From 1 October 2026, NSW insurers decide treatment liability against a three part test written into clause 8P of the Workers Compensation Regulation 2016. The words are short. The work they create for a claims file is not, and medication decisions are where the new test bites hardest.
Regulatory & Compliance
What changed on 1 October 2026?
The statutory test for employer liability for the cost of treatment and services changed from "reasonably necessary" to "reasonable and necessary". It applies to claims for medical or related treatment, hospital treatment, ambulance services and workplace rehabilitation services.
Alongside the change in wording, a new Part 4A of the Workers Compensation Regulation 2016 commenced. Part 4A prescribes the rules insurers must apply when deciding these claims, and also lists treatments and services an employer is not liable to pay for at all. The operative decision rules sit in clause 8P.
The SIRA Workers Compensation Guidelines were restructured at the same time. The detailed criteria that previously lived in the Guidelines for determining reasonably necessary treatment were removed and replaced with a cross reference to clause 8P. The practical effect is that the test now sits in the Regulation rather than in guidance, which raises its legal weight and narrows the room for interpretation.
What does clause 8P actually require?
Clause 8P sets out three elements an insurer must apply. Treatment or a service must:
| Element | What the insurer has to be satisfied of |
|---|---|
| Primary purpose | The treatment is for the primary purpose of treating the injury that is the subject of the claim. |
| Clinical justification | The treatment is clinically justified for that injury. |
| Value for money | The treatment is cost effective and represents value for money, meaning the cost is reasonable relative to the benefits achieved and relative to the cost of alternative treatments or services. |
The decision is claim specific. For a new claim made on or after 1 October 2026, the insurer must determine whether treatment is reasonable and necessary based on the individual facts and circumstances of that claim. There is no category of treatment that passes automatically because it passed on another file.
How does the primary purpose limb work on a medication file?
Primary purpose is the limb that most often gets glossed over, and it is the one that medication lists expose. A regimen that has been running for two years rarely has a single purpose. An opioid commenced for an acute lumbar injury, a proton pump inhibitor added to manage the gastric effects of an anti inflammatory, an antidepressant started for sleep and an aperient added because of constipation together form a chain in which only the first item has an obvious connection to the injury.
Under clause 8P each item needs to be traced back to the claim injury on its own terms. That is a clinical exercise in reconstruction: what was started, when, by whom, for what stated indication, and does that indication still exist. Dispensing history, prescriber correspondence and the clinical notes usually answer it. A medication list on its own does not.
What makes treatment clinically justified for the injury?
Clinical justification asks whether the treatment is appropriate for this injury in this person at this point in the claim. For medicines, that means dose, duration, indication and the evidence base all have to hold up, and it means the risk side of the ledger counts. A sedating combination that raises fall and overdose risk, or a long term opioid load with no documented functional gain, is hard to describe as clinically justified for a musculoskeletal injury even where the original prescription was entirely appropriate.
Justification also has a time dimension. Treatment that was justified in week two of a claim may not be justified in month twenty. Clause 8P is applied to the claim as it stands when the decision is made, which means the same medicine can be reasonable and necessary at one point and not at another.
How should insurers approach the value for money limb?
The value for money limb has two comparators written into it: the benefits achieved, and the cost of alternative treatments or services. That is an important structural point. An insurer is not simply asking whether a price is high. It is asking whether the outcome obtained justifies the cost, and whether a different intervention would obtain a comparable or better outcome for less.
For medicines this is where documentation does the heavy lifting. If a claim has been funding a compounded or non PBS item for an extended period, the limb requires a view on what benefit has actually been achieved and what registered alternative exists. That is a clinical and pharmaceutical comparison, and it needs to be on the file in writing before a decision is communicated, because it is the part of the reasoning most likely to be tested on review.
Which claims still run under the old test?
Transitional arrangements matter for the next several months. Claims for treatment made before 1 October 2026 continue to be assessed under the reasonably necessary test where liability was not finally determined before that date, or where the treatment was approved but had not been provided or had not been completed. In practice, claims teams are running two tests in parallel on different parts of the portfolio, and the date the treatment claim was made is the controlling fact.
Who is covered by the new test?
The changes apply to all workers, including exempt workers, coal miners and volunteers. They do not apply to dust disease claims. For exempt workers such as police, paramedics and firefighters, the move to reasonable and necessary is the primary change flowing from the reform package.
One operational change commenced at the same time and affects referral behaviour directly: the number of allied health consultations available without insurer pre approval dropped from eight to four. Fewer sessions before a decision point means the first clinical opinion on a file carries more weight than it used to.
What should claims teams change in practice?
Three things tend to separate a clause 8P decision that holds from one that does not.
First, reason by item rather than by claim. A single approval or decline covering an entire regimen will not demonstrate that each of the three limbs was applied to each treatment.
Second, record the comparator. If value for money is relied on, the alternative that was considered needs to be named, with its cost and its expected benefit.
Third, get the clinical reasoning from someone qualified to give it. Clause 8P asks questions about indication, dose, duration, risk and therapeutic alternatives. Those are pharmacy and medical questions, and an administrative file note is not the same thing as a clinical opinion.
Key Takeaways
- From 1 October 2026 the NSW test for treatment liability is reasonable and necessary, with the decision rules set out in clause 8P of new Part 4A of the Workers Compensation Regulation 2016.
- Clause 8P has three limbs: primary purpose of treating the claim injury, clinical justification for that injury, and cost effectiveness or value for money judged against benefits achieved and alternative treatments.
- Decisions are claim specific and must be made on the individual facts and circumstances of the claim.
- Treatment claims made before 1 October 2026 continue under the reasonably necessary test where liability was not finally determined, or where treatment was approved but not provided or not completed.
- The test covers all workers including exempt workers, coal miners and volunteers, but not dust disease claims.
- Allied health consultations available without insurer pre approval fell from eight to four on the same date.
Frequently Asked Questions
Is reasonable and necessary a higher bar than reasonably necessary?
The wording change was made alongside prescribed decision rules in clause 8P, and the detailed criteria that previously sat in the SIRA Workers Compensation Guidelines were replaced with a cross reference to that clause. The practical effect is a more structured and more clearly evidenced decision, with all three limbs needing to be satisfied.
Does clause 8P apply to medicines as well as therapy?
Yes. The test applies to claims for medical or related treatment, which includes pharmaceutical items, as well as hospital treatment, ambulance services and workplace rehabilitation services.
Which date decides whether the old or new test applies?
The date the claim for treatment was made. Claims made before 1 October 2026 remain under the reasonably necessary test where liability was not finally determined before that date, or where treatment was approved but not yet provided or completed.
Do dust disease claims follow the new test?
No. SIRA has confirmed the changes do not apply to dust disease claims.
What evidence supports a clause 8P decision on a complex regimen?
An item by item clinical review that traces each medicine to a stated indication, assesses dose, duration and risk, and names the therapeutic alternatives considered with their relative cost and expected benefit.
Sources: SIRA, Reasonable and necessary reforms commencing 1 October 2026, guidance for health providers and guidance for insurers; Workers Compensation Regulation 2016 (NSW) Part 4A, clause 8P; SIRA Workers Compensation Guidelines; SIRA workers compensation reform FAQs. The SIRA health provider page blocks automated retrieval, so the clause 8P elements above were taken from the indexed text of that page and cross checked against SIRA's insurer guidance and FAQs. Accessed 12/10/2026.
