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Legislative Council - Fifty-Third Parliament, Second Session (53-2)
2017-06-20 Daily Xml
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Return to Work Corporation of South Australia (Crown Claims Management) Amendment Bill

Committee Stage

In committee.

Clause 1.

The Hon. R.I. LUCAS: When the minister concluded the debate on 1 June, he did not address a whole series of questions that I put during the second reading contribution, so I intend to pursue a number of those during the committee stage of the debate. One of the key ones that I raised during the second reading was what the costs to the government are going to be as a result of particular changes that the government is asking us to undertake.

I outlined some of the information the confidential Bentley-Latham review had concluded and the government also has indicated that the intention is for government departments to be charged $25 million, I think it is, in 2017-18 in terms of premiums to ReturnToWorkSA. Separately, the government has been asked what is going to happen to the 200 employees who currently work within government departments and agencies on managing workers compensation. As a group, they rightly have been saying, 'We've got concerns about what you are doing in terms of policy but also what it means for us in terms of our jobs.' The PSA has been raising those particular issues as well.

The government has said, as I understand it, 'For 12 months you are going to continue in your current position.' The proposal in this bill is that new claims after 1 July will be managed by ReturnToWorkSA and their claims managers, but the existing 200 people in government departments will manage the pre-existing claims that are there and that there has been a commitment given for a 12-month period.

Firstly, can the government confirm the commitments they have given to the existing 200 individuals who work within government departments and agencies? Is it correct that they have given a commitment for just a 12-month period? If that is the case, what happens to those individuals immediately after the election in July of 2018?

The Hon. P. MALINAUSKAS: I am advised that indeed the Hon. Mr Lucas is correct, in that there has been a commitment given in writing, I understand, to the relevant employees that their employment will continue for 12 months. However, I am also advised that the number is not 200, it is closer to 140.

The Hon. R.I. LUCAS: The understanding from the confidential Bentley-Latham review is that it is 140 full-time equivalents, but it is up to 200 individuals because there are a number of people who are working part time with a number of departments and agencies. I think the figure the minister has been given by his adviser is technically correct in terms of full-time equivalents, but it is actually 200 individuals who have been given the commitment.

Can the minister take that on notice then and is he prepared to provide a copy of the written advice that has been given to those 200 individuals? I do not seek to delay the committee for that, but my question essentially then is what is the situation for these 200 individuals, or 140 full-time equivalents, come July next year? That is, will they be declared surplus to requirements and then subject potentially to Determination 7 if their agency cannot find them alternative work within the particular agency?

The Hon. P. MALINAUSKAS: I am advised that for those individuals concerned the commitment is to ensure that their employment continues for the 12-month period as discussed. Beyond that, there is every possibility that those individuals will continue to be employed within their respective agencies, providing advice and information, and performing functions in and around the application of return-to-work responsibilities that individual employers still have under the act.

To get to the nub of the question, there is no guarantee that that will be the case; however, there is every prospect that it will be the case. Nevertheless, the commitment is as it stands: those employees will be preserved for a 12-month period, as discussed.

The Hon. R.I. LUCAS: I return to the first question that I raised in the second reading, that is, what are the costs to the government? The minister will be aware that I have asked questions, and I am assuming at this stage that the minister might have sought advice from some of the agencies that he is responsible for in terms of SAPOL and the emergency services agencies. If you still have 200 people employed—at least for this first 12-month period, and possibly after that but certainly for the first 12-month period—and the confidential Bentley-Latham report estimated that the total cost of managing claims within the public sector at the moment was about $25 million, that is where this $25 million premium to be charged by ReturnToWorkSA has come from.

I do not have the number with me at the moment but I put it at the second reading. Somewhere between $17 million and $20 million of that was the cost of employing these workers within the public sector. If, in 2017-18, you are still continuing to employ the workers within your agencies, within SAPOL and others, and you are also having to pay $25 million in premiums to ReturnToWorkSA, is the government accepting, at the very least for 2017-18, that there will be a significant increase in terms of the budget cost of managing workers compensation in the public sector?

