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Rau sets hard boundaries for WorkCover

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The State Government is set to play hardball in its rewrite of WorkCover laws.

The proposed new scheme includes a two-year cap on income maintenance and will be extended to workers on current long-term injury arrangements.

“To get people back to work you need hard boundaries and these hard boundaries will be my ‘unmoveable’ in negotiations,” Industrial Relations Minister John Rau told InDaily today.

“The present scheme is a failure; it’s time to play hardball.”

Rau said the changes would almost wipe out WorkCover’s future liabilities of more than $1.2 billion and allow a reduction in levies paid by employers for WorkCover coverage.

“Look, as I’ve said before, the present scheme is a failure.

“Had the scheme been managed better, employers would have been paying less.

“We’ve made significant improvements to the way its been managed, but to get premiums down to a (nationally) competitive level, you have to completely restructure the scheme.”

Announcing the proposed Recovery and Return to Work and Recovery Bill 2014 to replace the Workers Rehabilitation and Compensation Act 1986, Premier Jay Weatherill said the new laws would be the “most significant WorkCover reforms in a generation”.

The changes include:

“These reforms will be the most substantial changes to the WorkCover in nearly 30 years and will be vital for South Australian businesses, big and small, to remain competitive,” Weatherill said.

“These are savings in the order of $180m per year for South Australian businesses.

“It is equally important for injured workers who have often been let down by the scheme in the past, and must be supported as best as possible to return to work.

“We have acknowledged that the scheme in its current form does not sufficiently support injured workers to return to work, leading to an increased unfunded liability and higher premiums for business.”

In January, the State Government released a policy paper, A new recovery and return to work system for South Australians, which lays out the key principles for the reform.

Rau said the Government will now speak to interested parties about the legislation before presenting a Bill into Parliament this year.

“The aim is to have these changes ready for full implementation by July next year.

“This is a new scheme, not a tinkering around the edges like previous attempts to improve WorkCover.

“I’ve spent a year working on this. It’s necessary.”

The proposed change most likely to be resisted is the capping of long-term claims.

Rau said the transitional arrangements to the new scheme would wipe these claims out of the system.

“There will firstly be a ‘work capacity’ review of all those claimants.

“Then, some of those claimants will be given a chance to exit the scheme (via a lump sum payment).

“And the remainder will be treated as though their injury had occurred on July 1, 2015 and they will have a maximum two years income maintenance from that point.”

Rau said he expected the full support of the Liberal Party for passage of these reforms quickly through parliament.

Last week State Liberal leader Steven Marshall said WorkCover was a top priority.

“I rang (the Premier) Wednesday to wish him all the best at the swearing-in ceremony at Government House and reminded him that our state faces some challenges,” Marshall said.

“I said ‘we face significant issues in South Australia and I hope your government is going to address them’.

“I raised WorkCover as a top priority and that was the extent of it in the three minute conversation.

“He didn’t mention any plans or specifics, so obviously I haven’t agreed to anything – he hasn’t raised anything.”

The State Government first admitted that WorkCover was a major problem in October last year.

Rau said the scheme was shot.

“It’s buggered,” Rau told InDaily last year.

“We’ll decommission the scheme and start again.

“It’s been amended, patched over and fiddled with for years and in the process has become so disliked, the only thing to do is to rub it out and start again.”

WorkCover administers workers’ compensation for more than 430,000 employees of almost 50,000 businesses.

Last year it managed 16,774 claims, collected $667 million in employer levies and paid out more than $809 million in claims.

The gap between income and expenditure is mostly covered by a massive $2.25 billion investment fund; its holdings in shares, property and cash delivered investment returns of $253 million.

Even with the investment income, WorkCover’s projected gap between estimated claims and estimated income leaves it with an unfunded liability of $1.2 billion.

Rau, who took over responsibility for WorkCover early in 2013, conducted an internal review of the organisation.

Recent history

WorkCover’s continuing increase in future debt was meant to be fixed by extensive reforms in April 2008, that came into force in July that year.

When the new laws were in place the unfunded liability had reached $984 million.

The reforms sparked angry protests from unions, not convinced they would do anything other than marginalise injured workers.

Employers were hoping improved scheme performance would deliver lower levies.

The liability went down slightly for two years to $982 million in 2009-10 and $952 million in 2010-11.

In 2011-12 it took another major leap as WorkCover Corporation posted a $1.389 billion in 2011-12.

History shows that despite a succession of further changes to claims management, legal services, redemptions and executive staffing, WorkCover’s promised improvements have failed to eventuate.

The model of a State-owned Corporation administering workers compensation was the social democracy dream of the Bannon Labor Government’s industrial relations Minister Jack Wright.

Responsibility for compensation was taken from the private sector insurance companies and a structure set up to ensure  all employers carried the responsibility of paying premiums.

It has now evolved into a corporation where responsibility for the management of worker’s claim is outsourced to private sector agents Employers Mutual SA and Gallagher Bassett.

Its legal advice and representation services are outsourced to Adelaide law firms Minter Ellison and Sparke Helmore.

Rehabilitation services are provided by a raft of suppliers.

Rau said in October that he accepts that the SA model is the “worst” of Australia’s 11 workers’ compensation systems.

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