Program Objectives
Prudential safety, industry competitiveness, and consumer confidence
PHIAC will continue to maintain a strong and visible presence in the industry
to ensure that consumers of private health insurance can be confident that their
insurer will remain efficiently run and financially sound. In particular, PHIAC will
maintain its program of fund reviews in 2013-14 to ensure that it has a sound
evidence base for its oversight activities. Reviews promote improved prudential
practices and governance and assist in normalising best practice behaviours within
the industry. The program will feature reviews that are both deeper and more
strategic in their reach, examining aspects of insurers’ business which, in PHIAC’s
assessment, represent increased risk.
In 2012-13, the Government established the Private Health Insurance Premiums
and Competition Unit (PACU) within PHIAC. Since its creation the PACU,
overseen by the Council of PHIAC, has commenced a program designed to
provide Government and the broader industry with detailed, robust and quicker
advice on issues affecting cost drivers, insurance premiums and competition.
PACU’s approach to this work is highly consultative. A list of projects for the
PACU in 2013 has been published on the PHIAC website. 1
In 2013-14, it is expected that PHIAC will continue to provide detailed actuarial
and financial analysis of submissions to assist the Minister for Health to consider
applications for premium increases under section 66-10 of the Private Health
Insurance Act 2007.
Prudential standards for the private health insurance industry
Since 2007, PHIAC has been developing a suite of prudential standards to improve
business practices within the private health insurance industry. In 2013-14, PHIAC
will continue this work, finalising a standard dealing with risk management. Also,
PHIAC will complete its review of the capital adequacy and solvency standards to
ensure that they better meet the needs of the evolving industry.
Effectively manage the Risk Equalisation Trust Fund
The Risk Equalisation Trust Fund is a central component of the policy of
community rating which ensures that all Australians have access to the benefits of
private health insurance regardless of their age or health status. PHIAC supports
this policy by assessing and administering the payments made into and out of the
fund on a quarterly basis. Significant PHIAC resources will continue to be
dedicated to this function to ensure that the fund is administered accurately and
on time.
1
Available at: <www.phiac.gov.au>
550
PHIAC - Agency Budget Statements – Agency Overview and Resources
Program 1.1: Deliverables
Qualitative Deliverables for Program 1.1
Prudential safety, industry competitiveness and consumer confidence
Qualitative Deliverable
2013-14 Reference Point or Target
Private health insurance funds are assessed
against Capital Adequacy and Solvency
Standards to ensure their solvency
Insurers are assessed at least quarterly as
part of the examination of mandatory
returns. Reports on matters of concern are
prepared by management as required and
considered by the PHIAC Council in the
discharge of its prudential oversight
Prudential standards for the private health insurance industry
Qualitative Deliverable
2013-14 Reference Point or Target
Prudential standards reflecting best
regulatory practice are developed and
implemented
Relevant policies are prepared and
submitted for industry consultation and
feedback
Effectively manage the Risk Equalisation Trust Fund
Qualitative Deliverable
2013-14 Reference Point or Target
Complete all trust fund transactions
correctly and in accordance with legislation
Transactions certified as accurate by the
Australian National Audit Office
Quantitative Deliverable for Program 1.1
Prudential standards for the private health insurance industry
2012-13
Revised
Budget
2013-14
Budget
Target
2014-15
Forward
Year 1
2015-16
Forward
Year 2
2016-17
Forward
Year 3
Number of targeted reviews
of private health insurers
carried out2
5
9
9
9
9
PHIAC
Quantitative Deliverable
2
The increase in target and forward years reflects an increase in resources dedicated to this activity.
551
PHIAC - Agency Budget Statements – Budgeted Financial Statements
Program 1.1: Key Performance Indicators
Quantitative Key Performance Indicators for Program 1.1
Prudential safety, industry competitiveness and consumer confidence
Quantitative
Indicator
2012-13
Revised
Budget
2013-14
Budget
Target
2014-15
Forward
Year 1
2015-16
Forward
Year 2
2016-17
Forward
Year 3
Percentage of funds
continuing to be solvent and
compliant with the Capital
Adequacy Standard
100%
100%
100%
100%
100%
Prudential standards for the private health insurance industry
Quantitative
Indicator
2012-13
Revised
Budget
2013-14
Budget
Target
2014-15
Forward
Year 1
2015-16
Forward
Year 2
2016-17
Forward
Year 3
Percentage of private health
insurers compliant with
PHIAC obligations and zero
financial loss for policy
holders
100%
100%
100%
100%
100%
Effectively manage the Risk Equalisation Trust Fund
Quantitative
Indicator
2012-13
Revised
Budget
2013-14
Budget
Target
2014-15
Forward
Year 1
2015-16
Forward
Year 2
2016-17
Forward
Year 3
Percentage of quarterly
payments calculated
correctly and made on time3
100%
100%
100%
100%
100%
3
Payments are made by the industry in accordance with applicable legislation.
