The Medicare clearing house is an accident waiting to happen, according to superannuation e-commerce expert Peter Philip. “Technology is a bit like plumbing – it’s all pretty dull until it goes wrong, but you really want qualified plumbers doing the work or the result could be pretty ugly,” says Philip, chief executive of SuperChoice, one of Australia’s largest super clearing houses. “Just like plumbing it’s important to have experts designing the system – you have to have the right size of pipes and the right connections to make sure everything works smoothly,” he observes. “When things aren’t connected properly it’s easy for the system to back-up end up with a big, expensive and smelly mess.”

If the proposed Medicare clearing house is extended to include default-fund employees without an extension of the data provided by Medicare to the funds, then many new employees will either have no insurance cover or limited cover for a significant period, according to super exchange expert Peter Philip. As this issue went to press, a Medicare spokeswoman confirmed that “under the clearing house policy it’s expected that superannuation funds will still deal with their members upon application to register the individual for life insurance.

This will involve the superannuation fund collecting information relevant for this purpose.” In response to this, Peter Philip warns that funds and employers are likely to experience big cost hikes to provide the data not initially picked up by Medicare. But, Medicare says it has had “discussions with superannuation administrators and trustees, through Medicare’s working groups, [which] have identified and agreed the data elements that Medicare Australia will capture to enable superannuation funds to initiate the offer of life insurance to their members,” according to the spokeswoman. The Medicare clearing house legislation is now stalled in the Senate, perhaps until the new financial year, and industry observers are sceptical about the Rudd Government’s ability to deliver on this election promise.

The legislation is crucial to ensure employer buy-in to the system, according to Mark Jackson, general manager compliance and general programs, Medicare. A report by Rice Warner Actuaries cautions about the uninsurance and underinsurance issue, and suggests that an alternative, but not a cheap one, would be for the Medicare data set to be extended to cover the data requirements of the default funds as occurs in the current payments system. If the full data is not provided initially, super funds typically contact the employer and/or the employee to obtain the missing details, the report says, but “these requests are often ignored and members continue to have limited or no [insurance] cover”.

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