The HCCS was legislated in 2002 to strengthen the medical indemnity insurance available to doctors in Australia following the collapse of UMP, a large medical defence organisation. The scheme allows Medical Indemnity insurers to share 50% of the costs of certain claims with the Australian government.

The amount of a claim must exceed a threshold before it can be claimed under the HCCS. This amount has been set at $300,000 since 2004 but will be increasing to $500,000 from July 2018. A claim under the HCSS must relate to an incident occurring within Australia and arise from the practice of a medical profession. The HCSS does not apply to claims relating to public patients treated in a public hospital.