What happened: NSW changed the statutory test for workers' comp treatment costs and banned a list of alternative therapies from employer-funded claims.
Who's involved: NSW State Insurance Regulatory Authority (SIRA), workers' compensation insurers operating in NSW.
What's at stake: The scope of treatment costs employers are liable to fund and the volume of allied health claims requiring insurer pre-approval.
Why it matters: Claims teams must apply a new test to every treatment request from October 1 and can no longer approve an explicit list of therapies.
Where it stands: Reforms commenced October 1, 2026.
Cuddle therapy, shamanic healing and gaming therapy are now explicitly banned from workers' compensation claims in New South Wales.
The exclusions are part of a package of reforms to the state's workers' compensation treatment rules that took effect on October 1, 2026. SIRA, the state's insurance regulator, published guidance for insurers the same day, setting out a rewritten statutory test, a detailed list of treatments employers can no longer be asked to fund, and a tightened threshold for allied health visits.
The changes sit in new provisions under Part 4A of the Workers Compensation Regulation 2016, alongside amendments to the Workers Compensation Act 1987.
The old statutory test asked whether a treatment was "reasonably necessary." The new version splits that into two separate requirements: "reasonable and necessary."
Under the updated rules, insurers assessing a treatment claim must check two things. First, the primary purpose of the treatment must be to treat the injury that is the subject of the worker's claim. Second, the treatment must be clinically justified for that injury and cost-effective - meaning its costs are reasonable compared to the benefits it delivers and the cost of alternatives.
That cost-effectiveness requirement is the practical shift. Every treatment request now has to clear both bars, not just one.
The guidance also sets out categories of treatment that employers are not liable to pay for. Insurers cannot approve them at all.
Alternative therapies are out entirely. The list names aromatherapy, crystal therapy, cuddle therapy, gaming therapy, homeopathic treatments, kinesiology, neuroreflective pain therapy using a cryotherapy machine, reflexology, sound therapy and wilderness therapy. Energy and healing practices are also excluded: energy clearing, reiki therapy, shamanic healing and what the guidance calls "spinal flow technique."
Life and wellness coaching - including wellness retreats - is excluded. Massage is banned unless a medical practitioner prescribes it, and even then the insurer must still decide it meets the new test. General health, fitness, social or recreational activities not prescribed by a doctor are also out.
Companion animals other than assistance animals lost their funding eligibility from July 1, 2026, under a related provision. Companion animals approved by the insurer before that date can continue.
The other change with immediate day-to-day impact is to allied health consultations. Workers could previously access up to eight allied health consultations without insurer pre-approval. That number has been halved to four.
The four-visit cap applies where the injury has not previously been treated by a provider from the same allied health practitioner group and treatment begins within three months of the injury. A further four consultations are available without pre-approval per Allied Health Treatment Request (AHTR) if the same practitioner is continuing treatment within three months and the insurer does not respond to the request within five working days. Where the insurer pre-approves treatment, the cap does not apply.
The reforms apply to all workers, including exempt workers, coal miners and volunteers, though coal miners and volunteers have partial exemptions - the domestic assistance, treatment-rate and rehabilitation-service-rate provisions do not apply to those two groups. Dust disease claims are excluded entirely.
The new test only applies to new treatment or service claims made on or after October 1, 2026. Claims lodged before that date - whether still being assessed or already approved but not yet completed - continue under the old "reasonably necessary" standard. That means claims teams will be running two standards side by side for some time.
The parallel running of two tests across existing and new claims adds an operational layer for insurers already managing complex workers' comp portfolios.
The reforms are set out in the Workers Compensation Act 1987, the Workers Compensation Regulation 2016 and the revised Workers Compensation Guidelines, all effective from October 1, 2026.