552
PHIAC - Agency Budget Statements – Agency Overview and Resources
Section 3: Explanatory Tables and Budgeted Financial
Statements
Section 3 presents explanatory tables and budgeted financial statements which
provide a comprehensive snapshot of agency finances for the 2013-14 Budget year.
It explains how budget plans are incorporated into the financial statements and
provides further details of the reconciliation between appropriations and program
expenses, movements in administered funds, special accounts and government
Indigenous expenditure.
3.1
Explanatory Tables
3.1.1 Movement of administered funds between years
Section 3.1.1 is not applicable to PHIAC.
3.1.2 Special Accounts
Section 3.1.2 is not applicable to PHIAC.
3.1.3 Australian Government Indigenous Expenditure
PHIAC
The 2013-14 Australian Government Indigenous Expenditure (AGIE) statement is
not applicable because PHIAC has no specific Indigenous expenses.
553
PHIAC - Agency Budget Statements – Budgeted Financial Statements
3.2
Budgeted Financial Statements
3.2.1 Differences in agency resourcing and financial statements
Section 3.2.1 is not applicable to PHIAC.
3.2.2 Analysis of budgeted financial statements
An analysis of PHIAC’s budgeted financial statements is provided below.
Departmental Resources
Comprehensive Income Statement
PHIAC is planning an operating surplus for 2012-13 and small operating surpluses
in 2013-14 and the forward years.
Levy revenues for 2013-14 and forward years reflect an increment consistent with
the increases in expenses brought about by normal expected growth in prices for
suppliers and employees and an amount for an enhancement in PHIAC’s
regulatory and information capacity. Expenditure is budgeted to be $6.9 million in
2013-14.
Balance Sheet
Cash balances are expected to be maintained and there is an expected growth in
employee provisions consistent with the growth in salaries and wages.
Other assets and liabilities are expected to remain relatively constant.
Cash Flow
Cash flows are consistent with the income and expenses discussed above.
Administered Resources
The administered activities relate to the Private Health Insurance Risk Equalisation
Trust Fund which is described earlier in this chapter.
554
PHIAC - Agency Budget Statements – Agency Overview and Resources
3.2.3 Budgeted financial statements tables
Table 3.2.1: Comprehensive Income Statement (showing net cost of services)
(for the period ended 30 June)
Budget
estimate
2013-14
$'000
Forward
estimate
2014-15
$'000
Forward
estimate
2015-16
$'000
Forward
estimate
2016-17
$'000
4,639
1,501
239
165
6,544
5,200
1,301
287
126
6,914
5,457
1,456
272
113
7,298
5,663
1,526
259
116
7,564
5,821
1,585
259
118
7,783
104
239
343
100
225
325
102
225
327
104
225
329
106
225
331
Gains
Other
Total gains
Total own-source income
343
325
327
329
331
Net cost of (contribution by)
services
6,201
6,589
6,971
7,235
7,452
6,226
6,590
6,972
7,236
7,453
Surplus (Deficit)
25
1
1
1
1
Surplus (Deficit) attributable to the
Australian Government
25
1
1
1
1
-
-
-
-
-
-
-
-
-
-
25
1
1
1
1
EXPENSES
Employee benefits
Supplier expenses
Depreciation and amortisation
Other
Total expenses
LESS:
OWN-SOURCE INCOME
Revenue
Sale of goods and rendering of
services
Interest
Total revenue
Revenue from Government
OTHER COMPREHENSIVE INCOME
Changes in asset revaluation
reserves
Total other comprehensive
income
Total comprehensive income
attributable to the Australian
Government
PHIAC
Estimated
actual
2012-13
$'000
555
PHIAC - Agency Budget Statements – Budgeted Financial Statements
Table 3.2.2: Budgeted Departmental Balance Sheet (as at 30 June)
ASSETS
Financial assets
Cash and cash equivalents
Receivables
Investments
Total financial assets
Non-financial assets
Property, plant and equipment
Intangibles
Other
Total non-financial assets
Total assets
Estimated
actual
2012-13
