National workers comp in reach

Since even Pre-Federation days, Australia’s lack of unified workers compensation and workplace health and safety laws have frustrated companies that employ staff in more than one state.

However, a Bill presently before Federal Parliament could make it easier than ever for multi-state companies to simplify their operations by allowing them to join Comcare, the Commonwealth’s workers compensation scheme, as self-insurers.

The Coalition Government made its first moves in this arena last year, when it lifted the moratorium on private corporations joining Comcare that Labor had introduced in 2007.

In March, the Coalition introduced the Safety, Rehabilitation and Compensation Legislation Amendment Bill, which if passed will remove the current requirement that a multi-state company must either be a former Commonwealth authority or in competition with a Commonwealth authority to be eligible to use Comcare.

It would also remove the need for prior ministerial approval and allow groups of corporations owned by the same holding company to apply to join the scheme through a group licence.

Employers insured through Comcare are also covered by the federal workplace health and safety regime, simplifying matters further.

However, it is not yet assured the bill will become law, as uncertainty remains over whether Labor or the other minor parties will support its passage through the Senate. 

Streamlined savings

Gary McMullen, National Practice Leader at Willis Workplace Risk Practice, has worked with large private companies self-insured through Comcare and says operating through a single scheme can save millions of dollars.

“It is a huge benefit to a business if they don’t have to work through several state-based worker compensation systems which have different rules,” he says. “We regard this bill as a game-changer in terms of reducing the regulatory burden. We are getting so many inquiries now from our clients who want to know more about the Comcare and how to access the scheme,” he says.

The 2004 Productivity Commission inquiry into workers’ compensation and occupational health and safety found there were considerable and unnecessary costs for multi-state employers because they have to comply with multiple regulatory schemes.

Precisely how much will be saved through this legislation is unclear, although current government estimates predict the bill could save businesses up to $30m a year.

However, Jane Hall, Special Counsel with law firm Corrs Chambers Westgarth, says Comcare may well find itself challenged as a regulator because taking on new companies means new industries, new risk and therefore requires new expertise.

“It’s far too early to say whether or not moving to a federal system will necessarily improve workplace safety,” she says.

“However, we can definitely say without doubt this is a huge cost- saving measure.”

“Adding additional employers to the scheme may initially create some challenges for the regulator’s compliance and enforcement activity. But I understand that Comcare is trying to improve its expertise and I suspect we will see them undertaking more investigations and prosecutions in the future.”

Flies in the ointment

Concerns, however, have been raised about Comcare’s recent financial performance. The scheme has run at a deficit in four out of the past five years (including $670m in 2011-2012) and has close to $1 billion in unfunded liabilities.

Although the deficit has since been reduced, the scheme’s funding ratio is currently 64%, well short of its 100% target.

Of particular concern is the fact that costs continue to climb even as claims are falling.

The big culprit is poor return-to- work outcomes, as well as rising costs for both medical treatment and administrative needs.

“Comcare is generally 15% more expensive because it is a long-tail pension scheme,” Willis’ Gary McMullen says.

“That is a big red flag to employers.”

He says a recent overhaul of WorkCover NSW lifted it out of deficit and should be repeated for Comcare, with a particular focus on tapering its benefits and shortening its long-tail liabilities.

“More important is that this again reinforces the need for a national premium scheme,” he says.

“Evidence from overseas suggests that large companies save between 25-40% of their premium spend when they join up to a national scheme.”

“A complete, national workers compensation scheme has been on the agenda since 1994. Happy 20th birthday – we would love to see one implemented soon.”