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Legislative Council - Fifty-Second Parliament, First Session (52-1)
2010-06-23 Daily Xml
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WORKERS REHABILITATION AND COMPENSATION

The Hon. R.I. LUCAS (17:02): I move:

That the regulations under the Workers Rehabilitation and Compensation Act 1986 concerning claims and registration—Discontinuance Fee, made on 26 November 2009 and laid on the table of this council on 11 May 2010, be disallowed.

In speaking to the motion, I refer members who participated in this debate previously to the debates of June, October and November. It was concluded in November last year. Similarly, I refer new members of the chamber who did not participate in those debates to the previous debate which commenced in June 2009 and which concluded in November 2009. I also refer members who are considering their position on the legislation to the very well-considered (if I say so myself) report of the Statutory Authorities Review Committee, which at the time comprised the Hon. Ms Zollo, the Hon. Mr Hunter, the Hon. Ms Bressington, the Hon. Mr Stephens and me, which was brought down in February this year just prior to the state election. In particular, I refer members to pages 62 to 64 of that report, which refers to the issue of self-insurance.

With that background, I can certainly shorten considerably my contribution to the debate. The issue of self-insurance has been often debated in South Australia and, as I indicated earlier, as recently as late last year. Put simply, what the Statutory Authorities Review Committee report included in its evidence were the significant benefits to workers, to employers and then ultimately to consumers through the provision of the self-insurance option in South Australia.

The evidence was conclusive—I do not think that it was even disputed by WorkCover—that self-insurers in South Australia, that is, businesses and companies that are allowed to self-insure, have a better return-to-work performance for their workers. For those in this chamber who are interested (and I would hope that is all members), one of the key factors in their interest in workers compensation is the issue of return to work performance: that is, is the scheme working to the benefit of workers and employees in terms of hopefully providing meaningful coverage during the period that they are injured or ill but, critically, how do these schemes perform in terms of getting workers back into work.

Everyone agreed in their evidence to the Statutory Authorities Review Committee that return to work was the critical measure in terms of measuring whether or not a workers compensation scheme is or is not working. Let me be the first to say that there is no perfect workers compensation scheme and there are no perfect employers and there can be criticism of self-insurers as there can be criticism of those employers within the WorkCover scheme, but, having made that statement at the outset, when one looks at the figures, it is pretty hard to argue against from the worker's viewpoint that self-insurance is certainly assisting because they have much better return to work performance measures.

In terms of employers and businesses, the comparative levy cost at the time of the committee reporting was significantly lower. It was almost half: that is, 1.7 per cent of the levy rate having to be paid as opposed to, at that stage, the 3 per cent that WorkCover was charging. Of course, those lower costs mean that our South Australian businesses that are self-insuring are more competitive (all other things being equal) than those being covered under WorkCover, and it also means that they are more competitive with interstate businesses because their levy rates are obviously much lower than our average levy rate of 3 per cent.

That is important, as we would all accept because, if our South Australian businesses can lower their costs of operating, then the goods and services they produce can be lower and more competitive and they can employ more South Australian workers in those particular businesses. If we continue to increase the costs of doing business through our WorkCover or any other factor, then that of course means that those businesses will be able to employ fewer workers.

The lower levy cost is obviously good for employers, but ultimately it is good for consumers, good for workers and good for the South Australian economy if we can achieve it under the same scheme because the Workers Compensation Act applies to self-insurers as it applies to those run by the WorkCover scheme. It is the same act and the same requirements; it is just that it is obviously being done in a better and more efficient fashion by the self-insurers and therefore their costs are lower.

The committee also reported a lower lost time claim frequency per million dollars of remuneration amongst self-insured businesses and lower average claim numbers and costs, resulting in self-insurers having 22 per cent of claim liabilities even though they were 36 per cent of the scheme. There was a range of measures that the committee reported on. Again, I refer those members who are interested to pages 62 to 64 of the committee report for a summary of the debate about self-insurers.

I will quickly outline the context and why we are in this situation. The council, after a long debate from June through to November, voted to disallow the regulations. The strong majority view of this council was that they were unfair and they should be disallowed. This council voted them down. They were voted down on, I think, 18 November last year and eight days later on 26 November, this government, which says it is listening to the people of South Australia, reintroduced exactly the same regulations. So, the Legislative Council voted them down and, eight days later, Mike Rann, Kevin Foley and Co. thumbed their noses at the Legislative Council and the people of South Australia and said, 'We know better. You voted them down; we're just going to re-introduce exactly the same thing.'

Of course, what the government then did—and it knew this—was that it then closed the parliament down in December so there was no opportunity to disallow the regulations again, and it refused to sit the parliament again until late May. So, for the period of the last six or seven months there has been no opportunity for the duly elected members of parliament in this chamber or in another chamber to reinforce the view that was first established back in November of last year.

That is why we are in this set of circumstances now. The council voted, disallowed. The government said, 'We know better,' reintroduced them and, because they closed the parliament down and kept it closed for such a long period of time, this is the first opportunity now to be able to ask those members of the Legislative Council who were here last year, 'Do you still have the same view?' and the new members to consider their position in relation to the disallowance of the regulation.

