CTU Critique: National’s ACC Policy
Thursday July 17 2008
National Party: “National will:
• Investigate opening the Work Account to competition.
• Conduct a full stock-take of the various components of the ACC scheme, evaluate progress to full funding, and identify areas of cross-subsidy or cost-shifting and underfunding of newly-legislated entitlements.
• Investigate the introduction of an independent disputes tribunal to end ACC's dual role of judge and jury on disputed claims.”
Response: There already has been a full stock take – a 500+ page review by PricewaterhouseCoopers Sydney (PWC). PWC said that they had formed “a moderately strong view that a government monopoly is the best observable mechanism for implementing the ACC employers account”.
The Report also found that that in comparison with schemes overseas the dispute rate in New Zealand is very low. In particular for workplace claims, ACC’s dispute rate of 0.2% compares with an Australian average of around 9%. The report found ACC’s universal coverage (which removes most of the coverage boundaries) and the lack of employer experience ratings of premiums may also contribute to the lower level of disputes.
National Party: “OECD data to the end of 2003 showed New Zealand's non-fatal injury rate rising when everybody else's except Luxembourg were falling. ACC data shows the number of work-related injury claims increased each year from 2002 to 2005, only declining in 2006.”
Response: Statistics NZ report that between 2002 and 2005, the number of work-related claims dropped from 143 to 134 claims per 1,000 FTEs, a 6% decrease in the rate of claims over four years.
In addition, elected health and safety reps were introduced in 2003 as part of the 2002 amendments to the Health and Safety in Employment Act. International research has shown the value of having worker representation and this is generally accepted as best practice by those interested in keeping workers safe. The Council of Trade Unions runs a health and safety rep training programme, funded by ACC. The programme’s trainers (who have trained 20,000 reps) believe that increases in claims result from workers who are more aware of ACC and what they are entitled to in terms of accident compensation.
National Party: “Incentives for employers to improve safety practices are poor in a scheme in which similar premiums are charged regardless of an employer's workplace accident record.”
Response: Privatisation to insurance companies opens up new incentives to deny injured employees cover. Claims are denied and fought and employers and insurers can collude together to deny accidents occurred in the workplace. Spending or rehabilitation is reduced and the costs are shifted from the employer to the worker. It is a fundamental conflict of interest to have employers managing employee injuries which are caused at the workplace and are linked to employer insurance premiums.
National Party: “Where accidents do occur, incentives for quick, high-quality rehabilitation are weak, and entitlements under the scheme for injured people are not of high quality.”
Response: NZ workers are back at work on the job earning their full wage quicker than Australian workers. Under ACC 88% of claimants return to work within six months, and this outperforms both the Australian average (85%) and all three comparable schemes (the state monopoly schemes of NSW 86%, Victoria 85% and South Australia 77%), with similar results for durable (longer-term) return to work. – Source: PWC report
ACC’s income-replacement benefits of 80% of pre-injury earnings is in line with or above many other schemes. Some workers’ compensation schemes provide benefits which are higher initially, but in many cases benefits are reduced over time by ‘step downs’ in these schemes. Total ACC financial benefits are broadly in line with other workers compensation schemes in Australia. - Source: PWC report
Workers compensation schemes which are closely comparable to ACC (periodic income benefits, comprehensive case management with coordination of a full range of benefits and services, and a focus on qualitative claimant outcomes of participation and independence) are all delivered through government monopolies, whereas privately underwritten schemes generally have a stronger focus on lump-sum financial settlements. A significant research base indicates that claimant outcomes are demonstrably better under periodic payments than in a lump sum environment. - Source: PWC report
National Party: “The experience of competition in the late 1990s was healthy for ACC. Levy rates are now substantially lower as a result of that experience, and the ongoing prospect of competition.”
Response: The experience was not as rosy. When National last promoted so-called choice in accident compensation one of the providers, a subsidiary of HIH Insurance had up to 40 percent of workplace cover, yet HIH went into liquidation with losses of around $1 billion. Fortunately, the Government had by then changed ACC back to public provision. There was very little collation of any other data when the scheme was privatised in 1990 so National’s statement is speculation, not backed up by the experience of unions, that competition worked.
__National Party: “Labour has retained the ability for larger employers to opt out of the state monopoly and either self-insure or use a private insurer.”
Response: The arrangements with large employers are closely regulated and ACC has the ability to remove accreditation. The CTU has serious concerns with the current Accredited Employer Scheme operation and believes this experience would be exacerbated with privatisation.
National Party: “With this in mind, National supports the introduction of competition and choice to the ACC Work Account (covering employees and the self employed at work). We believe this will result in safer workplaces and a more efficient and effective accident compensation system that benefits all New Zealanders.”
Response: Comparisons elsewhere indicate that privately underwritten workers compensation schemes as a group have higher levels of administrative cost on average than government monopoly schemes, likely driven the need to cover profit margins and marketing expenses. - Source: PWC report
Our scheme has cheaper overheads than those in Australia. New Zealand has lower claims management expenses (8% of total expenditure) than all Australian schemes (9% to 32%), and lower total administration expenses (24% of total expenditure) than the schemes providing comparable benefits (NSW 28%, Victoria 31%). In addition to these administrative expenses, most Australian schemes also pay significant legal costs for common law claims. - Source: PWC report
PricewaterhouseCoopers compared the current ACC scheme with other delivery models and they said based on available evidence, alternative scenarios (a mix of the systems in Australia, Canada and the US) would:
•have poorer rehabilitation and financial outcomes for the bulk of injury victims whose access is limited to the social welfare and health systems
•have poorer return-to-work outcomes and more variable financial outcomes for the small proportion of people in the fault-based insurance system.
National Party: “Employers provide the basic minimum cover for staff, as they are obliged to do. A more flexible scheme would encourage employers to buy more than the basic cover.”
Response: Employers could currently offer additional insurance to ACC – it is not evident that many do this.