While the State Government ponders options for a new WorkCover scheme, Self Insurers SA’s manager Robin Shaw has some advice on how to keep it simple and effective.
Whatever replaces the soon-to-be decommissioned WorkCover will need to be free of the two fundamental defects that have dogged the Corporation since its creation.
The first is a flaw in the founding Act of 1986.
The second is the shortcomings in delivery.
Firstly, since its inception, the SA scheme has developed a ‘tail’ – a small percentage of long-duration claims that carry a large percentage of scheme liabilities.
This continuous thread through the scheme can be traced to the political compromise of the original Act.
No rhetoric, restructuring, management reform, outsourcing, in-sourcing, or marketing can alter this defect, since it is statutory in nature.
The flaw is how and why the scheme moved from being an intended simplification of process to one where it paid long-term pensions to people who are not permanently incapacitated for work to any large degree – people who are, in reality, unemployed.
Two reports were the blueprint for the 1986 Workers Rehabilitation & Compensation Act – the Byrne Report and the 1985 White Paper – yet when translated into law their principles were skewed and “unintended consequences” evolved.
The Byrne Report proposed that long-duration compensation payments should be provided after a decision on the permanence of incapacity.
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The report’s authors assumed that permanent incapacity could be quantified quickly and simply, and a return to work would follow successful rehabilitation as a matter of course.
The 1985 White Paper retained the Byrne Report recommendation that payments would be at 100 per cent of weekly earnings until a decision on permanence of incapacity was made.
It did, however, also propose a range of other payment structures defined by time off work and levels of incapacity.
WorkCover was to have clear powers to set and pay entitlements over defined periods with a charter of fairness to the injured and a focus on return to work.
What emerged from Parliament in 1986 was so badly expressed that the intentions drawn from Byrne and the White Paper were lost.
The root cause of the claims liability problem for the South Australian workers’ compensation scheme is its inability to deem earnings by reference to the worker’s capacity for work.
The scheme could not deliver on the intent that high levels of long-term entitlements would be delivered only to those who suffered high levels of permanent incapacity for work.
There is another statutory feature that is linked with the duration defect – redemption.
The original intent was to redeem the liability to make small residual payments over a long period through the payment of a lump sum.
But over time, redemption gained another purpose which had, at best, a shaky legal basis.
As the claims tail grew, the Corporation sought an alternate means to curb its income maintenance liabilities.
Redemption was the chosen course.
Workers were selectively offered redemption lump sums in exchange for a voluntary cessation of weekly payments.
The theory was that the lump sums represented significant savings in liabilities, as they may well have done if they also terminated the claims being redeemed.
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The completion of a redemption came to be equated with a legal claim discharge.
This was not the case.
The offer of a redemption could not require a worker to waive all remaining entitlements under the Act – it was not a legal discharge.
Until recently, the scheme had imposed on itself a ban on all redemption, as imperfect a liability reduction solution as it was. But the inability to legally discharge claims remains a major flaw in the legislation. Redemption, regardless of how it is used, remains an unsatisfactory tool to conclude claims when used in isolation.
Secondly, the scheme faces service delivery problems.
Outsourcing has delivered none of the benefits expected of it since 1995.
Workers’ compensation claims are still managed by a group of administrators in an office receiving, determining and administering claims from a distance based on paperwork, phone calls and so on.
It is a model suited to types of insurance where all claims are broadly similar and fit within a fixed linear process.
Why do we continue to be tied to a model that is so ill-suited to personal injury when the evidence is that schemes are damaged by the exceptions that it generates?
In any mass-management model, exceptions are managed retrospectively.
The undetected risks are usually apparent after the event.
If the claims management system is to learn to reliably detect and manage human risks before they become exceptions, it must understand the issues and know how and when to respond to them.
In conclusion, this interplay of flaws is, to my mind, the root cause of the problems of the South Australian workers compensation scheme.
Slogans such as ‘improving the return to work rate’ are just euphemism to cover these harder matters. These issues have existed and continue to exist like an unbroken thread since 1986.
Without clear laws there is no clear understanding of what a person’s rights and obligations are.
Without intelligent application of the laws, there is no guarantee that those rights and obligations, and the limitations on them, will be delivered.
Robin Shaw is Manager, Self Insurers of South Australia Inc and Secretary, National Council of Self Insurers Inc
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