The Hon. P. MALINAUSKAS: I am advised the following. There is a fair bit of information here so I am going to attempt to truncate it for the purposes of—

The Hon. R.I. LUCAS: No, I am happy to listen to all of it.

The Hon. P. MALINAUSKAS: Here is the information. Agencies currently incur the cost of workers compensation claims directly. For claims with an injury date prior to 1 July this year, this will continue to be the case under the proposed new framework and this expenditure will reduce over time as these claims are closed out. Should the legislation before the parliament pass, ReturnToWorkSA would start managing and incurring costs for new claims from July onwards and will begin to levy a charge or a premium on government agencies. This charge will be small initially and build up over time as the number of claims build up each year.

Government agencies already fully budget for the future costs associated with workers compensation claims. The proposed arrangements will result in no net expenditure increase, but rather a change in the nature of expenditure over time from the direct costs of workers compensation, which will phase down, to a payment to ReturnToWorkSA, which will phase up.

A key point is that the arrangements for the government agencies will operate separately from the current registered scheme. There will be no effect on the premium for the current registered scheme for private employers as a result of the proposed reforms. ReturnToWorkSA will recover the costs of the government's workers compensation claims and its own administration costs in managing those claims. It will generate no profit or loss, nor will it improve or deteriorate its net asset position as a result of the reforms.

The intent is to transfer the management of the government's workers compensation claims to ReturnToWorkSA and achieve a mutual financial outcome for both ReturnToWorkSA and government agencies in the first instance. As is the case now, the factor that will dictate financial outcomes for the government is the incidence of workplace injury and the effectiveness of claims management and the achievement of return-to-work outcomes.

It is expected that over time the common expert administration and management of claims, as well as the experience and advice to agencies from ReturnToWorkSA, would result in lower costs, which would be available to the government to redirect towards core public services. As claims build up over time, ReturnToWorkSA, based on actuarial advice, will base its premium each year on the payments it projects it will incur in managing agency claims, plus administration costs.

Each agency will be levied a separate premium, based on estimated individual experience of that agency in the coming year. The 2017-18 premium will be set at approximately $26 million in total for the government, again reflecting the expected costs of new claims next year, plus administration costs for ReturnToWorkSA. As self-insurers, government agencies already pay ReturnToWorkSA a self-insurer levy to cover the initial administration costs to be incurred by ReturnToWorkSA in 2017-18 in managing the government claims. The premium is broken up based on an expected cost for each individual agency. ReturnToWorkSA will invoice agencies twice yearly in equal instalments. That is my advice.

The Hon. R.I. LUCAS: Can I ask the minister to clarify. The second reading says that from 2017-18 ReturnToWorkSA will actually charge $26 million (I said $25 million earlier) in premiums. The minister has confirmed that by way of the explanation he has given there, that is, for 2017-18, $26 million. Yet, earlier, in the second reading explanation he was indicating that there would be flexibility, that it would start smaller in terms of what the premiums would be for 2017-18 and, as things transitioned, it would increase. Yet, at the end of the speech, he confirms the second reading, that is, that there will be this $26 million premium that will be charged to agencies.

So, if the minister is talking about it factoring up or increasing, then you are starting off at a base of $26 million. He is indicating there that the $26 million is a base and it will actually increase, which makes it even worse. The minister rightly points out that over a number of years some of the existing 200 staff might, in essence, be moved out and therefore a cost removed.

But, let me give the minister an example (and it may well apply to some of his agencies). Some agencies might only have one person handling workers compensation claims management, but they also do other jobs. So, the CEO will come to the minister and say, 'Minister, Billy the goose (or whoever it is) is handling claims management but also does a range of other issues, so we can't get rid of that position completely because he or she does a range of other activities and we need to keep him or her on in that particular position.'

