Workers compensation needs real reform, not just fiddling


Tony Abbott’s “biggest bonfire of regulation in our country’s history” will allow some organisations to opt out of state compensation schemes and instead operate under the Commonwealth’s scheme, Comcare.
According to The Conversation, This change is likely to be counterproductive in an already messy system and has the potential to further undermine the viability and fairness of workers’ compensation arrangements in Australia.

As injured worker Soula rightly commented:

The first step in tackling the complex issue of Workers Compensation and building a successful system that doesn’t fail in the many ways it currently is, is to involve the injured worker.

No point the Government talking to itself and looking at stats that reveal nothing of what’s happening on the ground ie. injured workers are not getting properly assessed, treated or supported in their return to work. I know this, I’m one of them and I’ve had $0 for over a year now during my return to work efforts.
The Government needs to hear the voice of the injured worker. Like any successful organisation, you start with the consumer.

Workers compensation needs real reform, not just fiddling

Workers’ comp needs real reform, not ‘red tape’ fiddling

The Conversation – 24 March 2014

Prime Minister Tony Abbott’s “biggest bonfire of regulation in our country’s history” will allow some organisations to opt out of state compensation schemes and instead operate under the Commonwealth’s scheme, Comcare.

This change is likely to be counterproductive in an already messy system and has the potential to further undermine the viability and fairness of workers’ compensation arrangements in Australia.

Workers’ compensation does need regulatory reform. It needs real, ‘big picture’ reform, not piecemeal cuts or politicking.

The government is claiming the planned changes will save employers A$32.8 million per year in compliance costs, but at the same time workers’ compensation costs appear to be shifting from the state to taxpayers, workers and their families.

Cost shifting arises from two key problems with current workers’ compensation arrangements. First, the negative consequences of regulatory duplication and inconsistency. Second, the impact of financial pressures on the ability of schemes to meet their primary objectives.

Regulatory duplication

Presently, separate workers’ compensation schemes exist across Australia’s nine jurisdictions. This poses an important regulatory burden on firms operating in multiple states. Each scheme has different coverage, injured worker entitlements, scheme governance and business models, employer reporting requirements, claims excess arrangements, and employer premium rates. Their data capture and reporting processes also differ, making it impossible to compare raw injury data and claims performance across jurisdictions in a meaningful way. The repeal will not change this.

Even firms operating in only one jurisdiction are subject to unnecessary regulatory burdens. Governments compete against each other; taking turns in tweaking and reforming their systems to continually reduce premium rates for employers and modify flexible arrangements such as self-insurance.

The high price of low cost

Competition among schemes on employer costs assumes that lower premium rates improve business prospects and jobs (albeit with no evidence of employers relocating to minimise workers compensation premiums).

Pressure on governments to have lower than average premium rates has seen those with higher rates politicised as inefficient and ineffective. Little attention is directed to the different protections those jurisdictions may offer injured workers. The result is the inevitable “ratcheting down” of premium rates around Australia.

Premium reductions are appropriate responses to reduced administrative costs, improved governance and advances in health and safety performance. However, our report looking at changes to NSW’s compensation legislation suggests reductions can also be made by eroding the protections available under the scheme.
NSW workers’ compensation reforms

The NSW government’s latest workers’ compensation scheme reforms were prompted by a 2011 actuarial deficit estimated at A$4.1 billion. The deficit was attributed equally to the impacts of the 2008 global financial crisis on scheme investments, the discount rate used for actuarial estimation, and the expected increase in future liabilities for payments to long-term, seriously injured workers.

The government determined the deficit had to be eliminated quickly. Premium increases were unacceptable. Instead, the reforms sought to truncate the “tail end” of scheme liabilities by ejecting the majority of long-term injured workers from the system.

The changes eliminated or severely restricted access to weekly and medical compensation for many work-related injuries and illnesses. Furthermore, insurers are now unilaterally able to decide an injured worker’s capacity to earn a hypothetical income from a job that need not exist, and reduce their weekly income accordingly. Accepting legal fees for advising clients about an insurer’s decision was also made illegal.

