Document ID: chunk:federal_register_of_legislation:F2024L00144:reg:65:p7
Version: federal_register_of_legislation:F2024L00144
Segment Type: reg
Provision Reference: reg 65 (pt 7/38)
Character Range: 59435–62123

inclusion in the HCCP.

       (f)           Threshold in relation to the high cost claimant's pool means the designated threshold. The threshold is $50,000.

    The amount to be notionally allocated to the HCCP is to be calculated in accordance with the formula , where:

       (a)          m is 82 per cent
       (b)          R is the total gross benefit for the current and the preceding three quarters less the amount notionally allocated to the ABP in the current and preceding three quarters
       (c)          T is the designated threshold
       (d)          H is the sum of the amounts notionally allocated to the HCCP in the preceding three quarters.

    Subject to a maximum of 82 per cent of gross benefits being included in Risk Equalisation when summing the ABP and HCCP components.

(Part 2, Private Health Insurance (Risk Equalisation Policy) Rules 2015)

It is not intended that the HCCP calculation will deduct amounts or result in negative amounts, for example as a result of an adjustment, through literal application of the above formula in cases where no benefits have been previously allocated to the HCCP for the claimant.

The amount to be notionally allocated to the HCCP is calculated as:

where:

C is gross benefits in the quarter for the claimant
m is 82 per cent
p is percent of gross benefits to be allocated to ABP in the quarter, where p is dependent on the age of the claimant
q is current quarter
T is HCCP Threshold, equal to $50,000
 is the residual after age based pooling (ABP)
C (m-p) is the maximum allowable proportion of gross benefits to be allocated to the HCCP after ABP.

The above formula sums up the residual benefits after ABP for the current and preceding three quarters, takes out the threshold ($50,000), multiplies the result by 82 per cent and from this amount subtracts the sum of benefits that were already included in the HCCP in the preceding three quarters. If this calculation is less than zero (could be as a result of reversal) the formula will return zero and if it is not zero will return the calculated benefit. Further, this calculated benefit undergoes another test to ensure that no more than 82 per cent of the gross benefits are included in Risk Equalisation. The amount to be notionally allocated to the HCCP is taken to be the minimum of the previously calculated benefit or the sum of maximum allowable proportion of gross benefits to be allocated in the HCCP after ABP for the current and the preceding three quarters.

Circular 08/04 of 25 January 2008 provides detailed information to assist health insurers complete the high cost claimants section of the HRF 601.1, with a spreadsheet example attached to