There's a similar rule for seniors at ISU championships -- if the host country entry doesn't qualify to the long program (or to the short program after qualifying rounds) they're allowed to move on to the next phase regardless of placement.
Examples that come to mind are Jenna Arrowsmith at 1995 Worlds in Birmingham, UK and Patrick Meier at 1997 Worlds in Lausanne, Switzerland (and he wasn't even last in the LP, although his SP placement kept him last overall).
For championships I know this rule and I think it is quite nice for the guest country, as for GP Finals I think it is really weird. Just look at the results of Devora Radeva at this final, she is so far behind the others...