Bupa HI Pty Ltd v Chief Commissioner of State Revenue [2024] NSWSC 1105

Background

At all relevant times, the Plaintiff carried on a business of providing health benefits to residents in NSW. The Plaintiff was required by s. 10 of the Health Insurance Levies Act 1982 (NSW) (“HIL Act”) to pay a levy calculated in the manner and at the rate specified in ss. 10 and 10A.In December 2020, RNSW commenced an investigation into the Plaintiff’s compliance with the HIL Act.  In April 2022, the Assessments were issued to the Plaintiff noting that while holders of certain Commonwealth concession cards are not to be counted, there is an onus on the health fund to substantiate that their member is a holder of a valid card and that until the Plaintiff could present evidence of valid concession card data, all contributors residing in NSW would be included in the levy calculation.

The Plaintiff objected to the Assessments, the objections were disallowed and in January 2023 this proceeding was commenced.

The Statutory Framework

Section 10 provides that an organisation that, on the first day of any month, carries on the business of providing health benefits to contributors in NSW is liable to pay to the Chief Commissioner a monthly levy in accordance with s. 10A of the HIL Act.

Section10A(1)-(3) provides:

10A Calculation of monthly levy

1. The monthly levy for a month is the amount calculated in accordance with the following formula:
   
   L = (S + 2F) x C x D x 17
   where:
   
   L is the monthly levy in dollars.
   S is the number of single contributors at the beginning of the month.
   F is the number of contributing families at the beginning of the month.
   C is the prescribed rate in force during the month.
   D is the number of days in the month.

2. In subsection 1:
   contributing family means a family or group whose members are contributors with respect to a health benefits fund by virtue of a single policy of insurance.
   single contributor means a contributor who is not a member of a contributing family.
3. In determining the values of S and F in the formula given in subsection (1), single contributors, or members of a contributing family all of whom:
   1. are permanently resident outside New South Wales, or
   2. are members of one or more of the following classes of contributors:
      1. persons who contribute to an organisation for the purpose of securing entitlement only to benefits other than basic health benefits,
      2. persons who hold one or more of the following cards issued to them by the Commonwealth:
         • Concession Card
         • Health Benefits Card
         • Pensioner Health Benefits and Transport Concession Card
         • Pharmaceutical Benefits Concession Card and Social Security Card
      3. persons who are in receipt of a service pension under Part III of the Veterans’ Entitlements Act 1986 of the Commonwealth,
   are not to be counted….”

Section 11 HIL Act provides that an organisation that carries on the business of providing health benefits to contributors in NSW shall furnish, in addition to each monthly levy under s. 10, a return in a form approved by the Chief Commissioner.

Section 11A(1) provides:

11A Assessment of monthly levy by organisations in certain circumstances

1. If an organisation is liable to pay a monthly levy under section 10 but is unable to determine accurately the number of contributors for the purpose of calculating the amount of the levy, the organisation is to make an estimate of the number of its contributors for the purpose of paying the levy.
2. The organisation must, once the precise number of contributors becomes known to it, inform the Chief Commissioner of the number of contributors.
3. The organisation:
   1. must then assess the difference between the amount paid and the amount of the monthly levy, and
   2. must pay any additional amount required or it may apply for a refund if the amount paid exceeds the monthly levy.

The Plaintiff’s Submissions:

The Plaintiff sought to establish its liability under s.10 HIL Act, by reliance on expert actuarial evidence of Mr Stolk.

Its lay evidence sought to demonstrate and address part of the Defendant’s case, that it would have been “easy” for the Plaintiff to obtain and maintain contemporaneous evidence from policyholders for each month during the Relevant Period and that it had simply failed to do so by submitting that:

• information about whether a prospective customer holds a concession card is not, and was not during the Relevant Period, information “mandatory” for the commencement or continuation of membership or the purchase of health insurance from the Plaintiff.
• the Plaintiff did not and could not verify the accuracy or currency of concession card information as this would require campaigns requesting existing members to verify their concession card details, and only a small percentage would typically respond.

The Court accepted this evidence.

The Plaintiff also contended that the Court should accept Mr Stolk’s evidence, as an expert actuary. Mr Stolk conceded that it was not possible for him to know with certainty the number of Exempt Contributors; in the absence of direct survey information, but he was able estimate the proportion of NSW resident contributors who were exempt on a “central estimate” basis. The Plaintiff submitted that the “central estimate” constituted persuasive evidence of the number of Exempt Contributors during the Relevant Period, being 18.7% of total contributors. Or, alternatively, the Plaintiff contended that the Court should accept Mr Stolk’s estimate, a figure that was “highly unlikely” to exceed the actual number of Exempt Contributors, being 11% of all contributors, that is, he was 90% sure that at least 11% of contributors were exempt.

