PHI 68/18 Pilot Projects (PDF 52 KB)
The purpose of this circular is to clarify whether an insurer can roll out a new benefit without breaching the principle of community rating under the Private Health Insurance Act 2007 (the PHI Act) even though the services available for the benefit are not nationally or widely available. This advice is being given because there has been uncertainly expressed by insurers to the public about the mainstreaming of some pilot projects.
Under the PHI Act, insurers must not take or fail to take action, or in making decisions have regard or fail to have regard to any matter, that would result in the insurer improperly discriminating between people who are or wish to be insured under a complying health insurance policy. This is known as the principle of community rating.
Section 55-15 of the PHI Act provides an exception to the principle of community rating requirements in respect of pilot projects. Where an insurer conducts a pilot project in accordance with the Private Health Insurance (Complying Product) Rules 2015, this does not contravene the principle of community rating. This is despite the insurer being able to limit participation in a pilot project on the basis of where a person lives.
Once the pilot project ends, the exception to the principle of community rating requirements no longer applies. As such, after the pilot project has ended, an insurer cannot offer coverage of the treatment in a way that amounts to improper discrimination.
However, following the pilot project, if coverage of a service is only available in certain locations, this would likely not amount to improper discrimination as long as policies which include the treatment provide the same coverage for it without any distinction based on where the policy holder lives.
- a policy holder living in any location could at least theoretically receive a benefit for the treatment if they travelled to a location where it was available; and
- if the same treatment becomes available in more locations, the location where the treatment is received will not affect the policy holders’ entitlements in respect of the treatment (i.e. they will be entitled to benefits on the same terms, regardless of where the treatment is provided).
In such circumstances, and assuming all other requirements of the principle of community rating under the PHI Act are met, the insurer has not taken or failed to take action or made a decision that would result in the insurer improperly discriminating between policy holders or prospective policy holders in contravention of the legislation, and the policy will comply with the community rating requirements.