$'000
Budget
estimate
2013-14
$'000
Forward
estimate
2014-15
$'000
Forward
estimate
2015-16
$'000
Forward
estimate
2016-17
$'000
5,674
116
5
5,795
6,026
116
5
6,147
6,383
118
5
6,506
6,642
118
5
6,765
7,057
118
5
7,180
318
213
88
619
6,414
191
149
88
428
6,575
106
90
88
284
6,790
192
199
88
479
7,244
88
139
88
315
7,495
86
63
149
70
44
114
99
12
111
303
19
322
286
38
324
1,415
90
1,505
1,654
1,610
90
1,700
1,814
1,827
90
1,917
2,028
2,069
90
2,159
2,481
2,317
90
2,407
2,731
4,760
4,761
4,762
4,763
4,764
93
93
93
93
93
4,667
4,760
4,668
4,761
4,669
4,762
4,670
4,763
4,671
4,764
LIABILITIES
Payables
Suppliers
Other payables
Total payables
Provisions
Employees
Other provisions
Total provisions
Total liabilities
Net assets
EQUITY
Reserves
Retained surpluses or
accumulated deficits
Total equity
Table 3.2.3: Departmental Statement of Changes in Equity — summary of movement
(Budget year 2013-14)
Retained
earnings
$'000
Asset
revaluation
reserve
$'000
Opening balance as at 1 July 2013
Balance carried forward from
previous period
Surplus (deficit) for the period
Appropriation (equity injection)
4,667
1
-
93
-
-
-
4,760
1
-
Estimated closing balance as
at 30 June 2014
4,668
93
-
-
4,761
556
Other
reserves
Total
equity
$'000
Contributed
equity/
capital
$'000
$'000
PHIAC - Agency Budget Statements – Agency Overview and Resources
Table 3.2.4: Budgeted Departmental Statement of Cash Flows
(for the period ended 30 June)
OPERATING ACTIVITIES
Cash received
Goods and services
Funds from Government
Interest
Net GST received
Other cash received
Total cash received
Cash used
Employees
Suppliers
Net GST paid
Other cash used
Total cash used
Net cash from (or used by)
operating activities
Estimated
actual
2012-13
$'000
Budget
estimate
2013-14
$'000
Forward
estimate
2014-15
$'000
Forward
estimate
2015-16
$'000
Forward
estimate
2016-17
$'000
94
6,226
250
155
6,725
100
6,590
225
155
7,070
102
6,972
225
155
7,454
104
7,236
225
155
7,720
106
7,453
225
155
7,939
4,507
2,086
6,593
5,005
1,618
6,623
5,239
1,730
6,969
5,422
1,786
7,208
5,574
1,854
7,428
132
447
485
512
511
282
282
95
95
128
128
253
253
96
96
(282)
(95)
(128)
(253)
(96)
-
-
-
-
-
-
-
-
-
-
(150)
352
357
259
415
5,824
5,674
6,026
6,383
6,642
5,674
6,026
6,383
6,642
7,057
Purchase of property, plant and
equipment
Total cash used
Net cash from (or used by)
investing activities
FINANCING ACTIVITIES
Cash used
Repayment of borrowings
Total cash used
Net cash from (or used by)
financing activities
Net increase (or decrease) in cash
held
Cash and cash equivalents at the
beginning of the reporting period
Cash and cash equivalents at the
end of the reporting period
PHIAC
INVESTING ACTIVITIES
Cash used
557
PHIAC - Agency Budget Statements – Budgeted Financial Statements
Table 3.2.5: Capital Budget Statement
Estimated
actual
2012-13
$'000
Budget
estimate
2013-14
$'000
Forward
estimate
2014-15
$'000
Forward
estimate
2015-16
$'000
Forward
estimate
2016-17
$'000
282
95
128
253
96
282
95
128
253
96
282
95
128
253
96
282
95
128
253
96
Intangibles
Total
$'000
Other property,
plant &
equipment
$'000
$'000
$'000
-
789
276
1,065
-
471
63
534
-
318
213
531
By purchase – internal resources
-
63
32
95
Sub-total
-
63
32
95
-
191
1
96
-
287
1
-
853
308
1,160
-
662
159
821
-
191
149
340
PURCHASE OF NON-FINANCIAL
ASSETS
Funded internally from
departmental resources
Total acquisitions of nonfinancial assets
RECONCILIATION OF CASH USED
TO ACQUIRE ASSETS TO
ASSET MOVEMENT TABLE
Total purchases
Total cash used to acquire
assets
Table 3.2.6: Statement of Asset Movements (2013-14)
Buildings
As at 1 July 2013
Gross book value
Accumulated depreciation/amortisation
and impairment
Opening net book balance
CAPITAL ASSET ADDITIONS
Estimated expenditure on new or
replacement assets
Other movements
Depreciation/amortisation expense
Other
As at 30 June 2014
Gross book value
