The Bond Guarantee Scheme is under review with the Aged Care Financing Authority (ACFA) announcing it has been tasked with identifying and assessing alternative models.
Despite reiterating that the Government has not made a decision to change the existing scheme, ACFA says it has identified two alternate options to the existing scheme that “warrant more detailed consideration” and now wants to hear from providers.
ACFA has outlined the alternate options in a discussion paper, which are to retain the existing Scheme but with a retrospective levy following default events; or creating a guarantee fund pool with a prospective annual provider levy.
These options follow consultation with experts on finance and insurance, and organisations representing aged care consumers and providers, and discussion with officials of several Commonwealth, state and territory governments about other schemes that protect assets against loss.
Its modelling suggests that the annual cost of either option would be less than one per cent of the value of accommodation payments, and potentially considerably less. Retaining the current Scheme is also a viable option.
The cost to providers will also depend on whether everyone pays the same amount of levy per unit of accommodation payment, or whether there is risk rating of providers.
ACFA has also identified three policy issues that are important to any guarantee scheme alternatives:
- What role should there be for reinsurance (spreading the risk of claims against the scheme)?
- Should providers be able to opt out of the scheme on condition of providing their own guarantee arrangements?
- Should risk rating be used to determine provider contributions toward a scheme?
Providers wishing to make a submission need to do so via email to the ACFA Secretariat by 3 March 2017.
ACFA will report back to the Government in April.