Proposed measures to tackle the “financial deterioration” of NSW’s workers’ compensation scheme have drawn criticism from lawyers, unions, mental health advocates and other stakeholders.

A key concern is the state government’s plan to raise the whole person impairment (WPI) threshold used for assessing income support and medical treatment.

Law Society of NSW president Jennifer Ball says the proposed increase to 31% impairment will “conceivably exclude nearly all workers with psychological injury from making a claim. To reach 31% WPI, a person would need to demonstrate they’re unable to live alone, care for dependants or to function in society.” 

At present, a worker with a psychological injury must demonstrate a WPI of 15% to receive a lump sum payment under the scheme.

NSW Treasurer Daniel Mookhey says reforms are needed to the nominal insurer workers’ compensation scheme for the private sector, and to the Treasury Managed Fund serving government workers and volunteers.

He told a parliamentary inquiry reviewing the state’s draft laws that proposed changes to liability and psychological injury entitlements are a “first step”.

He says the nominal insurer workers’ compensation scheme’s finances have worsened since his last update in March, when it held 85c for every dollar it expects to pay in future claims.

Finalisation of December valuations shows the scheme now holds 82c for every $1 expected.

The inquiry heard about 50% of mental injury claims remain open after a year, while 91% of physical injury claims are resolved within 13 weeks.

Mr Mookhey says the average cost of a psychological injury claim has soared from $146,000 in 2019 to $288,542 last year.

The Australian Workers’ Union’s NSW branch opposes the increase to the permanent impairment threshold. 

“This is an impossibly high threshold,” it said in its submission on the draft. “In addition to excluding almost all psychologically injured workers, many front-line workers and first responders will be denied compensation after 130 weeks.

“This is in addition to the introduction of more severe limitation of weekly payments – slashing the maximum time frame from five years to 2.5 years.”

State insurer icare says modernising the scheme will help prevent more premium increases, securing a program that is affordable, focuses on prevention and provides the best recovery support.