The Australian Government will reduce doctors' contributions to the cost of rescuing the United group, while levelling the playing field in the medical indemnity insurance market.
The Government is removing the competitive advantage United has gained over other medical indemnity insurers, now that United is in a strong financial position. Government assistance will instead go directly to doctors.
Doctors making United Medical Protection (UMP) support payments will now pay less and for a shorter time.
"The Government will cut doctors' contributions to the cost of the Government's rescue of the medical indemnity insurance group, UMP. The Government will reduce annual UMP support payments by $1,000 for all doctors making these payments, and cut the length of time the scheme will run by two years. This will make medical indemnity costs more affordable for doctors," Mr Abbott said.
United has returned to financial strength sooner than expected, due to the Government's IBNR indemnity scheme, under which the Government covers the costs of United's Incurred But Not Reported liabilities. The IBNR indemnity scheme allowed doctors to continue to practice with security of cover. Stabilised by the IBNR indemnity scheme, United is now in a strong financial position and in November 2004 announced substantial premium reductions.
"Other medical indemnity insurers had concerns that United had been given an unreasonable competitive advantage. The Government commissioned an independent review to ensure that all medical indemnity providers operate on an equal footing," Mr Brough said. "The Government is determined that no insurer should receive a competitive advantage from the assistance it provides to make the industry secure and affordable, including any beneficiaries of the IBNR indemnity scheme."
On 12 January 2005, Mr Abbott and Mr Brough announced that they had asked the former head of the Institute of Actuaries of Australia, Mr Graham Rogers, to review competitive neutrality in the medical indemnity insurance market.
Mr Rogers notes in his report that the Australian Government's medical indemnity package has been extremely valuable in stabilising the industry. The report found that the high cost claims scheme benefits an average member by $1,146, the premium support scheme provided an average assistance of $409 per member and the Government schemes provided reinsurance savings to insurers which benefited members by an average of $607.
"Mr Rogers found that United has a competitive advantage from the IBNR indemnity scheme,"
Mr Brough said. "The Government has accepted his report and will act to remove the competitive advantage, with medical indemnity insurance groups that have received a benefit from the IBNR indemnity scheme making a series of payments to the Government. The Government will use funds from this measure to reduce the payments doctors make under the UMP support scheme."
The report is available on departmental websites at: