Q-COMP submission

Contacts Flavia Gobbo Elizabeth Woods Chair Chief Executive Officer Telephone: (07) 3020 6416 Telephone: (07) 3020 6444 Fax: (07) 3020 6426 Fax: (07) 3020 6426 Email: flavia.gobbo@qcomp.com.au Email: elizabeth.woods@qcomp.com.au Q-COMP PO Box 10119 Brisbane Adelaide Street Qld 4000 Website: www.qcomp.com.au

Contents (To navigate electronic document, click on links in contents table below or open

bookmarks on left side of screen) 1. Queensland scheme performance – meeting scheme objectives ........................................ 3

1.1 Definition of ‘worker’ ..................................................................................................... 3

1.2 Definition of ‘injury’ in relation to psychiatric/psychological injuries .............................. 4

1.3 Journey claims.............................................................................................................. 5

1.4 Insurer fraud investigations and prosecutions .............................................................. 7

1.5 Employers’ workplace rehabilitation obligations ........................................................... 8

1.6 Return to work assist .................................................................................................... 9

1.7 Employer excess payment ......................................................................................... 11

1.8 Summary of Q-COMP’s service delivery .................................................................... 13

2. The performance of the Queensland workers’ compensation scheme in comparison with the scheme arrangements in other Australian jurisdictions ................................................ 15

2.1 Inter-jurisdictional comparison.................................................................................... 15

3. WorkCover’s financial position ........................................................................................... 16

3.1 Q-COMP monitoring of WorkCover’s financial position .............................................. 16

4. Common law claims ........................................................................................................... 17

5. Self-insurance arrangements ............................................................................................. 20

5.1 Models of insurance provision across Australian jurisdictions.................................... 20

5.2 Self-insurance arrangements in Queensland ............................................................. 20

6. Structural review................................................................................................................. 22

6.1 Information paper ....................................................................................................... 22

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1. Queensland scheme performance – meeting scheme objectives

TOR 1: The performance of the scheme in meeting its objectives under section 5 of the Act

Sections 1.1 to 1.3 are issues which are frequently raised with Q-COMP by stakeholders. 1.1 Definition of ‘worker’ This issue addresses the scheme objective of balancing fair and appropriate benefits for injured workers and reasonable costs levels for employers (section 5(4)(a)). Issue Q-COMP Review Officer and stakeholder feedback consistently identifies as an issue the definition of ‘worker’ under section 11 and schedule 2 of the Act. The definition of a ‘worker’ in the workers’ compensation scheme is different from the definition used by the Australian Tax Office (ATO) and by the business community generally, creating confusion about who are independent contractors for ATO purposes and who are workers for workers’ compensation purposes. The current definition of worker is considered by many stakeholders to add direct and indirect cost to business, independent contractors, insurers and Q-COMP without delivering any significant value to any stakeholder. Facts Since 1999 the Housing Industry Association and the Master Builders Association have regularly raised the issue with Q-COMP, WorkCover and policy officers in the Department. The definition of ‘worker’ for the purpose of workers’ compensation is broader than the definition used by the ATO. A business can be contracting its work to contractors who see themselves as self-employed contractors:

typically with their own ABN who invoice for their time who enjoy the tax benefits of being self-employed (running their own business) manage their own tax, superannuation and business insurance.

Accordingly, a business may not declare ‘wages’ to WorkCover for these contractors for the purpose of determining premium. However, sometimes these contractors are ultimately determined to be ‘workers’ under the Act. The Construction and Transport Industries report that this is a significant issue for them. Following audits by WorkCover, a business may face a premium penalty for failing to declare wages of these contractors/workers as remuneration and be forced to pay an ongoing workers’ compensation premium for payments made to people that the business engaged as contractors.

If a ‘contractor’ suffers an injury at work and submits a claim for compensation with WorkCover, sometimes they are determined to be a ‘worker’ and the claim is accepted. For example, a

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contractor paid by the hour for mainly labour is considered a ‘worker’ under our Act and the claim will be accepted. The costs of these claims are added to the claim history of the employer’s policy as are any penalties. Approximately 5% of all applications for Q-COMP to formally review insurers’ decisions are created as a result of the complex definition of ‘worker’ for the purposes of coverage by the employer’s policy. Each review may involve consideration of large numbers of workers who are employed by a particular employer. Additionally, employers report that there are other worker definitions that they are exposed to, for example ATO, payroll tax and Q-Leave definitions, creating even more complexity. Notes Following the recommendations of the Kennedy Commission of Inquiry in 1996, the Borbidge Government introduced the WorkCover Queensland Act 1996. This Act defined a worker covered by the scheme as an individual who works under a contract of service and is a PAYE taxpayer in relation to the remuneration or other benefit received for the performance of work under the contract of service. This definition excluded contractors who were sole traders. In 1999, the Beattie Government amended the WorkCover Queensland Act 1996 to replace the PAYE definition with a ‘results test’ from 1 July 2000. It is this results test that remains the subject of disputes about coverage. The explanatory notes for this amendment indicate the reason for broadening the definition of ‘worker’:

These restrictions are proving to be detrimental to the livelihood of many workers and their families, because they do not belong to the diminishing group of PAYE tax payers.

It is noted that there is a federal initiative to look at opportunities for harmonisation of the various workers’ compensation schemes in Australia. One initiative is looking at the ‘worker’ definition but the process is still ongoing. 1.2 Definition of ‘injury’ in relation to psychiatric/psychological injuries This issue addresses the scheme objective of balancing fair and appropriate benefits for injured workers and reasonable costs levels for employers (section 5(4)(a)). Issue While there are relatively few stakeholder, case management or insurer issues with regard to employment being a ‘a significant contributing factor’ with respect to physical injuries, this is not the case in relation to psychiatric/psychological injuries. Stakeholder feedback and observations from the dispute resolution process at Q-COMP show:

Employers are confused and concerned to find that work does not have to be the main factor for determining claims for psychiatric/psychological injuries, where there may be a range of other non-work-related factors contributing to the psychological condition.

Employers currently only have a legislated right of appearance if they are the applicant for review (this is also the case for injured workers).

The current definition of psychiatric/psychological injury is considered by many stakeholders to add direct and indirect cost to business, insurers and Q-COMP without delivering any significant value to any stakeholder.

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The second part of determining whether a claim for a psychiatric/psychological injury is one for acceptance involves deciding whether or not there has been reasonable management action. Most of the anxiety, time and cost for workers and employers relates to proving or disproving allegations about the ‘reasonableness’ of management action.

Facts Statutory claims are ‘no fault’ claims under the legislation. The exception is claims for psychiatric/psychological injuries (‘psychological claims’), which are fault based. However, this fault based rule does not apply to psychological claims arising from a traumatic incident, eg an ‘armed hold up’.

Under section 32 of the Act, an insurer has two key considerations when determining a non-traumatic psychological claim. Firstly, employment must be ‘a significant contributing factor’ to the injury, and then the claim can only be accepted if the injury arose out of or in the course of unreasonable management action. Scheme statistics in relation to psychological claims show:

There are approximately 4,500 psychological claims per year being 4.3% of all compensation claims for 2010-11 (on an increasing trend up from 2.9% in 2007-08). This has stabilised for 2011-12.

The average cost of psychological claims is four times the average cost of all other statutory claims.

Psychological claims have a rejection rate of 60% which is 18 times higher than the rejection rate for physical claims.

While representing only 4.3% of claims lodged with insurers, psychological claims represent 31% of all review applications (disputes) lodged with Q-COMP.

Similarly, psychological claims represent 41% of all appeals lodged with the Queensland Industrial Relations Commission (QIRC).

42% of insurer referrals to the Medical Assessment Tribunal are in relation to psychological claims.

Almost all rejected psychological claims are claims for stress relating to perceptions of unreasonable management action at work, rather than stress from traumatic incidents at work.

Notes In the WorkCover Queensland Act 1996 the definition of injury for all injuries included the requirement for employment to be ‘the major significant factor causing the injury’.

The inclusion of ‘the major significant factor causing the injury’ on all claims did have a dampening impact on the number of compensation claims lodged. In 1999 the WorkCover Queensland Act 1996 was amended to the current definition. 1.3 Journey claims This issue addresses the scheme objective of balancing fair and appropriate benefits for injured workers and reasonable costs levels for employers (section 5(4)(a)).

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Issue The inclusion of journey claims under the Queensland workers’ compensation scheme. Facts The Queensland scheme (under sections 35 and 36 of the Act) provides compensation for injuries which occur while a worker is on a journey between their home and workplace (‘journey claims’). Refer to Table 1 for a comparison of coverage arrangements for journey claims in Australian workers’ compensation jurisdictions. Table 1 – Current (July 2012) coverage arrangements for journey claims

Jurisdiction Journey to/from work Journey undertaken for work purposes

New South Wales No*, some exceptions Yes*

Victoria No Yes, some restrictions

Queensland Yes Yes

Western Australia No Yes

South Australia No Yes

Tasmania No, some exceptions Yes

Northern Territory Yes Yes

ACT Private Yes Yes

Commonwealth

Comcare: No, some exceptions Seacare: Yes

Comcare: Yes Seacare: Yes

Source: Safe Work Australia – 2012 Key Workers’ Compensation Information, Australia There are between 6,000 to 7,000 journey claims each year, representing 6% of total statutory claims in a given year. Gross payments (prior to recoveries) on these claims represent 10% of total statutory claim payments. For the 2011-12 financial year, statutory payments (net of recoveries) on journey claims were $43 million. Of the $1.35 billion spent on claims annually, $69 million is spent on journey claims with $27 million of the $69 million being refunded primarily by compulsory third party motor vehicle insurance. Notes On 22 June 2012 the Workers’ Compensation Legislation Amendment Bill 2012 passed the NSW parliament, removing journey claims unless there is a ‘real and substantial connection’ between the employment and the accident.

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Sections 1.4 to 1.6 refer to opportunities Q-COMP has identified with respect to its own functions to improve efficiency in the scheme. 1.4 Insurer fraud investigations and prosecutions This issue addresses the scheme objective of balancing fair and appropriate benefits for injured workers and reasonable costs levels for employers (section 5(4)(a)). Issue Under the legislation, the responsibility for prosecuting injured workers for fraud-related offences committed against WorkCover rests with WorkCover (the commercial insurer within the Queensland workers’ compensation scheme) rather than with Q-COMP (the regulator), who performs this function for all other insurers. This results in some duplication of the functions of fraud investigation and prosecution. Facts It is an offence under sections 533 and 534 of the Act to defraud or attempt to defraud an insurer and provide false or misleading information or documents to Q-COMP, WorkCover, a self-insurer or a registered person. Under section 536 of the Act, self-insurers must refer matters to Q-COMP to investigate and undertake prosecution where appropriate, where they believe on reasonable grounds that an injured worker is defrauding or attempting to defraud the self-insurer. However, under section 536 WorkCover must undertake investigations and prosecutions relating to allegations of injured worker fraud made by employers holding a WorkCover policy. During the 2011-12 financial year: Self-insurers made 16 fraud referrals to Q-COMP. Q-COMP commenced prosecution against four injured workers for fraud-related offences

committed against self-insurers. Of the four prosecutions commenced by Q-COMP, three matters were successfully

prosecuted while one matter remains ongoing. Q-COMP spent $24,411 on investigating and prosecuting injured workers for fraud-related

offences.

Option for insurer fraud investigations and prosecutions: amend the legislation to refer all allegations of fraud-related offences against WorkCover to Q-COMP for investigation and prosecution (consistently with the management of self-insurer fraud referrals).

Consequences This amendment would be consistent with Q-COMP’s primary function to regulate the scheme and would improve clarity between the functions of WorkCover as a commercial insurer and Q-COMP as the scheme regulator. There would be less likelihood of actual or perceived bias being attached to WorkCover as it would no longer be required to investigate and prosecute injured workers in relation to claims which it administers.

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An increased workload for Q-COMP requiring additional resources to investigate and prosecute WorkCover fraud referrals would be funded by insurer contributions. Notes Section 536 of the Act replaced section 485 of the WorkCover Queensland Act 1996. Section 485 placed a responsibility on all employers, including self-insured employers, to report to WorkCover reasonable suspicions of workers’ compensation fraud for WorkCover to undertake investigations and prosecutions where appropriate. Upon establishment of Q-COMP as the independent regulatory authority within the scheme, section 536 replaced section 485 to require self-insured employers to report reasonable suspicion of workers' compensation fraud to Q-COMP. However, WorkCover is still required to investigate and prosecute allegations of injured worker fraud made by all other employers. 1.5 Employers’ workplace rehabilitation obligations This issue addresses the scheme objective of employers and injured workers participating in effective return to work programs (section 5(4)(d)). Issues Stakeholder feedback has highlighted that there is unnecessary red tape around the requirement to have a rehabilitation and return to work coordinator (RRTWC). An interjurisdictional comparison shows that while Queensland has some of the most stringent requirements for employers, our return to work rates are comparable nationally and with individual states. In addition, there is feedback that there is only one avenue to qualify as a RRTWC. Currently, only successful completion of a workplace rehabilitation course accredited under the Vocational Education, Training and Employment Act 2000 will meet the requirements. Facts In Queensland, for employers who are considered to be in a high risk industry (with wages of $2.146 million) or who have wages of $7.049 million for the preceding financial year, there is a requirement to appoint a RRTWC and have in place a workplace rehabilitation policy and procedures. Currently there are around 2,900 employers who employ 8,900 RRTWCs. Q-COMP registers and educates RRTWCs and accredits employers’ workplace rehabilitation policy and procedures. Q-COMP has been involved in ongoing reform of our processes to identify opportunities for improved efficiencies including a reduction of red tape for employers. We have been able to make some positive changes and we believe there is scope for more.

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Feedback from Q-COMP’s Regional network program (RNP) forums consistently demonstrates a need for education regarding the most common injuries reported within the scheme. For the first six months of 2012, we have had 2,200 participants attend our forums and workshops. Q-COMP will continue with the RNP that educates RRTWCs. Options for employers’ workplace rehabilitation obligations The following options are intended to provide greater flexibility for employers to meet their workplace rehabilitation obligations.

Option: legislative amendment of criteria for employers to have a RRTWC, to include an additional requirement that employers must have had statutory claims totalling 15 or more work days lost in any year.

This would reduce the number of employers required to have RRTWCs by 36%. This will exclude those employers who infrequently interact with the scheme. If employers meet the recommended criteria, options should be given to them to meet their workplace rehabilitation obligations.

Options:

Where employers have within their employ staff who are specialised in workplace rehabilitation (ie allied health providers, rehabilitation counsellors etc), those staff are automatically accepted as RRTWCs without further training.

Employers who have in place detailed systems to support injured workers can apply to Q-COMP for exemption from the requirement to have a RRTWC.

Q-COMP endorses the requirement for these employers to have workplace rehabilitation policies and procedures. Currently Q-COMP directs these employers to our website that makes available an acceptable policy and procedures. However, there is an additional legislative requirement that the employer notify Q-COMP that they have received the policy and procedures.

Option: remove the additional legislative requirement that the employer notify Q-COMP that they have received the workplace rehabilitation policy and procedures.

Consequences Adopting these recommendations and retaining the RNP will assist employers by providing a meaningful education with respect to workplace rehabilitation. In addition it will reduce red tape for employers by reducing unnecessary costs for those who infrequently interact with the scheme. 1.6 Return to work assist This issue addresses the scheme objective of employers and injured workers participating in effective return to work programs (section 5(4)(d)).

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Issue Optimise participation in the Return to work assist program. Facts Return to work assist (RTWA) is a Q-COMP program designed to assist injured workers find a job after their claim has finished. It is complementary to the short tail scheme that exists in Queensland. Currently it is mandatory for insurers to refer injured workers to RTWA if there is a non-return to work outcome when the statutory claim is closed. The team assists injured workers with:

career development accessing education accessing job services providing support.

The formal establishment of RTWA was part of the 2010 legislative reforms, and it is having a positive impact on the Queensland workers' compensation scheme by reducing common law costs. This is achieved through a reduction in the:

amount awarded under the ‘past economic loss’ head of damage when RTWA injured workers with an open common law claim return to work. Based on a review of approximately 200 RTWA participants, it was estimated that participation in the program could reduce the awarded past economic loss by approximately 20%.

amount awarded under the ‘future economic loss’ head of damage when RTWA injured workers with an open common law claim return to work. Independent solicitors commissioned by Q-COMP have looked at a number of RTWA cases and quantified significant reductions in the future economic loss award of damages due to the involvement of RTWA. This is because economic loss is reduced when injured workers return to some form of employment and when this occurs prior to the settlement of a common law claim it demonstrates that the worker has a residual earning capacity.

number of injured workers who pursue a common law claim due to their involvement in the program.

84% of injured workers who are able to participate in the program returned to work. This result contributes to the total scheme return to work rate, increasing from 97.1% to 98.6% when RTWA outcomes are included. See how RTWA is helping injured workers by watching Gary Watson's story: http://www.qcomp.com.au/case-studies/gary-watson.aspx.

Option for Return to work assist: amend the legislation to make it mandatory for insurers to refer injured workers to the RTWA program if they are making a common law claim for future economic loss on the basis that they are unemployed.

The amendment would allow the worker to opt out of participating in the program. This would be taken into account in the settlement of the worker’s common law claim.

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Consequences This option would result in all unemployed common law litigants who make a claim for future economic loss being referred to RTWA and being obligated to satisfactorily participate in the program to fulfil their common law duty to mitigate their loss. Section 1.7 refers to an opportunity Q-COMP has identified to improve efficiencies and cut red tape in the scheme. 1.7 Employer excess payment The following issue addresses the scheme objective of providing for flexible insurance arrangements (section 5(4)(e)). Issue Addressing the relatively high number of claims under the Queensland scheme. Facts One of the features of the Queensland workers’ compensation scheme is that it has significantly more claims than any other scheme. The number of claims is disproportionately high relative to other schemes when adjusted for labour force and safety records of the respective schemes. The reason is the current employer excess and claim lodgement arrangements in Queensland. Graph 1 shows the disparity in terms of claim numbers. Graph 1 – Annual statutory claim numbers for Australian schemes

Statutory Claim Numbers (2010-2011)

0

20,000

40,000

60,000

80,000

100,000

120,000

QLD VICNSW SA

WA

TAS NT

COMCARE

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In Queensland injured workers are required to lodge an application for compensation with the insurer to receive compensation regardless of how minor in nature and insurers need to administer the assessment and compensation process. The excess in Queensland is Queensland ordinary time earnings (QOTE) which is currently $1,263 or the value of the first week of benefits if under that amount. WorkCover Queensland administers all the claims from the beginning, including those where the excess period for weekly compensation is not exceeded. Medical expenses are not covered by the excess and payment needs to be made by WorkCover either directly to the medical provider or by reimbursing the worker.

Option for employer excess payment: amend the legislation to remove the requirement for claims to be lodged with the insurer until the excess amount in wages or medical expenses payable by the employer (equivalent to QOTE) is exceeded. The amount of excess remain the same. Retain the right for the employer or injured worker to lodge a claim with the insurer immediately if there is: dispute strong indication that the claim will cost more than QOTE.

In all other jurisdictions claims are lodged through the employer. In Victoria for example, where claims are lodged with the employer, the employer is not required to pass that claim on to the insurer for 10 days. The excess amount payable by an employer in Victoria is the first 10 days of compensation and the first $610 of medical expenses. If the injured worker returns to work and does not require any further treatment within the bounds of these excess provisions the employer is under no obligation to lodge the claim. The employer is simply required to keep a register containing details of the injury. Victoria has about 30,000 statutory claims a year compared to about 105,000 in Queensland. Both Queensland and Victoria enjoy low premium rates. Consequences If Queensland employers were not required to lodge claims unless the QOTE value is reached in payment of wages or medical expenses, it is estimated that 55,000 claims would be removed from the system. If any of those claims were disputed the employer could lodge the claim with WorkCover. This would reduce red tape and allow employers, workers and treating doctors to manage low impact and uncomplicated injuries themselves and get on with business. The disadvantage of such a scheme is that it delays the involvement of a third party rehabilitation manager or case manager which could potentially be detrimental to outcomes for workers. While this option reduces red tape for employers in interacting with WorkCover, it includes the requirement for employers to develop and maintain a register for minor injuries.

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Q-COMP submission

Section 1.8 addresses how Q-COMP’s service delivery contributes to the efficient administration of the scheme and the Act (section 6). 1.8 Summary of Q-COMP’s service delivery Q-COMP is fully funded by contributions from all insurers in the scheme. Each self-insurer pays a levy to Q-COMP being a percentage of its estimated claims liability and WorkCover’s contribution reflects its portion of claims in the scheme. Q-COMP’s operational costs represent 0.9% of the total scheme liability. Q-COMP’s primary function is to regulate the scheme and section 330 of the Act outlines a number of specific functions that Q-COMP must perform in regulating the scheme. Q-COMP has been able to achieve a several fold increase in its output over the last five years. A summary of each legislative function within a five year snapshot follows.

1. Medical Assessment Tribunal hearings have remained constant at around 2,770 per year over the last five years. The average waiting time for a hearing is eight weeks and 90% of decisions are delivered to injured workers within 48 hours after hearing.

2. The Return to work assist function did not exist five years ago. This past year there have

been 2,303 referrals from insurers. Q-COMP is achieving an 84% return to work rate for those who participate.

3. Review applications have increased significantly from 2,381 in 2007-08 to 3,237 in 2011-

12. Average timeframes for decision-making are the same in 2011-12 as for 2007-08 at 36.8 days. Q-COMP is expecting a reduction of these timeframes in 2012-13.

4. The rate of appeal of review decisions has remained constant at 16%.

5. The number of appeals has increased from 346 in 2007-08 to 487 in 2011-12. However

Q-COMP and the Queensland Industrial Relations Commission work hard to resolve matters before hearing. Only 80 matters proceeded to hearing in 2011-12.