This has occurred so many other times with whole-of-government-wide initiatives, which occurred with Shared Services originally and is occurring currently with EPAS in terms of amounts that were attributed to savings, where agencies say, 'Look, this particular person was doing this job and was nominally included as part of the savings toward the whole-of-government-wide initiative, but we need that person because he or she is doing some other job as well.'

You, not just personally, but the government collectively, will potentially have a range of these smaller agencies, which will say, 'We've only got one person and we can't get rid of that particular person. If we get rid of that person other rehabilitation programs or work safe programs or occ health and safety-type programs won't be conducted by this agency because the person who is managing workers compensation claims is also doing work health safety programs and a whole range of other things like that within this particular agency, or might even be doing completely unrelated work because it is such a small agency.'

I ask the minister to again clarify that if the base premium is $26 million and if, in the early part of that explanation, it is actually going to factor up, is the minister indicating that ReturnToWorkSA in years 2018, 2019 and onwards might be charging aggregate premiums higher than $26 million as it takes on more and more responsibilities?

The Hon. P. MALINAUSKAS: I think I understand the tenet of the Hon. Mr Lucas's question, but maybe for the sake of clarity I might shore that up before providing a response. My understanding is that the Hon. Mr Lucas is asking: if the $26 million figure largely reflects what the current cost to the state is in terms of the overall management and payment of these claims, and that amount is going to be paid to ReturnToWorkSA and there is not a saving realised through a reduction in the number of people managing those claims, then how could it be cost neutral? Is that, in essence, another way of putting your question?

The Hon. R.I. LUCAS: That is one of the questions; that is part of it.

The Hon. P. MALINAUSKAS: That being the case, I think we are going to have to take that question from the Hon. Mr Lucas on notice and give him a response in due course.

The Hon. R.I. LUCAS: Mr Chairman, if questions are going to be taken on notice, which will be useful, I refer the minister and his advisers to a series of questions that I put at the second reading. It would be useful to get answers to those. They were not provided at the end of the second reading. I understand the Hon. Tammy Franks may well have questions that she put at the second reading that still do not have answers, either. I think it would be useful if the minister would provide us with answers to questions that members put. It would assist the debate.

To clarify this particular dollar issue that is being raised, one is exactly the question the minister has just highlighted; that is, at least for 2017-18 the minister seems to be indicating that the costs to the government are going to be significantly higher than the current costs because you have committed to the 200 people continuing to be employed. There is a saving of $5 million because that is the fee that is currently paid, but $20 million of the $26 million is still going to be paid and you are going to be charging departments $26 million.

So, a department like SAPOL is going to continue to employ two, three or four staff, whatever the number happens to be, and you are going to be slugged with a premium to ReturnToWorkSA, which you will have to pay. My obvious question to you is: are you going to be given additional appropriation for SAPOL to pay for this statewide thing, or are you and SAPOL going to have to find a saving within SAPOL to meet that government-imposed cost? That is just for the first year.

My second question ensues from the answer the minister read, which stated that in the first year it is $26 million. I do not have a copy in front of me, but in the early part it states that as it transitions there is a lower cost in the first year, and as things transition it will be increased in terms of the premium. So, the $26 million in the first year is going to be increased in following years. If all the savings are achieved to offset that further increase, the total cost in the end will be this perfect zero sum game of $26 million. I am saying to the minister that that does not always happen, for the reasons I outlined.

Whoever is in government after March 2018 may well have a situation where you are told by your CEO that you have to keep existing staff, and you do not achieve the savings, but you still have to find the money to pay the premium, which may well further increase to ReturnToWorkSA. So, they are important budget issues before we move on to the issues about where the improvements are going to be in terms of managing injured workers and claims, for example.

The Hon. P. MALINAUSKAS: I understand the tenor of the Hon. Mr Lucas's question. The only thing that his remarks do not take into account are the potential savings that are going to be realised through the better management of claims in the long term. If you accept the wisdom, as the government does, that having ReturnToWorkSA manage the claims (with all their substantial expertise in doing so) brings a benefit when it comes to the outcome of those claims, that in turn realises a saving. That is an important dynamic in the context of the Hon. Mr Lucas's question.

