What is Community Rating and Risk Equalisation?

What is Community Rating?

The principal of community rating is to ensure that everybody has access to health insurance. Community rating prevents private health funds from discriminating between people on the basis of their:

  • health
  • gender
  • race
  • sexual orientation or religious beliefs
  • age (except to the extent allowed under lifetime health cover)
  • place of residence (except to the extent that they live in different risk equalisation jurisdictions
  • any other characteristic of a person that is likely to result in increased need for hospital treatment or general treatment
  • frequency with which a person requires treatment
  • amount of extent of the benefits to which a person becomes entitles during a period

What is Risk Equalisation?

The purpose of risk equalisation is to support the community rating principal. Insurers are not allowed to risk-rate premiums, so risk equalisation partially compensates insurers that have a riskier demographic profile by re-distributing money from those insurers paying less than average benefits to those paying higher than average benefits. The Risk Equalisation Trust is administered by APRA.

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