RELEASE DATE 30/05/2007
Over reliance on redemption payouts in workers compensation schemes contradicts the primary objective of return to work, has been shown to lead to the development of ‘lump sum’ culture, and can have an overall inflationary effect on schemes, according to WorkCover SA.
“The suggestion that increased use of redemptions would significantly improve the WorkCover Scheme’s funding position demonstrates a fundamental misunderstanding of the financial operation of the Scheme,” said WorkCover CEO, Julia Davison.
“We are firmly of the view – supported by our professional advisers and the experience of other schemes – that WorkCover’s financial position will only improve if the Scheme achieves better return to work outcomes in the long-term without the use of redemptions where capacity for work exists,” said Ms Davison.
A review commissioned by the WorkCover SA Board in 2004 by McEwan Mountford Pty Ltd stated as one of its key findings that, “the sustained use of redemptions to terminate claims appears to have contributed to an increase in longer term continuance rates”.
Twenty-eight per cent of WorkCover claimants have been on the Scheme for longer than three years, making up 45 per cent of the total claims liability.
The primary objective of the Workers Rehabilitation and Compensation Act 1986 is to return injured workers to work. According to WorkCover SA, redemption payments are appropriate only after all other return to work avenues have been exhausted and only then when they are in the interests of both the injured worker and the Scheme.
In 2005-2006, WorkCover identified 1,386 claims appropriate for redemption for a total cost of $75.8 million, compared with 816 claims in 2004-2005, for a total cost of $36.1 million.
“Redemption payments may appear to provide mutually-beneficial outcomes on an individual case basis but at a scheme level, over reliance on redemption payments can undermine return to work objectives, induce unfavourable behaviour change and have an overall inflationary effect on the Scheme,” said Ms Davison.
Media contact: Danielle Martin, WorkCover SA – (08) 8233 2381 or 0418 295 324
The following graph is from the South Australian Restoring Claims Management Excellence – Final Report by McEwan Mountford Pty Ltd publised in May 2004.
The graph shows the continuence rates for each injury month over a number of years. The darker red lines are the older injury months. The lighter yellow lines are the more recent experience. It clearly illustrates the increasing number of injured workers staying on the WorkCover scheme for longer.
