by Kevin Hague
There are quite a number of nasty legislative and regulatory provisions coming into force today. Among them are Nick Smith’s Experience Rating Regulations for ACC.
Experience rating will result in an individual employer’s ACC levies being adjusted up or down on the basis of their work injury record. The idea is supposedly that individual employers will respond to the prospect of increased or reduced levies by improving workplace safety.
On the face of it, that doesn’t sound like the craziest of ideas, until we look at how experience rating operated when ACC were last required to use it. When experience rating was in place in the 1990s it created perverse incentives both for employers and for ACC. The 1990s experience revealed:
- Experience rating had a negative financial impact on the financial performance of the ACC scheme – more funds were paid out in levy rebates resulting from positive experience ratings than received in loadings on levies due to negative experience ratings.
- The formula for experience rating changed each year in an attempt to address the above problem – resulting in year to year uncertainty for employers.
- Experience rating placed pressure on ACC staff to remove costs by moving claims from the work account to other accounts and increased the likelihood of employers contesting that an injury was a work injury, with resultant uncertainty and delays in cover and rehabilitation for the injured person.
- ACC were required to spend significantly more time and money in defending cost allocation through the dispute resolution process rather than focusing on rehabilitation of claimants.
Helen Kelly from the NZ Council of Trade Unions hits the nail on the head when she says:
Rewarding employers for a lower claims rate doesn’t reduce accidents but provides incentives for accidents to be covered up – either not reported, or misrepresented as having happened out of work, or bullying employees not to seek treatment. This will weaken health and safety practice by distorting the incidence of and reasons for accidents.
It will also lead to the end of industry-wide approaches on health and safety issues as employers focus on their own enterprise, reducing innovation and the sharing of learning across employers in a sector. Workers will suffer because their industry as a whole will not learn from the experiences of others.
And as the author of the ACC scheme, Sir Owen Woodhouse, has himself pointed out, experience rating runs counter to the community responsibility principle upon which ACC was founded.
This isn’t about reducing workplace injuries at all. It is about forcing ACC to behave more like an insurance company in preparation for its privatisation.