A NSW upper house committee has rejected the government’s proposed overhaul of workplace injury laws, leaving the reforms in doubt.

The Labor government said the changes were needed to address rising mental injury claim costs, and without them private sector employers would face soaring premiums in the nominal insurer scheme.

But the Public Accountability and Works Committee, after an inquiry into the planned reforms, says the government’s “case for urgency has not been made out”.

In the final report, committee chair and Greens MP Abigail Boyd says the proposals’ “implications are dramatic, harsh and dangerous”.

The inquiry also covered a second bill tabled by the government in August after its first draft legislation failed to pass the upper house.

One of the most controversial proposals involved raising the whole person impairment threshold for accessing mental injury benefits and damages.

“The provisions … lifting the degree of permanent impairment thresholds temporarily to 25% and then to 31% should be withdrawn by the government, and if put forward in the house, opposed,” the report says.

The current thresholds for weekly payments and compensation for treatment, services and assistance are 21%. They are 15% for non-economic loss lump sum payments and for modified common law damages for employer negligence.

“In the light of all the evidence given to the inquiry, the case for lifting the threshold for the degree of permanent impairment for workers with a primary psychological injury … has not been made out,” the committee says.

The report says it is not volume of claims causing financial difficulties in the workers’ compensation scheme.

“A number of submissions pointed to the impacts that current practices of claims managers are having on injured workers … Further improvement is needed to address ongoing issues with claims management processes and return to work rates.”

The report recommends the government conduct a “comprehensive” review of claims management practices.

“If the government fails to establish such a review, then this committee should consider establishing a public inquiry into claims management practices.”

The committee also suggests the government develop financial modelling for state insurer icare bringing claims services in-house.  

A government response to the report is due by February 3, the report says.