6. With 60% of workplace injuries occurring outside Brisbane, Q-COMP has initiated a

Regional network program to educate those in the industry responsible for returning injured workers to work, about improving return to work outcomes. The Q-COMP board endorsed this strategy in November 2011. Since then, 10 regional representatives have been appointed from local allied health professionals (from Mount Isa, Toowoomba, and all major coastal centres) and over 2,500 people have attended educational sessions throughout Queensland.

7. In 2011-12, Q-COMP has registered 9,000 RRTWCs and ensured that 2,900 employers

have accredited workplace rehabilitation policies and procedures.

8. Q-COMP administers 17 tables of costs for use by insurers to ensure consistent application of fees for medical and allied health services across the scheme.

9. Q-COMP regulates 25 self-insurance licences that represent 258 employers. This has

remained relatively constant since self-insurance commenced in 1997. Q-COMP and WorkCover are committed to implementing an agreed system of real time monitoring of

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WorkCover’s performance and compliance with the Act (including financial performance).

10. Q-COMP has managed an increased number of applications for right to information from

91 in 2007-08 to 1,329 in 2011-12. Injury payment profile releases (an injured worker’s workers’ compensation history) have grown from 13,122 in 2007-08 to 28,343 in 2011-12.

11. To augment the Regional network program, Q-COMP conducts two conferences a year

(one in Brisbane and one regionally). All are fully subscribed with over 600 delegates in Brisbane.

12. Q-COMP’s continuing process of e-business development has resulted in website visitor

access increasing from 56,783 visitors in 2007-08 to 169,261 in 2011-12.

13. The self-insurer levy rate has decreased from 2.37% (07-08) to 2.30% (11-12) to 2.28% (12-13).

In 2012-13 our operating expenses are budgeted to increase 0.41% in spite of a significant increase in the volume of business. Q-COMP will deliver more services to Queenslanders than ever before on account of operational efficiencies that have been realised through our commitment to innovation, process improvement and service delivery. Q-COMP has:

gained efficiency from e-business initiatives such as the move to electronic review files and electronic medical files with iPad file transfer technology in the Medical Assessment Tribunals

identified, developed and implemented new products and services to improve scheme outcomes

a consistent program of evaluating the effectiveness of functions and rationalising staff where possible

redeployed staff in response to business needs. We pride ourselves on our open and accountable approach to regulation. As a statutory authority funded by the employers of Queensland we take our corporate governance and reporting seriously. Our transparent reporting has been recognised consistently by our annual report being awarded gold in 2009, 2010 and 2011 by the Australasian Reporting Awards. As a part of our drive to be an effective and efficient regulator we also look inwardly to create a vibrant, innovative and professional culture. Independent surveys in 2009 and 2011, benchmarked against global best practice methods, show that Q-COMP has a highly positive culture which has translated into improved service and employee satisfaction. We are proud that our results place us in a select group of organisations that have achieved the high ‘constructive’ benchmark in the Organisational Culture Inventory. In 2011 we achieved the Human Synergistics Culture transformation award. We have a comprehensive survey strategy that gives our customers a voice in how we conduct business. Consistently over the last five years independent survey results have told us our customers believe we have increased our service offering and our service delivery. Our customers see us as efficient and worthwhile.

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2. The performance of the Queensland workers’ compensation scheme in comparison with the scheme arrangements in other Australian jurisdictions

TOR 2: How the Queensland workers’ compensation scheme compares to the scheme arrangements in other Australian jurisdictions

2.1 Inter-jurisdictional comparison Attachment 1 is the report of our independent actuary Finity comparing the cost of providing workers’ compensation benefits to injured workers in Queensland with the cost of other Australian workers’ compensation jurisdictions.

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3. WorkCover’s financial position

TOR 3: WorkCover’s current and future financial position and its impact on the Queensland economy, the State’s competitiveness and employment growth

3.1 Q-COMP monitoring of WorkCover’s financial position Q-COMP and WorkCover are committed to implementing an agreed system of real time monitoring of WorkCover’s financial performance and compliance with the Act. Q-COMP has a statutory obligation to provide this information to the Minister.