The Hon. R.I. LUCAS: Again, we can pursue this, if we are reporting progress, when we get to that stage, but can I again refer the minister, and his advisers in particular, to the information in the confidential Bentley-Latham report. I know what ReturnToWorkSA is saying, both to Bentley-Latham and to individuals, but the Bentley-Latham report actually states that the cost of managing under the self-insured scheme at the moment is significantly lower than ReturnToWorkSA's costs of managing workers compensation. I put the figures from Bentley-Latham—not my figures, but Bentley-Latham's figures—on the record in the second reading. I am going from memory but I think it was something like 39 per cent or something of total costs were ReturnToWorkSA's figures whereas for the government currently it was 28 per cent of the total costs were actually management expenses, as estimated by ReturnToWorkSA.

Rob Cordiner and the new management of ReturnToWorkSA say, 'Look, yes, that might have been the case when Bentley-Latham did it 12 months ago or nine months ago but we are hoping to improve and our costs are going to reduce'—and that may or may not be the case. That is the reason why in the second reading I said that this is all a bit pre-emptive. It may well be that in two or three years ReturnToWorkSA can demonstrate that the confidential Bentley-Latham report was two years too early or three years too early and ReturnToWorkSA is a much better manager and operator.

However, there is certainly no evidence that the government's own confidential report to back up what the minister has just indicated—and I accept that he was given that as advice—and the reason why the minister refuses to release the Bentley-Latham report, having commissioned it, is that it just does not support his argument. If it did support his argument he would have released it to individual members to convince them about the merit and the worth of the particular program.

From our viewpoint, as we indicated at the second reading, we do not have any ideological fight in relation to this. Essentially, we are unconvinced by the evidence. There is nothing in the second reading and there is nothing that has been given to us, because the questions have been ignored, that would convince any sensible person, I think, to say, 'This is the reasonable way to go and the appropriate way to go.'

If, at some stage in the future, a government can convince someone: here is the evidence, and let us do it that way because ReturnToWorkSA is managing it better, then fine, but at the moment that does not appear to be the case. There are many other questions that I have and I know the Hon. Tammy Franks has some questions which I think she wants to highlight that still have not been answered. My request to the minister would be that once the Hon. Tammy Franks speaks, or indeed anyone else who has questions that have not been answered, it would make sense to reconvene this committee when there are answers that have been prepared to all of those questions, rather than us having to repeat them again and delay the committee proceedings.

The Hon. T.A. FRANKS: I rise to ask the minister if he has been provided with a cheat sheet or some sort of fact sheet with some 10 or so questions that I asked at the second reading stage to provide answers to, or should I just start to read them out again?

The Hon. P. MALINAUSKAS: Yes.

The Hon. T.A. FRANKS: Excellent.

The Hon. P. MALINAUSKAS: I believe the Hon. Tammy Franks asked about the increased cost for Education, particularly in the area of special needs. Government agencies, including Education, are already fully budgeted for future costs associated with workers compensation claims. The proposed arrangements will result in no net expenditure increase but rather a change in the nature of expenditure over time from the direct costs of workers compensation which will phase down to a payment to ReturnToWorkSA.

I understand that on 31 May the Hon. Ms Franks asked a question regarding the AEU's concerns that principals will spend more time in the tribunal. The proposed changes will not impact on principals. DECD has a central Injury Management Unit that will continue to have oversight of work injury claims and will liaise with the claims agents regarding any disputes that may arise. It was also asked: what is the government's motivation or was this associated with privatisation? The minister has answered this question in the other place and made it very clear that it is not part of some conspiracy theory in aid of privatisation or 'fattening the pig'. As the minister himself said, 'There is no market and there is no pig.'