Accumulated depreciation/amortisation
and impairment
Closing net book balance
558
PHIAC - Agency Budget Statements – Agency Overview and Resources
Table 3.2.7: Schedule of Budgeted Income and Expenses Administered on Behalf of
Government (for the period ended 30 June)
INCOME ADMINISTERED ON
BEHALF OF GOVERNMENT
Revenue
Non-taxation
Interest
Risk equalisation levy1
Total non-taxation
Total revenues administered on
behalf of Government
Total income administered on
behalf of Government
EXPENSES ADMINISTERED ON
BEHALF OF GOVERNMENT
Finance costs
Risk equalisation distribution1
Total expenses administered on
behalf of Government
Budget
estimate
2013-14
$'000
Forward
estimate
2014-15
$'000
Forward
estimate
2015-16
$'000
Forward
estimate
2016-17
$'000
64
420,195
420,259
67
470,534
470,601
71
525,225
525,296
81
584,268
584,349
95
647,663
647,758
420,259
470,601
525,296
584,349
647,758
420,259
470,601
525,296
584,349
647,758
64
420,195
67
470,534
71
525,225
81
584,268
95
647,663
420,259
470,601
525,296
584,349
647,758
PHIAC receives levies from industry under the Private Health Insurance (Risk Equalisation Levy) Act 2003 and are
remitted to the Department of Health and Ageing (being the Portfolio Department) for return to the Official Public
Account. Funds returned to industry for risk equalisation are then appropriated under the Private Health Insurance
Act 2007, again via the Department of Health and Ageing, for redistribution to industry. The funds returned and
received from the Department of Health and Ageing are not duplicated in the table above but are shown under
Outcome 9 of the Department of Health and Ageing's chapter in this PB Statements.
PHIAC
1
Estimated
actual
2012-13
$'000
559
PHIAC - Agency Budget Statements – Budgeted Financial Statements
Table 3.2.8: Schedule of Budgeted Assets and Liabilities Administered on Behalf of
Government (as at 30 June)
Estimated
actual
2012-13
$'000
Budget
estimate
2013-14
$'000
Forward
estimate
2014-15
$'000
Forward
estimate
2015-16
$'000
Forward
estimate
2016-17
$'000
34
34
34
34
34
34
34
34
34
34
Total assets administered on
behalf of Government
34
34
34
34
34
LIABILITIES ADMINISTERED ON
BEHALF OF GOVERNMENT
Payables
Suppliers
Total payables
5
5
5
5
5
5
5
5
5
5
5
5
5
5
5
ASSETS ADMINISTERED ON
BEHALF OF GOVERNMENT
Financial assets
Cash and cash equivalents
Total financial assets
Total liabilities administered on
behalf of Government
Table 3.2.9: Schedule of Budgeted Administered Cash Flows
(for the period ended 30 June)
OPERATING ACTIVITIES
Cash received
Risk equalisation levy1
Interest
Total cash received
Cash used
Risk equalisation distribution1
Financing costs
Total cash used
Net cash from (or used
by)operating activities
Net increase (or decrease) in cash
held
Cash at beginning of reporting
period
Cash at end of reporting period
1
Estimated
actual
2012-13
$'000
Budget
estimate
2013-14
$'000
Forward
estimate
2014-15
$'000
Forward
estimate
2015-16
$'000
Forward
estimate
2016-17
$'000
420,195
64
420,259
470,534
67
470,601
525,225
71
525,296
584,268
81
584,349
647,663
95
647,758
420,195
64
420,259
470,534
67
470,601
525,225
71
525,296
584,268
81
584,349
647,663
95
647,758
-
-
-
-
-
-
-
-
-
-
34
34
34
34
34
34
34
34
34
34
PHIAC receives levies from industry under the Private Health Insurance (Risk Equalisation Levy) Act 2003 and are
remitted to the Department of Health and Ageing (being the Portfolio Department) for return to the Official Public
Account. Funds returned to industry for risk equalisation are then appropriated under the Private Health Insurance
Act 2007, again via the Department of Health and Ageing, for redistribution to industry. The funds returned and
received from the Department of Health and Ageing are not duplicated in the table above but are shown under
Outcome 9 of the Department of Health and Ageing’s chapter in this PB Statements.
560