Helen Kelly: Private sector and ACC a bad mix

Helen Kelly. Photo / Mark Mitchell

The news that ACC is contracting four private companies to manage the cases of up to 1500 long-term claimants should send shivers down the spine of every New Zealand worker.

Despite its hollow denials (contradicted by its pre-election noises), this National Government is clearly desperate to introduce private sector involvement to ACC, and this is plainly the first move towards much more extensive privatisation of the work account.

This is bad news for injured workers because the experience of private sector case management in both New Zealand and Australia is that claimants receive an inferior and probably more expensive service. It is tainted with perverse incentives for profit.

In a recent article, the northern branch of the Employers and Manufacturers Association (EMA) proposed that New Zealand adopt the workers' compensation system of Victoria, Australia.

There the management of claims is handled by private sector "Third-Party Administrators" (TPA) whilst the levy setting and collection is performed by the government.

Proponents of the Victorian system hoped private providers would compete for market share through efficient service delivery and claims management. Instead they found that providers competed in unhealthy ways. Agents were compelled to impress employers with "tough" claims management and suppression of costs.

The EMA's most alarming proposal is that "TPAs' claims cost overruns can be met by the TPA, creating an incentive to stick to a capped budget". If this is adopted, situations will certainly arise where financial concerns will override the health considerations of injured New Zealanders.

People will miss out on basic entitlements to medical care because the administrators have to meet a budget to turn a profit.

Gallagher Basset, a multinational company that manages claims in Victoria, is one company looking for case management business here. A quick search on the internet shows their name appears on countless consumer watchdog and complaint sites.

This hardly inspires confidence that such a system and its operators will operate to the benefit of the injured worker.

One of ACC's founding principles is community responsibility - which means we recognise the interdependence of our industries.

For example, the economy relies on road workers to build roads that we all need to transport goods and we collectively share the responsibility for their health risks by paying levies to a single public provider.

Labour had already undermined that principle with a self-insurance alternative to ACC known as the Accredited Employer Programme (AEP). Employers participating in the scheme take on the management of injury, and administer payment for any compensation granted.

Many accredited employers contract their claims and injury management to third-party administrators. A quarter of New Zealand's workforce, employed in 183 of our largest corporations, is already subject to this corporate rather than community model.

In 2008, Research NZ compared return to work outcomes and claimant satisfaction between claims managed by the third parties and those managed directly by ACC.

The research found: "ACC would appear to have a better performing service delivery model than the Accredited Employer Programme based on claimant satisfaction feedback."

The same research found that whilst administrators return people to work faster they were subsequently injured again, indicating people were returned to work before they were ready.

Injured workers have experienced a series of problems with administrators under the Accredited Employer Programme. Union member feedback shows that they regularly provide lower entitlement than ACC.

Some administrator case managers behave in an unacceptably adversarial manner, and become personal about issues. This is less apparent within ACC.

Communication between case managers and claimants is frequently difficult under Accredited Employer Programme, with uncertainty around who the decision-maker is, lack of back-up when case managers are absent and difficulty in making the right contact.

The administrators are also known to routinely instruct claimants to attend an appointment with a preselected specialist, without a meaningful explanation.

The employer-TPA contract should contain provisions to support a claimant's return to work but these contracts are often not transparent or accessible. Altogether there is a lack of consistency across these administrators and research concluded that they act as an additional barrier to people trying to access their legal entitlement.

If the Government shifts claims management from ACC to business, a conflict of interest is created for the financial gain of the business, whilst compromising the welfare of the claimant.

Ultimately it will destroy what is left of the principle of community responsibility by treating ACC as an insurance business in competition with others.

Significantly it has never ruled out opening up ACC to private competition. "Not in this term" is all it has said. The phrase "never say never" might spring to mind. You can see which way the wind is blowing.

* Helen Kelly is the president of the Council of Trade Unions.