PHIAC has issued a circular to clarify the position of PHIAC regarding director independence as it relates to private health insurers in corporate group structures.

Following initial feedback and to avoid doubt, PHIAC proposes that Schedule 1, section 1(7) be amended to remove any doubt that independent directors of the parent company and/or the board of another subsidiary of the parent company will not lose their independent status by reason of those directorships.

This requirement does not, however, remove from the board of the private health insurer the need to comply with the independence criteria as detailed in the definition of an independent director in Rule 4 of the draft standard.

We have updated our 52 page Toolkit to help private health funds implement the governance standards.

The Toolkit explains:

•what corporate governance means
•what your board needs to do
•what policies and documents you need to prepare
•constitution changes
•corporate governance reporting
•board succession
Call David Jacobson on 07 3878 5098 or email djacobson at langes dot com dot au if you’d like to discuss issues that concern you.

PHIAC has commenced a second round of industry consultation on the development of a governance standard for the private health insurance industry by releasing a revised draft legislative instrument and a discussion paper that responds to issues raised in the first round of consultation.(see here)

The Standard, to be located at Schedule 1 of the Private Health Insurance (Insurer Obligations) Rules, sets out the minimum requirements that all registered private health insurers will need to comply with once the Standard is endorsed by PHIAC.

It is expected that the prudential standard will be made in September 2009, with a four month transition period.

Written submissions on the content and regulatory impact of the draft standard must be received by COB Wednesday, 5 August 2009.

The Private Health Insurance Administration Council (PHIAC) is an independent Statutory Authority that regulates the private health insurance industry.

PHIAC has announced that it will restructure to bring a stronger focus to its statutory role of protecting the interests of consumers of private health insurance, including to make sure it can deal quickly and effectively in the (unlikely) event that there is a major prudential crisis within the PHI industry.

PHIAC will be rolling out a suite of prudential standards.

Capital standards have already been reviewed.

A draft standard on Corporate Governance is currently circulating within the industry for comment by 6 March 2009, with an intended commencement date in June 2009.

The draft standard includes rules on:

• board composition;
• independence of directors;
• chairperson;
• residency of directors;
• director associates of shareholders;
• board charter;
• delegation;
• board policies;
• board performance;
• board renewal;
• board audit committee;
• conflicts of interest;
• internal audit.

It is clear that health funds will be coming under greater regulation and that PHIAC expects boards to be fully involved and responsible for their organisations.

Langes specialise in advising not-for-profit companies and have had experience with these types of standards for listed companies (supervised by ASX) and financial institutions (ADI’s) and insurers (supervised by APRA).

We have have produced a 52 page Toolkit to help private health funds implement the governance standards.

The Toolkit explains:

• what corporate governance means
• what your board needs to do
• what policies and documents you need to prepare
• constitution changes
• corporate governance reporting
• board succession

Call David Jacobson on 07 3878 5098 if you’d like to discuss issues that concern you.