The Chief Commissioner’s Submissions:

The Chief Commissioner’s case was that the case turned on a question of statutory construction: “whether properly construed, the [HIL Act] allows the use from time to time of an actuarily estimated number of [Exempt Contributors]”.

It was submitted:

• on its proper construction, the “exemption” in s.10A(3) is one that is only available to those health insurers who are able to prove the “precise” number of Exempt Contributors.
• on that basis, the HIL Act does not permit the Plaintiff to rely on actuarial evidence to establish its liability; and
• the actuarial evidence that the Plaintiff sought to rely on does not demonstrate the number of Exempt Contributors precisely, as at any relevant point during the Relevant Period.

The Chief Commissioner contended that to succeed, the Plaintiff should be able to demonstrate the “precise” number of Exempt Contributors, and that the HIL Act does not permit the Plaintiff to rely on actuarial evidence to establish its liability.

The Chief Commissioner also contended that the effect of ss. 10, 10A and 11A of the HIL Act were to impose an “obligation” on a health insurer to know the number of contributors relevant to the calculation of the Levy.

The Chief Commissioner also relied on s. 48 of the Taxation Administration Act 1996 support of its submission that a health insurer is under a positive obligation to ascertain the precise number of Exempt Contributors in order to have the benefit of s. 10A(3) HIL Act.

Decision

The principal issue in dispute was whether the Plaintiff discharged its onus of proving that there were Exempt Contributors in the number for which it contends. Hmelnitsky J addressed two issues for consideration:

1. Whether the Plaintiff is entitled to rely on actuarial evidence

Hmelnitsky J did not accept the Chief Commissioner’s description of how the HIL Act operates, that a health insurer who does not know the “precise” number of Exempt Contributors is liable to pay the levy but without the benefit of any exemption.

Hmelnitsky J noted that since the Plaintiff sought that the Assessments be revoked on the basis that it had more Exempt Contributors than were considered by the Chief Commissioner, the Plaintiff should, therefore, demonstrate this by admissible evidence.

Citing Federal Commissioner of Taxation v Dalco, Hmelnitsky J noted that “there is a difference between the placement of the onus of proving a fact and the manner in which that onus may be discharged”. Hmelnitsky J also noted that ss. 10, 10A and 11A HIL Act, taken together with s. 48 of the TA Act, would not alter this conclusion.

Hmelnitsky J held that, contrary to the Chief Commissioner’s position, an insurer is not bound to rely on evidence that was available to it, at the time its liability arose. Hmelnitsky J also noted that actuarial evidence providing only indirect proof of a fact in issue is no reason for it to be disregarded, but what is necessary is that the evidence is probative of the existence of a fact in issue.

Hmelnitsky J concluded that while the evidence on which the Plaintiff relies is opinion evidence, it is nevertheless probative of the existence of a particular fact in issue, that is, the number of Exempt Contributors during the Relevant Period for which the Plaintiff contends. As such, Hmelnitsky J further concluded that the Plaintiff was entitled to rely on any admissible evidence it prefers.

2. Whether the Plaintiff discharged its onus

Hmelnitsky J was satisfied that Mr Stolk’s “highly unlikely” figure of 11% was unlikely to exceed the actual number of Exempt Contributors, being 90% sure that at least 11% of contributors were exempt.

Hmelnitsky J concluded that while the Plaintiff did not prove what the “precise” number of Exempt Contributors was, this was of no consequence as the Plaintiff was able to demonstrate the number of Exempt Contributors for the purpose of calculating its liability under s. 10 HIL Act by way of expert actuarial evidence.

Further, as to the Chief Commissioner’s submission that health insurers have to prove the “precise” number of Exempt Contributors, the Court rejected that proposition and construction at [87]:

“….An insurer’s liability to pay the levy is required to be worked out in accordance with the whole of the formula in s.10A, two integers of which are (a) the total number of contributors and the (b) total number of Exempt Contributors. The formula produces a final number by reference to those and other integers, and this final number is the amount of the insurer’s liability. Liability in that amount is imposed by s10.The Act does not operate by imposing the levy on the basis of the first integer and then allowing an exemption for the second.”

Orders

1. The five notices of assessment issued to the plaintiff on 11 April 2022 for levy payable under s 10 of the Health Insurance Levies Act 1982 (NSW) for each month during the years ending 30 June 2017 to 2021 be revoked.
2. The matter be remitted to the defendant to make assessments in accordance with these reasons.
3. The defendant to pay the plaintiff's costs.

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