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4. Common law claims

TOR 4: Whether the reforms implemented in 2010 have addressed the growth in common law claims and claims cost that was evidenced in the scheme from 2007-08

Background information The Queensland workers’ compensation scheme is the only short tail scheme in Australia. It is very competitive. Statutory benefits are finalised promptly. If a worker’s injury does not resolve, when this injury becomes medically stable and stationary it is assessed for permanent impairment (PI) using the AMA IV guides. Based on the PI a lump sum offer is made. The worker must make an irrevocable election to accept the lump sum offer or proceed to common law (unless the work related impairment (WRI) is over 20% in which case the worker can take the lump sum offer and proceed to common law). PI (and WRI) makes no allowance for pain and PI does not measure a person’s disability. Attachment 2 is correspondence from Dr Jon Douglas, Physician and Chair of the General Medical Assessment Tribunal addressing the medical assessment of injured workers. Dr Douglas distinguishes between the definitions of ‘impairment’ and ‘disability’ and notes that the World Health Organisation defines disability as ‘any restriction or lack (as a result of impairment) of ability to perform an activity, in the manner or within the range considered normal for a human being’. Providing access to common law damages seeks to compensate an injured worker for disability for injuries that arise out of employer’s negligence. There is unfettered access to common law in Queensland. 2010 common law reforms During the reform period, there was debate about whether the scheme should introduce a common law threshold to reduce the number of common law claims. This means excluding injured workers from the ability to make a common law claim where permanent impairment is assessed below a nominated level. This did not occur but several legislative amendments were passed that were aimed at addressing both the rising numbers of common law claims and their costs. In particular:

Injury Scale Value was introduced decreasing the amount paid for general damages. The case of Bourk v Power Serve Pty Ltd & Anor [2008] QCA 225 was reversed

ensuring that claimants must show negligence by the employer in order to be successful. WorkCover reviewed its case management practices and this has resulted in higher return to work rates in the statutory phase, also contributing to downward pressure on claim numbers and costs. This has been complemented by Q-COMP’s Return to work assist program.

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Q-COMP submission

Trends since the amendments are that the number of claims is down and costs of claims are reducing. The longer the trend continues the greater the confidence we have that this is not a ‘honeymoon’ period. In 2010-11, new claims were 9.6% less than 2009-10; in 2011-12 new claims were 4.7% less than 2010-11. Graph 2 – Common law claims by financial year

3,268 3,422 3,3153,066

3,3843,620

4,194

4,991

4,5104,299

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

Consequences of introducing a common law threshold Queensland is a short tail scheme where disability is dealt with in the common law phase not in the statutory phase. If injured workers were excluded from commencing a common law claim because their PI assessment did not meet a nominated threshold, there would be workers who suffer with a disability not compensated even though employer negligence contributed to the disability. Currently the Medical Assessment Tribunal (MAT) deals with disputed PI assessments and speed of dispute resolution is the hallmark of our scheme’s success. It is noted that Q-COMP recruits widely to attract specialists to the MAT. There are not necessarily more specialists available in Queensland with appropriate qualifications to sit on tribunals. If a threshold of a particular PI is introduced, it is expected that many injured workers who fall below the threshold will contest the PI as otherwise there is no possibility of a common law claim:

If a worker is assessed with a PI > 0% but below the threshold, the insurer issues an offer of lump sum compensation along with the notice of assessment. The worker’s entitlement to compensation stops when they respond to the insurer with a decision about the offer or 20 business days after they receive the offer, whichever is sooner. If the worker disagrees with the assessed PI the insurer will refer them to the MAT.

If a worker is assessed with a PI of 0%, the insurer issues a notice of assessment and no offer of lump sum compensation is made. If the worker disagrees, they can request the insurer to refer their claim to the MAT for assessment of PI. Alternatively, the worker continues on benefits until their claim is administratively terminated on the basis that

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Q-COMP submission

they have no ongoing incapacity for work. If a worker disagrees with the termination they can apply for review of the decision to Q-COMP.

This will necessarily mean more tribunals. The current eight week waiting period for a tribunal will expand on a continuing basis as there are no more doctors to do the work. The tribunals may never catch up with demand. In 2010/11, 2,100 claims received a 0% WRI, of which 50% proceeded to common law. If a 0% WRI threshold was introduced the number of referrals could potentially increase by up to 2,000 (although it is unlikely all will proceed to MAT). The approximate cost of a worker waiting one additional week is $1,000.

An introduction of a common law threshold is of significant concern to Q-COMP as the viability of the MATs as an effective dispute resolution service will be compromised. Experience in other states has shown that introducing a threshold gradually results in ‘bracket creep’ as more assessments achieve the minimum threshold. There are potential behavioural changes where injured workers who have an initial PI assessment under the threshold may be more likely to dispute the PI assessment. Additional applications for review to Q-COMP may be sought when benefits are terminated on the basis that there is no ongoing incapacity. It is noted that there are about 4,300 common law claims in a year and 105,000 statutory claims. A small change in behaviour during the statutory claim phase may have a significant financial impact.