Together the NSW reforms not only managed to eliminate the $4 billion deficit in less than 12 months, but also enabled further reductions in NSW employer premiums of 7.5% in June 2013 and another 5% in January 2014. These came on top of an accumulated 33% reduction in premiums since 2005.

Who ultimately pays?

Our report for Unions NSW found reducing employer premiums and eroding systems of support for injured workers externalises the human and financial costs associated with poor work health and safety performance. That is, it transfers costs from employers to injured workers.

Without personal resources or family support, these workers can then be left to depend on a Centrelink disability support pension. Similarly Medicare provides a crucial safety net when compensation schemes (and private health insurers) refuse to cover ongoing medical treatment for work-related injuries. Together, these federally funded systems are subsidising premium reductions in workers’ compensation schemes.

Health minister Peter Dutton recently cited a 124% increase in Medicare costs over the last decade, calling the trend “unsustainable”. Social services minister Kevin Andrews made a similar statement with respect to “this relentless growth in [welfare] recipient numbers’. Yet the impact of cost shifting from workers” compensation systems remains unacknowledged.

In order to draw a direct line to increased welfare costs, more information is required. Broad quantitative data on scheme collections and expenditure, return to work, welfare and Medicare expenditure, along with specific case studies of individuals will help researchers establish the extent of cost shifting in the future.

Drift to failure

If government ministers are serious about reducing unnecessary regulatory duplication, they will focus on delivering nationally consistent arrangements. The recent efforts to harmonise WHS legislation was an important step in the right direction for ensuring the health and safety of workers and provides a clear example of what needs to be done.

It is time for a serious conversation in Australia about the value we place on workers and their health and safety. Competition is important but it needs to be driven by efficiency and effectiveness rather than the erosion of support for people who most need it.

The jurisdictional “race to the bottom” for lowest premium rates, arguably just shifts the costs of poor work health and safety onto federal social security systems (taxpayers), workers and their families, and reduces public policy incentives for investment in safe and healthy workplaces.


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8 Responses to “Workers compensation needs real reform, not just fiddling”

  1. Put your hand up if you think the Abbott government cares about injured workers? For the majority who didn’t, keep this at the forefront of your concerns. Austerity measures have failed miserably around the world and yet we have a government determined to implement them. The plan is to destroy unions, favour some small but mostly big business, use the mantra of ‘job creators’ for the wealthy, get rid of regulations, reduce wages and of course transfer the responsibility of workplace injuries to the worker via income protection insurance policies. Have a close look at how conditions for American workers have declined including their WC system and also look at the UK where there is now virtually no WC system. Sorry but this is our future unless we vote them out on every level, local, state and federal. Be aware of how your vote will affect your life and how it will affect others.

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  2. The only way is to start our own political party. Is it to late to be registered for the state election??????????

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  3. Lets face it the australian government is corrupt as fuck!!!!!! full stop.

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  4. Lets face it politicians don’t give a shit about people on W/C as long as they are covered 24/7 for any kind of accident with no 70 or 80% reduction on wages after 13 wks!!!!!

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    • Exactly, they don’t see us, they know we are there but refuse to look at us in the eyes….unfortunately they know that our actions (legal ones) are very limited. They also know we cannot join forces…but we could and should form a political party…I know people think it is costly and take time but that will be better than just writing on a forum…if you can’t beat them , join them…then when you are in …attack!…

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  5. Totally agree Richard, it is about time we, the injured workers stood up for ourselves and others alike by forming a political party. To stand without intimidation and be able to speak about the deplorable workcover system without ruinous repercussions should’ve been done years ago. The system needs to be challenged and substantial changes need to be implemented ASAP. Let the games begin….

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    • Maluco 27
      I was only suggesting the same thing to family and friends who have seen the change in me after my workplace injury that after several spinal ops and fusions I have been in the WC NSW system now for 2 weeks short of 5 years, gone through all the insurers bag of tricks and lies and still here. A political party really does need to be formed, how does one go about it? everyone talks about it, I am ready to stand for it.
      We inured workers need strength and need to support the cause of rights lost but we must unite and gather momentum.
      Happy for private pm’s to get the ball rolling on the political party

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  6. Changes to the system are necessary, particularly claims management practices.
    See my post about the lack of research on the effects of claims management practices on health outcomes:

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