ACC books plunge $7.2b into deficit as state insurer proposes hiking levies

Injured people take longer to return to work than a year ago, costing ACC more. Photo / NZME

The Accident Compensation Corporation concedes there’s room for it to tighten its processes, as it proposes increasing the levies it charges to help pay for rising claims costs.

However, the state insurer warns the constrained health system is hampering efforts to get injured people rehabilitated, back to work in some cases and off its books.

ACC said, in its just-released annual report, that “lower-than-expected rehabilitation performance” contributed towards it reporting a wider-than-expected $7.2 billion deficit in the year to June. In the previous year, it reported a $911 million surplus.

ACC noted the cost of providing services and compensation to injured people increased by 16% over the year.

The average claimant who received weekly compensation for less than a year took 69.7 days to return to work at the beginning of the fiscal year. By the end of the year, this number had risen to 72.8 days.

While ACC has developed a “Three-year Investment Plan” to help improve its performance, it noted the situation wasn’t clear-cut.

It pointed to staff shortages across the wider health sector delaying how long it takes claimants to access health services and increasing the length of time between consultations.

“Timely and regular access to primary, secondary and tertiary care are critical to rehabilitation,” ACC said.

Another issue ACC faced was that two court judgments increased the scope of what it covers and the breadth of who’s entitled to this coverage.

This pushed up its outstanding claims liability, or its estimate of what it will spend on claims related to injuries that have already occurred, to the tune of $3.6b.

Victims of unreported childhood sexual offending, who are unable to work as adults, are largely the beneficiaries of this.

ACC is figuring out how to interpret and implement a Court of Appeal ruling (ACC vs TN), including by back-paying some victims of sexual offending.

Because ACC’s financials are consolidated within those of the Government, the financial headwinds it faced in 2023/24 materially affected the Government’s books, published last week.

The Treasury attributed $4.1b of the Government’s $12.9b (operating balance before gains and losses) deficit in 2023/24 to ACC.

The Government’s deficit was the largest since 2020, when an enormous amount was spent on the Covid-19 response.

The pinch for the governing parties is that they campaigned on both getting the books back to surplus quickly and keeping taxes down.

Minister for ACC Matt Doocey now needs to decide whether to hike ACC levies to enable ACC to better cover its costs, so it doesn’t weigh on the Government’s books.

Last month, he said, “It is my expectation ACC will look at existing costs within the scheme to ensure that any levy increase is absolutely justified before final decisions are made.

“I have also set clear expectations to ACC around improving rehabilitation performance by the end of the parliamentary term, and it is my expectation ACC will better use injury prevention as a lever to improve its performance.”

ACC is proposing to increase the levies it collects from vehicle owners to cover the costs of injuries that involve moving vehicles on public roads by up to 7.8% a year over the next three years.

It is also suggesting upping the levies it collects from wage and salary earners to cover injuries suffered by workers outside the work environment by up to 4.8% a year over the next three years.

In addition, it is proposing to hike the levies it collects from employers and self-employed people to cover injuries that happen in the work environment by up to 4.8% a year over the next three years.

Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.