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5. Self-insurance arrangements

TOR 5: Whether the current self-insurance arrangements legislated in Queensland continue to be appropriate for the contemporary working environment

5.1 Models of insurance provision across Australian jurisdictions There are 3 models of insurance provision across the Australian jurisdictions, in terms of the combination of options available to employers. Table 2 summarises the insurance and associated service provision models that exist in Australia. Table 2 – Workers’ compensation insurance provision models in Australia

Model 1 Underwritten by a central fund 1 government-owned monopoly insurer manages claims and rehabilitation + self-insurance option

Model 2 Underwritten by a central fund Agents1 manage claims and rehabilitation + self-insurance option

Model 3 Underwritten by private insurers Private insurers manage claims and rehabilitation + self-insurance option

QLD: 1 government owned insurer (WCQ), 25 self-insurers Comcare: 1 government owned insurer (Comcare) – out sources some claims management to agents (2), 29 self-insurers

VIC: 5 agents, 38 self-insurers NSW: 7 agents, 60 self-insurers & 7 specialised insurers2

SA: 1 agent, 70 self-insurers and state public sector manages its own claims

WA: 8 private insurers, 1 insurer for govt departments, 27 self-insurers TAS: 7 private insurers, 11 self-insurers NT: 5 private insurers

1An agent is a third party organisation contracted to provide assessing, claims management and rehabilitation case management. 2Specialised insurers are licensed to underwrite the insurance risks for special industries or classes of business (eg. Hotel employers, coal mines, racing). 5.2 Self-insurance arrangements in Queensland Performance of self-insurers Q-COMP licences and monitors the performance and compliance of 25 self-insurers which represent 258 employers. There are about 152,000 employers in total in Queensland. The indicators below provide insight into the performance of the self-insurers compared to WorkCover on key performance indicators.

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Table 3 – Summary of self-insurer claims management performance Self-Insurer performance

WCQ All Self-

Insurers

Trend for self-insurers since

2010-11 Average cost of statutory claims (2011-12) $7,640 $6,820 stable Average cost of damages claims (2011-12) – excluding nil settlements

$138,516 $131,082 down 2.5%

Average workdays lost for statutory time lost claims (2011-12)

39.1 30.6 down 2.4%

Return to work rate (2011-12) 97.2% 96.3% up from 96.2% (stable) The above results are based on finalised claims. The rate of complaints in the self-insured sector of the scheme is low. In 2010-11 there were 54 complaints registered with Q-COMP regarding self-insurers. There were 12,597 claims registered with self-insurers in this period. During the public briefing on 11 July 2012, a question raised by the Committee was the possibility of a conflict of interest for a business that is both the insurer and employer as occurs with self-insurance. Our comprehensive performance management program, including regular reviews of statistics, audits and fielding complaints about self-insurers, concludes that there is no evidence to support a systemic problem relating to conflict of interest. Self-insurer prudential risk The risk of self-insured employers not being able to meet their workers’ compensation liabilities is managed by the requirements for them to lodge bank guarantees for at least 150% of their estimated claims liability and to have a specified level of reinsurance, and by Q-COMP monitoring their performance and financial results. Reinsurance is required to be with an APRA-approved insurer and the retention amount per event is required to be between $300,000 and $1 million. The solvency risk to the scheme posed by self-insured employers is very low. Employee threshold requirement When self-insurance was introduced in 1997, there was a threshold of 500 employees. In 1998, this threshold was increased to 2,000 employees. Of the 25 current self-insurers, five of these do not meet the 2,000 employee requirement (as they entered the self-insurance system before the threshold increased). These insurers are low risk and categorised as high performers. The size of these organisations does not appear to be impacting upon their capacity to carry the infrastructure and costs associated with self-insurance. Comparison with other Australian jurisdictions There is only one other jurisdiction in Australia that includes a specified number of employees as a prerequisite for self-insurance. That is New South Wales which requires 500 employees to self-insure. Attachment 3 is the report of our independent actuary Finity about self-insurance.

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6. Structural review

TOR 6: in conducting the inquiry, the committee should also consider and report on implementation of the recommendations of the Structural Review of Institutional and Working Arrangements in Queensland’s Workers’ Compensation Scheme

6.1 Information paper It is noted that an update of the implementation of recommendations of the Structural Review has been provided to the Finance and Administration Committee by the Department of Justice and Attorney-General.

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