There was a question regarding no evidence that the system is broken and whether the public sector is underperforming. The rationale for change is not based on the performance of the public sector, as previously stated. It is about consistency, efficiencies and streamlining the management of work injuries. ReturnToWorkSA has made significant improvements in the quality and consistency of claims management services to over 50,000 registered employers and their workers in the state over the last two years. The government considered whether there were any opportunities for the Crown to also benefit from strategies that ReturnToWorkSA has employed.

Taking into account that ReturnToWorkSA is solely focused on work injury claims as its core business, it makes sense to streamline the management of work injury claims for the Crown. The Crown, although one employer, operates in silos with the individual agencies replicating claims management processes. There is no overarching risk management approach and most agencies have developed their own processes and practices in the management of their work injury claims. ReturnToWorkSA has developed IT systems and data analytics that would be of huge benefit to the Crown in identifying and managing risks. This level of data capability is currently unavailable within the Crown.

I believe the number of staff impacted was a source of concern. The Commissioner for Public Sector Employment issued a communication in May to all agency chief executives, stating that over the next 12 months there would be no reduction in the Crown injury management workforce as a result of the transition of work injury claims management to ReturnToWorkSA. Crown injury management staff will continue to be required to manage the current claims, as only claims with a date of injury on or after 1 July will be managed by ReturnToWorkSA. Some of these claims may require management for up to three years (inclusive of medical entitlements).

In addition, there will still be a requirement for all agencies to have ReturnToWork coordinators in accordance with section 26 of the Return to Work Act 2014 to work with ReturnToWorkSA to support their injured employees in their recovery and return to work. I understand you are wondering whether public sector claims managers have to train EML and GB case managers. My advice is the answer is no. ReturnToWorkSA's claim management agents are skilled and trained in the management of work injury claims.

Regarding your question on consultation, there has been extensive engagement and consultation with key partners regarding the implementation of the transition. This has included regular fortnightly meetings with the Commissioner for Public Sector Employment, SA Unions and the PSA regarding the transition. All unions and associations have received formal correspondence regarding the proposed changes.

Governance and working committees are in place, with key government agencies to oversee and contribute to the implementation of the transition. An information session for all government injury management and HR staff was presented by the Commissioner for Public Sector Employment. Crown injury management staff have been extensively engaged in a variety of workshops regarding the changes for the opportunity to consult on the implementation of ReturnToWorkSA's service delivery model.

Meetings with agency CEs, CFOs and HR officers have been held to discuss the transition, provide information on the financial impacts and discuss the new service delivery model. The government project team continues to work with all key partners to ensure that all appropriate consultation and engagement continues to occur.

How have public sector employees been informed of the changes? I am advised that public sector employees have been provided with a number of written communications from the Commissioner for Public Sector Employment, as well as a face-to-face information session run by the commissioner. There have been eight workshops run by the Office for the Public Sector for public sector injury management staff. There is a website that provides information on the changes, as well as the opportunity for public service staff to ask any questions. There are also frequently asked questions on the Office for the Public Sector website.

How have injured workers been engaged or communicated with? I understand that until such time as the bill is determined, it is deemed unnecessary to contact injured workers. I understand that one of the Hon. Tammy Franks' questions was: why is Minda, RSB and also RDNS exempt from the changes? The bill allows for these instrumentalities to be exempt from the commencement date that will apply to the rest of the Crown. In respect of each of these instrumentalities, the minister has given clear assurances that we will work out a way so that they are not negatively impacted. ReturnToWorkSA is working with the entities in question to explore the most appropriate insurance arrangements for them. The options to be explored include private self-insurance or premium paying employer in the general registered scheme. As mentioned, the minister has made it clear that he will ensure that these organisations are not negatively impacted by this proposal.

Finally, I understand you are asking why the Return to Work Corporation of South Australia Act is being amended. The Crown cannot form part of the registered ReturnToWorkSA premium paying scheme without a legislative amendment. As the bill represents a change to the administration of the Crown scheme, not a change to the entitlements within the scheme, it is appropriate that the amendment be to the Return to Work Corporation of South Australia Act, which deals with the administration and operation of the Return to Work Corporation.

