Sixth report on the costs of the Australian Government’s Run-Off Cover Scheme for medical indemnity insurers
A.1.1 ROC support payments are paid to Medicare Australia in the form of an annual lump sum imposed as a tax on each MII from 1 July 2004. The lump sum is intended to cover the cost of claims and the MIIs’ administration and implementation costs.
A.1.2 The amount of support payments is calculated as a percentage of premium income received from contributing practitioners. The calculation rules are set out in the MI ROCSPA and regulations. The tax imposed on each MII is the applicable percentage of the insurer’s premium income (section 6) for the applicable contribution year ending on 30 June or an alternative date specified in the regulations (section 5).
A.1.3 All MIIs except for AMIL were required to remit their first ROC support payments on 30 June 2005. Since AMIL’s policy year was a calendar year, it was not required to remit ROC support payments until 31 December 2005.
A.1.4 Under section 7, a MII’s premium income for the purpose is the sum of all of the premiums paid to the insurer for medical indemnity cover provided for medical practitioners, reduced according to the formula:
Premium income equals
Net premium — Net premium × Applicable percentage ÷ (1 + Applicable percentage)
A.1.5 Net premium is calculated according to section 7 as follows:
- sum of all premiums paid to the insurer during the operation of the Scheme for medical indemnity cover provided for medical practitioners (including subsidy payments made to the insurer on behalf of medical practitioners to assist with the cost of purchasing medical indemnity cover under the Medical Indemnity Premium Support Scheme, section 43(1) Medical Indemnity Act) (subsection (1));
- minus the amount of GST payable (subsection (2)(a)) and the amount of stamp duty payable (subsection (2)(b)) in relation to the premiums; and
- plus/minus other payments specified in the regulations.
A.1.6 For premium payments relating to 2009-10, the applicable percentage is specified in the regulations as 5 per cent for all insurers, and thus the ROC support payment will be calculated as net premium x 5 per cent ÷ 1.05.
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