I am not going to repeat all of the Hon. Rob Lawson's excellent contribution of last year, but I refer members to a couple of figures which he highlighted and which I am sure were provided to him by Self Insurers of South Australia (SISA). Under this proposed regulation, there is a massive increase in the exit or discontinuance fee for a business that wants to leave WorkCover to become a self-insurer.

The Hon. Mr Lawson highlighted four or five examples. A petrol wholesaler with about 500 employees, currently paying a levy of $570,000 a year, under the regulation would have to pay a discontinuance fee of some $1.08 million. A furniture retailer with 250 employees, paying a levy of some $456,000, would pay a discontinuance fee of $852,000. An employer in the air conditioning installation industry with 1,000 employees, currently paying a levy of $2.7 million a year, would have to pay $5.1 million in discontinuance fees.

A very well-known private hospital in South Australia which had invested significant sums in preparing for self-insurance was faced with a $1.5 million discontinuance fee, which the private hospital simply could not afford to pay. A very well-known national transport group we are told faces a fee of some $7 million in order to depart the WorkCover scheme. In their case, they wanted to join the commonwealth ComCare scheme rather than become a self-insurer. These are some of the examples the Hon. Mr Lawson highlighted last year in terms of the significance of the increase in the exit fee.

If this is disallowed, what happens? The existing quite significant exit and discontinuance fees continue. So, there is still a complicated formula which is applied which was operating up until November of last year which, because it was significant anyway, still discouraged businesses from becoming self-insurers.

They had to go through considerable cost-benefit analysis to determine whether it was not only in their financial best interest but also in their employees' and workers' best interests to move to self-insurance because there was still a significant exit or discontinuance fee. Let's be quite clear on this: if this is disallowed, it does not mean that there is no exit or discontinuance fee; it means that the significant exit or discontinuance fees that existed until November of last year would still continue to operate.

I note in the government's response last year that it never really addressed the issue of what is in the best interests of the workers. I repeat that, if the key factor in a workers compensation scheme is return to work and self-insurers have much better return-to-work measures than the WorkCover scheme, my challenge to the government members, who I am sure will oppose this again, is to have them address that particular issue.

Why do they believe it is in the best interests of the workers to be locked into a scheme with such poor return-to-work performance outcomes and prevented from moving to a scheme of operation which has demonstrated, through self-insurance, that the return-to-work ratios for those businesses and employees are much higher? That is a challenge I give to the government members who are going to respond. The other thing the government wants to argue for is that in some way, if these companies leave the WorkCover scheme and become self-insurers, problems will ensue for the viability of the WorkCover scheme.

Again in the Statutory Authorities Review Committee report, there is reference to evidence from Mr Robin Shaw, who currently works for the self-insured employers in South Australia but, in a previous life, was a senior manager within WorkCover. He gave evidence to the committee which to this point has not been challenged by the government, and again I leave it to them to respond. I quote the committee's report:

Mr Shaw's evidence to the committee was that there was a view that too much self-insurance was a threat to the fund because it represented a loss of levies. However, Mr Shaw stated when he was an employee of WorkCover there had been two separate actuarial reports received by the board which made it clear that an increase in the extent of self-insurance from, say, 36 per cent to 46 per cent was no risk to the stability of the scheme.

I have been further advised that one of those reports was in October of 1998 by the then WorkCover scheme actuary, PricewaterhouseCoopers, which presented a report to the WorkCover board about the possibility that the growth in self-insurance might destabilise the average levy rate. I am told that PwC concluded, in part, that:

If all self-insured eligible employers were removed from the scheme, the average levy rate would not increase, regardless of the definition of eligibility used.

I repeat that this was WorkCover's own actuary, so we are told—PricewaterhouseCoopers—that basically said to the WorkCover board that if all self-insured eligible employers were removed (that is, those who wanted to become self-insured were to leave the scheme), the average levy rate would not increase regardless of the definition of eligibility used. That dismisses the argument of the government members during the last debate that, in essence, this is what would happen, that if people left the scheme the average levy rate for everyone else would increase.

I would ask the government representative—because I assume the minister will not deign to get involved in the debate—whether he is prepared to get from WorkCover copies of that 1998 PricewaterhouseCoopers actuarial report and the second actuarial report to which Mr Robin Shaw referred, which evidently comes to the same conclusion, and provide copies of those actuarial reports to members so that they can be considered. As I said, I have not seen that. I am advised by Mr Shaw that that is the nature of the advice that PricewaterhouseCoopers gave in 1998, but there was obviously another actuarial report which I am also advised gave similar advice as well.

So, to conclude, that is my contribution. Obviously, I urge members opposite to support the motion. I have referred members to the debates of last year and to the Statutory Authorities Review Committee report. I have also issued a challenge to government members, or to the minister if he enters the debate, to provide answers to the issue of what is in the interests of the workers in relation to return-to-work ratios, but also to table copies of those actuarial reports which evidently debunk the claims that have been made by government members in the past and, I assume, in the future about the potential impact of this regulation being disallowed.

Debate adjourned on motion of Hon. B.V. Finnigan.

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