Introduction

On 21 March 2013, the National Disability Insurance Scheme Act 2013 (Act) was enacted following significant amendments to the National Disability Insurance Scheme Bill both in the House of Representatives and in the Senate.

The Act establishes a national disability insurance scheme in Australia, which will be known as DisabilityCare Australia (Scheme). The Scheme is the Commonwealth Government’s response to the Disability Care and Support inquiry report by the Productivity Commission which concluded that the current disability support system in Australia is “underfunded, unfair, fragmented and inefficient, and gives people with a disability little choice and no certainty of access to appropriate supports”.

The Scheme, which is being introduced in stages and sites in Tasmania, Victoria, South Australia and New South Wales, commenced operation on 1 July 2013 for people falling within certain age groups. Full role out of the Scheme is scheduled to commence progressively from July 2013. The Scheme is being partly funded by a 0.5 per cent increase to the Medicare levy, which recently received bipartisan support..

This article provides a brief overview of the Scheme and an examination of the matters likely to affect insurers, namely:

  1. the interaction of the Scheme and other statutory/common law entitlements to compensation; and
  2. the predicted impact of the Scheme on liability insurance.

Overview

The purpose of the Act and the Scheme is to support the independence and social and economic participation of people with a disabilities and enable them to exercise choice and control over the care and support they receive.

A person can access the Scheme if they meet the access criteria in sections 22 to 25 of the Act. Under section 24, a person meets the disability requirements if:

  1. the person has a disability that is attributable to one or more intellectual, cognitive, neurological, sensory or physical impairments or to one or more impairments attributable to a psychiatric condition;
  2. the impairment or impairments are, or are likely to be, permanent;
  3. the impairment or impairments result in substantially reduced functional capacity to undertake, or psychosocial functioning in undertaking, one or more of communication, social interaction, learning, mobility, self-care and self-management;
  4. the impairment or impairments affect the person’s capacity for social and economic participation; and
  5. the person is likely to require support of the Scheme for the person’s lifetime.

The Scheme is premised on an “insurance” approach, meaning that it provides for the funding of life long needs of the life long needs of a person with a disability, the costs of which are supported by actuarial assessment and spread across the community, rather than a patchwork of various programs offering defined services based on budgetary allocations which can usually only address immediate demands.

At a general level, the main components of the Scheme are as follows:

  1. the Act provides for the establishment of the National Disability Insurance Scheme Launch Transition Agency (Agency), which is an independent body corporate that is responsible for delivering the Scheme;
  2. if a person is eligible to access the Scheme (known as a ‘participant’), the Agency, with the participant, must develop a personal plan which sets out the goals and aspirations of the participant and the general supports that the participant requires, including those which are “reasonable and necessary” and will be funded by the Scheme;
  3. the participant’s plan forms the basis of the package of support the participant will receive from the Agency and once the plan is approved by the Agency, it comes into effect and the participant will receive a budget for the supports identified in the plan;
  4. any amounts payable under the Scheme are then paid to the participant or a person nominated by him or her or specified by the Agency for the purchase of services from State and Territory service providers and businesses. In this way, the person funded by the NDIS controls their support package.

The Act also provides for items such as the review of individual participants’ plans, the types of services that can be funded, the registration of service providers and the review of decisions made by the Agency. Draft Rules (Rules) providing further detail to the Scheme have also been published by the government.

Compensation entitlements

Chapter 5 of the Act deals with the interaction between rights and entitlements under the Scheme and compensation payments. Importantly, the Act does not replace existing statutory compensation schemes or interfere with a participant’s right to damages. Instead it contains a number of sections which are aimed at preventing “double recovery”:

  1. In relation to participants who have rights to compensation but are not pursuing those rights, the Agency may require them to take reasonable, specified action to obtain the compensation (section 104). If the participant(s) fails to take the action and the entitlement to compensation arises:
    1. under a statutory compensation scheme, the participant’s plan becomes suspended until the participant takes the required action; or
    2. at common law, the Agency may take the action in the name of the participant or take over any existing claim that is not being pursued. Any amount recovered by the Agency as a result of a claim made or taken over by the Agency must be paid to the participant, after the deduction of amounts paid for the benefit of the participant under the Scheme and the costs of the claim.
  2. In relation to participants who receive benefits under the Scheme and subsequently secure compensation (whether under judgment or by settlement), those participants must repay the Agency an amount, calculated according to the amount of benefits previously paid under the Scheme, subject to adjustment for contributory negligence and provisions which ensure that the participant is not required to repay more than the compensation they have obtained;
  3. In relation to participants who have received compensation in respect of their disability, Section 35 of the Act provides that the Rules may prescribe a method for assessing the reasonable and necessary supports for which a participant may receive funding under the Scheme, including methods or criteria relating to taking into account:
    1. lump sum compensation payments that both specifically include and do not specifically include an amount for the cost of supports; and
    2. periodic compensation payments that include an amount for the cost of supports.

At the time of writing, draft rules regarding how the Agency will take into account previous compensation payments have not been released.

The Act also provides for direct re-payment to the Agency by compensation payers and insurers (including statutory insurers), similar to the Medicare and Centrelink recovery legislation (sections 109 to 115). Those provisions make it an offence for a compensation payer or insurer to make a payment to a participant after having received a recovery notice from the Agency if they have not already paid any amount owing to the Agency.

Foreshadowed impact on insurance claims

One of the uncertainties surrounding the introduction of the Scheme following the Productivity Commission’s report related to how the Scheme would operate in respect of liability for personal injuries and the relevance of various insurances, such as public liability insurance and medical indemnity insurance.

The above “recovery” provisions make it clear that participants in the Scheme will retain any statutory and common law entitlements to compensation they may have, such that the Scheme will operate as a safety net for people who find themselves disabled through no fault of anyone else and without a right to compensation through a “no-fault” statutory compensation scheme.

Indeed, people with a right to claim compensation either under a statute or at common law may be compelled to exercise it or have it exercised for them. Therefore, liability insurance will remain an important asset for business, property owners and health professionals.

With regard to expected claims levels, it has been reported that the lack of existing support for those with disabilities has lead some people with severe disabilities to bring legally difficult claims in Court in an attempt to obtain the support required.

Until the NDIS Rules regarding eligibility criteria and the range of services which may be funded by the Scheme are finalised, it is probably too early to predict whether the Scheme will lessen the motivation of people with legally difficult claims to pursue those claims.

Overall, however, we do not expect any significant reduction in claims numbers, particularly having regard to the fact the Scheme will not include funding for other heads of damages usually included in a claim for compensation, such as pain and suffering damages, impairment benefits or economic loss.