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Widest ever option range proposed to ACC scheme

Widest ever range of options proposed to fund ACC scheme

ACC has proposed its widest ever range of options to fund the scheme for the 2003-04 year, including one option that involves no ACC levy component at all in the annual motor vehicle re-licensing fee for petrol powered vehicles.

The option is one of several spelled out in ACC’s consultation documents released today at the start of a month-long public consultation process on proposed levies, scheduled each year.

Summary of proposed 2003/04 average levy rates

The basic levy proposals can be summarised as follows (figures are per $100 of payroll/liable earnings, exclusive of GST)

Account Current 2002/03 average Proposed 2003/04 average Proposed changes
Employers’ account (workers’ compensation) 0.85 0.82 -3%
Self-employed account (workers’ compensation for self-employed) 1.75 1.72 -2%
Earners’ account (non-work claims) 1.07 1.07 0%
Residual Claims 0.35 0.30 -14%

Account Current 2002/03 Proposed 2003/04 Proposed change
Motor Vehicle account (composite average per motor vehicle) $169.67 $207.26 22%

For its consultation on the 2003-04 levy rates, ACC has unveiled an expansive range of funding and classification options and a new data presentation format.

The main ACC levy accounts put up for consultation (employers, self-employed, wage and salary earners, as well as motorists) this year, for the first time, feature “composite” levy rates for each levy payer group.

These amalgamate two separate levy portions: one portion to fully-funded new and ongoing claims and the other portion to cover “residual” ongoing claims dating from the time when claims under the respective accounts were not funded over their entire lifetime.

The Corporation is proposing that the ACC levy deducted from the pay packets of wage and salary earners be held at the present rate of $1.20 per $100 of earnings (GST inclusive, or $1.07 per $100 of earnings where GST is exclusive).

The consultation documents also discuss funding the co-payments that many medical providers currently charge to cover the shortfall between ACC’s contribution and their final fee.

Removal of the co-payment would bring New Zealand in line with the International Labour Organisation requirements that the cost of medical treatment be defrayed.

Based on current claim numbers, the estimated full funded cost to ACC for paying the full cost of medical treatment and removing claimant co-payments for new claims is $200m across all ACC accounts. In addition medical costs for existing claims would cost an additional $130m.

The Corporation is proposing to reduce the average 2003/04 ACC levies for employers by 7% from an average composite levy of $1.20 to $1.12 per $100 (GST exclusive) of payroll.

ACC is also proposing to reduce the average composite 2003/04 ACC levies for self employed by 3% from an average $3.17 to $3.09 per $100 (GST exclusive) of liable earnings.

ACC’s standard approach is to calculate how much money it needs to fully fund new and ongoing injury claims, along with a small reserve, for the main accounts (employers, self-employed, wage and salary earners, as well as motorists) during the coming levy year.

The Corporation also consults on the setting of a “residual” levy for each of these main accounts to cover the on-going cost of claims originating from when ACC operated on a pay-as-you-go basis, instead of funding claims over their entire lifetime.

The existing liability for these residual claims needs to be fully funded by 30 June 2014.

As well as these funding options, ACC also consults on changes made to the classifications of risk groups, which may result in either an upward or downward shift in the levy rate. Most of the Consultation options involve combinations of funding and classification changes.

The new and ongoing costs of serious injuries continue to have a major impact on the ACC scheme. For example, there are eight claimants currently in the Motor Vehicle account portfolio whose estimated life cost is over $10 million for each claim. Over the course of one year, more than 90,000 motorists’ levies need to be collected to fund the lifetime costs of five seriously injured children.

ACC is proposing various options to fund the 2003/04 average Motor Vehicle account composite average levy.

The Consultation documents on this account feature the most extensive combinations of funding and classification changes, but all result in a proposed composite average levy increase of 22% from the current $169.67 per vehicle (including petrol excise duty) to $207.26.

This increase in levies has been caused primarily by an increase in and improved estimation of long-term rehabilitation costs of those seriously injured.

An example of a Motor Vehicle account funding option is a proposal to skew the petrol powered vehicle funding balance totally in favour of petrol excise duty funding the entire claim requirements for these vehicles. This would effectively remove the ACC levy component from the annual motor vehicle re-licensing fee for petrol powered vehicles. An example of a Motor Vehicle classification option is a proposal for no classifications whatsoever, with everyone paying the same levy rate.

Summary of proposed 2003/04 average composite levy rates

The composite levy proposals can be summarised as follows (figures are per $100 of payroll/liable earnings, exclusive of GST)

Current 2002/03 rate Proposed 2003/04 rate Percentage change
Average composite employer levy $1.20 $1.12 -7%
Average composite self-employed levy $3.17 $3.09 -3%
Average composite wage and salary earners’ levy $1.07 $1.07 0%

Average composite motorists’ levy (per motor vehicle) $169.67 $207.26 22%

These are derived as follows (figures are per $100 of payroll/liable earnings, exclusive of GST):

Current 2002/03 rate Proposed 2003/04 rate Percentage change
Employers gross average levy $0.90 $0.87 -3%
Less workplace safety discounts $0.05 $0.05 0%
Net average employer levy $0.85 $0.82 -3%
Residual claims average levy $0.35 $0.30 -14%
Average composite employer levy $1.20 $1.12 -7%

Current 2002/03 rate Proposed 2003/04 rate Percentage change
Earners average work levy $1.04 $1.04 0%
Residual claims average levy $0.03 $0.03 0%
Average composite earners’ levy $1.07 $1.07 0%

Current 2002/03 rate Proposed 2003/04 rate Percentage change
Self-employed average work levy $1.75 $1.72 -2%
Residual claims average levy $0.35 $0.30 -14%
Self-employed non-work levy (composite) $1.07 $1.07 0%
Average composite self-employer levy $3.17 $3.09 -3%

Written submissions on the Consultation documents are due at ACC by 5pm on Thursday 10 October 2002.

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