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22 May 2013
NSW WorkCover, its insurer agents, lawyers, doctors and injured workers all want the state’s workers’ compensation scheme to be more effective, but they are divided on how to achieve this.
A NSW joint parliamentary committee is inquiring into the scheme, which WorkCover itself says is unsustainable.
But there is considerable argument about the 16 recommendations under consideration, with many critics telling public hearings last week that the scheme’s administration is the problem, not the benefits it pays.
NSW WorkCover is the country’s largest workers’ compensation scheme, covering almost 270,000 employers and more than 3 million workers. It receives 80,000 claims a year and has 100,000 open at any time. About 42,000 of these claimants receive weekly benefits because of their ongoing incapacity to work.
The scheme also has a $4.1 billion deficit. Geniere Aplin, GM of its Workers’ Compensation Insurance Operations, says analyses by WorkCover, two actuaries and the NSW Auditor-General have all found the scheme is unsustainable.
“Much of the recent debate has been focused on the deficit, but the urgent and equally related problem is whether the scheme is structured appropriately to support injured workers and to return them to work efficiently and fairly,” Ms Aplin told the committee.
She says injured workers are staying off work longer and more are receiving lump sum payments.
Insurers were represented at the inquiry’s public hearings by Allianz and the Insurance Council of Australia (ICA). They advocate an earlier step-down from 100% payments and more effective testing of work capacity.
But ICA, and others to appear, have noted that the 16 recommendations in an issues paper on the scheme have not been costed.
Insurers have come under fire for staffing their claims departments with young, inexperienced people who argue with doctors and treat injured workers like frauds. But the inquiry has also heard that agents feel WorkCover guidelines constrain them.
ICA’s National Workers’ Compensation Committee Chairman David Krawitz, who is Allianz Chief GM Workers’ Compensation, says agents are bound by their contracts with WorkCover and its guidelines, but often feel the legislation and its application prevent them from achieving optimal outcomes.
He says that although most injured workers want to get back to work, that cannot be said for all of them.
An injured person can get any number of assessments and can choose and change assessors “pretty much at will. We believe that creates a climate in which it is very hard for us to manage the process.”
Insurers can arrange an independent medical assessment on work capacity, but it is not binding.
Mr Krawitz says earlier step-down in payments would encourage people back to work.
“The incentives today are not strong in that regard,” he said.
Australian Lawyers Alliance NSW Director Bruce McManamey says an “ever-growing bureaucracy” has interfered with the scheme and that there have been four reductions in benefits since 1995.
He says the way the scheme is managed through its agents impedes the return to work process, and micromanagement prevents claims-handlers from using their experience and expertise to try to get better outcomes.
UnionsNSW does not believe the scheme is in crisis at all, with Secretary Mark Lennon describing the move to reduce benefits as “a race to the bottom”.
He says outsourcing claims to agents has not worked in NSW, Victoria and SA and that cutting payments will not encourage people to return to work.
The inquiry has heard that many workers are significantly financially worse off on WorkCover payments, and employers do not want to employ injured workers or anyone who has had a workers’ compensation claim.
UnionsNSW recommends the average premium should be increased by about 8% a year over 10 years to restore the fund.
Kevin Purse, a senior research fellow at Central Queensland University whose doctorate is in workers’ compensation policy, says the $4 billion deficit is an actuarial calculation that is inherently uncertain. He says a better guide to the scheme’s performance is its funding ratio, which at 78% is very conservative.
“WorkCover has more than sufficient funds available to meet its current financial obligations,” he said.
Dr Purse also disagrees that NSW benefits should be cut to improve the state’s competitive position, saying NSW has more serious work injuries than Victoria.
“The main causes of the scheme’s performance have been a failure of claims agents in delivering their injury management responsibilities, despite being paid $318 million in fees to do so as of last year; WorkCover’s apparent inability to manage its agents; and the lack of compliance with their legal obligations by sections of the employer community in providing suitable employment for injured workers ready to return to work.”
Dr Purse cited a decline in enforcing workplace health and safety laws as another factor.
Allianz and QBE are the largest WorkCover agents.
Speaking on behalf of Allianz, Mr Krawitz says 70% of the company’s 2011 claimants had fewer than five days off work, and 90% had less than 30 days off.
But he says claims that are not resolved quickly are becoming an increasing cost.
Mr Krawitz says Allianz endorses additional benefits for severely injured workers, but the scheme does not give agents tools to resolve the claims of a substantial group that could return to work earlier.
“We believe it is the ineffectiveness in differentiating between the seriously and less-seriously injured that is the most significant challenge in the scheme’s structure,” he said.
The committee’s report will be tabled on June 13.
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