Fixing what is broken

WorkCover in South Australia has released a discussion paper for public comment on 9 November 2009.  The paper is called “Consultation on a new framework for employer incentives” and poses the following questions:

• Do you think there should be any financial incentives for employers in relation to workers rehabilitation and compensation?
• What do you think about the proposed design principles?
• Do you have any specific ideas for employer incentives that encourage return to work?

This discussion paper is part of the review process by the WorkCover Corporation and should be supported.  Public comments close on 18 December 2009.

The paper itself has some points of considerable interest.  The existing incentive scheme is called a Bonus/Penalty Scheme which has existed for almost 20 years.  PricewaterhouseCoopers undertook a review and below are the findings, according to WorkCover:

“WorkCover has been working with PricewaterhouseCoopers (PWC) to gain a better understanding of the effectiveness of the Bonus/Penalty Scheme in South Australia.  Only very weak links were found between the Bonus/Penalty rate and claim outcomes.  No evidence was found to suggest that the Bonus/Penalty Scheme has delivered better health and safety outcomes for workers in South Australia.”

That last sentence seems to be a phenomenally honest statement about a scheme that has existed since 1990, been so persistent and continues to be so popular with employers.  Such forthrightness from a government authority about one of its own programs is rare.

At some point in the past there may have been some logic in the scheme as similar elements existed under the WorkCare scheme in Victoria many years ago.  But since the preventative arm, Safe Work SA, split from WorkCover around 2005, the incentive scheme has not sat comfortably with the government’s RTW focus.

The discussion paper goes on to state:

“WorkCover has not seen much evidence that the Bonus/Penalty Scheme has either reduced injury rates or made workplaces safer.  If anything it appears to have had some adverse side-effects, such as encouraging stakeholders to focus excessively on claim costs, the claim costs ‘window’ and coding, instead of return to work.”

Regardless of pointing out the difference between “no evidence” and “much evidence”, WorkCover’s comments illustrate a reality that OHS and RTW professionals have been wrestling with for years, companies have been encouraged to focus on financial cost of Return-To-Work rather than on the injured worker.

As part of WorkCover’s analysis of the existing incentive scheme, it undertook a literature review on experience ratings systems and found the following

“There were some noteworthy findings about experience rating systems, for example:

• there is no clear consensus that they have reduced injury rates or made workplaces safer;
• they have created perverse motivations, for example to suppress claims, dispute the coding of claims, or only focus on reducing claims within the ‘experience window’;
• they may reduce claim numbers but not average claim costs, and average claim severity tends to increase – this is further evidence that the reporting of small claims is sometimes ‘suppressed’; and
• there is no obvious link between experience rating bonuses/penalties and an employer’s commitment to safety and return to work.”

The Productivity Commission in 2004 (as discussed in Alan Clayton’s workers compensation review for the Tasmanian Government) recommended experience ratings for large employers as a contributor to the full funding of workers compensation schemes. ( p.44)  It is strongly suggested that those wanting to comment on this South Australian WorkCover paper should closely look at the recent changes to workers’ compensation made by the Tasmanian Government.

But it is not all gloom and doom as WorkCover SA has set the parameters for the next scheme.  In the discussion paper, they list 11 proposed design principles for consideration:

Focus on return to work

Be affordable and sustainable

Have a direct and substantial effect

Target the right employers

Tailor to specific employer groups

Loss matters

Be simple to explain and run

Use a mix of solutions

Capitalise on the tools and resources we already have

Be transparent

Use an evidence-based approach

In anticipation of the Federal Government’s plans to harmonise workers compensation once OHS is out of the way, such discussion papers, reviews and, more importantly, the public submissions, may provide some clues to how Australia workers compensation and RTW programs may look in ten years time.

Kevin Jones