Planned changes to medical indemnity legislation could eventually lead to a “gradual reduction” in support from the Federal Government, according to law firm Colin Biggers & Paisley.

The Medical and Midwife Indemnity Legislation Amendment Bill 2019 was introduced and read a second time in Parliament last month by Health Minister Greg Hunt.

One of the key changes involves removing the existing contract requirements for the premium subsidy support scheme. The scheme is presently administered via contracts with four insurance providers. The new arrangement essentially extends the scheme to more insurers who must provide universal cover to the medical practitioners they take on.

Insurers would be able to raise the risk loading based on the risk posed by a practitioner by up to 200% of the standard premium price. It is currently set at 100%.

The bill also introduces a separate allied health practitioner high cost claims scheme. It will mirror the existing high cost claims and exceptional claims schemes.

“It is apparent that the proposed amendments in the bill give effect to a gradual reduction in the level of Commonwealth support for the medical indemnity industry given that structural reforms have strengthened the sector,” Partner Michael Bracken says in a post on the law firm’s website.

He says the reforms have “strengthened the sector and reduced the uncertainty surrounding medical indemnity viability and evidence that medical indemnity insurers have in recent years consistently exceeded minimum regulatory capital requirements”.

“It is anticipated that monitoring of the support schemes will continue and that the Federal Government is likely to further consider scaling back support to reduce the cost.”

The Government stepped in to subsidise the medical indemnity market in May 2002 after United Medical Protection, then the country’s largest medical indemnity provider, was placed in provisional liquidation.

The collapse came at a time when the industry was facing huge increases in claims, costs and premiums.

Since then the Government has been funding seven professional indemnity schemes to ensure access to affordable cover for private sector medical practitioners.

“The Government remains committed to guaranteeing that these schemes continue to operate,” Mr Hunt said.

“In the 2018/19 financial year alone, the Government provided $83 million in support of practitioners and to the continual operation of these schemes. This bill continues and extends that support but places it on a sustainable and competitive basis, going forward.”

The legislative changes are set to take effect in July next year.