The Hon. T.A. FRANKS: I thank the minister for his answers from the information that he has been provided with. I note that in my second reading contribution I said that I was not at all engaging in the debate about whether or not this was fattening up the pig, so I found it interesting that that was one of the answers. I am not sure that the minister covered the response on asking for the Bentley-Latham report to be tabled and how much has been spent on the Bentley-Latham report. They were two glaring omissions in the answers to the questions I put on notice in the second reading debate.

I also asked quite specifically for the number of claims managers currently employed in the public sector to be provided. When I asked for the consultation process, I did not ask for meetings, I asked for a list of the external and internal stakeholders to be provided. I will add to that: at what point were they engaged in this consultation? Was it in the drafting of the bill, or was it after the bill was already prepared? If the timing could be provided, that would be useful.

I did raise concerns that have been raised with me by the AEU of South Australia. They had a meeting with me the day before I made my second reading contribution; as we know, this bill has been a somewhat rushed process. The AEU has now had time to write, I think, to other members of parliament, but certainly to myself and so I reiterate some of their concerns. They have raised concerns that I would like addressed when we resume at clause 1. I note that we are probably going to report progress now.

They have flagged that the loss of DECD self-insured status will result in the following occurrences: the loss of experienced DECD claims management staff; the imposition of a return-to-work premium on schools and preschools; increased costs overall to DECD schools and preschools; increased administrative accountability for leaders; increased administrative workload for leaders; salaried costs of injured workers performing modified duties being met by schools and preschools; the loss of early intervention support; increased legal disputation; and DECD schools and preschools losing control of human resources and human resources outcomes.

I ask the minister to take that on notice and bring back a response in the continuation of the debate on this bill in clause 1. I also seek leave to table the letter that the AEU of South Australia has sent to myself, dated 2 June 2017, outlining their concerns, and ask that the minister respond to that letter in the debate.

Leave granted.

The Hon. T.A. FRANKS: Further, given that we have not been provided with the payment amount for the Bentley-Latham report, can the minister confirm that amount? I have been told that it is $111,288.02. It would be good to know whether the price there is indeed right or not. With that, I have several other questions, but it would have been good to get all the questions answered as we commenced clause 1. I look forward to the response to the AEU's written verbalised concerns.

The Hon. P. MALINAUSKAS: We will take some of those questions on notice. The one that did jump out from the Hon. Ms Franks that we do have an answer for at hand is, of course, the number of staff working in claims management. I am advised that number, as mentioned earlier, is approximately 140 FTEs.

The Hon. R.I. LUCAS: Just before we report progress and apropos of the earlier discussion, can I just quote for the minister's benefit the actual sections from pages 26 and 27 of the Bentley-Latham report in relation to management expenses. They relate to this issue about ReturnToWorkSA saying to the government that they are going to reduce costs because they are more efficient.

What Bentley-Latham have said to the government is that currently the level of management expenses in the insured scheme—that is, ReturnToWorkSA scheme—is significantly higher than in Crown agencies. They say that the current costs for the insured scheme are around 0.5 per cent of remuneration, which is 39 per cent of 2015–16 injury year claim costs. Page 26 of the report notes that the equivalent figure for existing Crown agencies is 28 per cent of 2015–16 injury year claim costs, or 0.3 per cent of total remuneration.

Management costs are actually 28 per cent of total costs in the existing arrangements that are in SAPOL and DECD and others, and it is actually 39 per cent in ReturnToWorkSA. Clearly, there are no savings to be achieved, according to Bentley-Latham. My question when we reconvene is: does the government accept what Bentley-Latham, their own confidential advisers, have said, that, 'Hey, it's actually more efficiently being handled in terms of management costs and expenses by SAPOL, DECD, Health and a variety of other areas as opposed to the equivalent costs in ReturnToWorkSA'?

The Hon. P. MALINAUSKAS: Again, we will take those questions on notice.

Progress reported; committee to sit again.

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