Thursday, May 26th, 2011

In March I wrote that employers and workers alike face another year of uncertainty with a range of issues likely to impact upon the troublesome WorkCover Scheme.

In more recent times there have been some further upheavals which give cause for concern and justify my view that we are certainly, so far as WorkCover is concerned, experiencing a year of uncertainty.

Changes at the Top

A couple of weeks ago it was announced by WorkCover that Jeff Matthews (Deputy CEO WorkCover SA) and Ian Rhodes (CFO WorkCover SA) have been made redundant.

Mr Thompson, who arrived from New South Wales to take over the role of CEO from Julia Davidson just 12 months ago confirmed that the positions of Deputy Chief Executive and Chief Financial Officer were “no longer required in WorkCover’s organisational structure”. He went on to say that the structure, “has been realigned with our new strategic direction and has refocused the organisation on enhanced service delivery to injured workers and employers”.

With the unfunded liability sitting at $865 million dollars it is difficult to accept that the position of Chief Financial Officer of this embattled organisation is redundant. Ian Rhodes was, in his role as CFO “responsible for strategic and day to day management of revenue, finance and investment functions, strengthening actuarial modelling and performance monitoring and reporting capacity”. With the many financial challenges facing the Scheme and the proposed changes to the Employer Payment System one would think that a CFO had an important role in the structure.

Similarly, it is a little difficult to understand how the position of Deputy CEO can be made redundant at this point in time.

Rehabilitation Report

Mr Thompson’s avowed aim to realign the structure of WorkCover and refocus the organisation on enhanced service delivery to injured workers and employers will be tested in the coming months as WorkCover assesses the results of the independent review into the use of vocational rehabilitation services in the Scheme which was carried out by Price Waterhouse Coopers’ partner (and my name sake) John Walsh.

The report found that there were too many rehabilitation providers in SA and that claims were over serviced without corresponding outcomes.

Claims management by EML was criticised in the report which concluded that there was “limited upfront and strategic case management practice” which was exacerbated by inexperienced case managers.

While it may be appropriate to criticise claims management by EML it would be unfair if criticism were deflected from WorkCover because EML can only operate with the policies and procedures imposed by WorkCover and it would be important to assess the terms of the contract which exists between WorkCover and EML to determine whether there is sufficient incentive for EML to produce outcomes rather than adhere strictly to WorkCover policy, procedures and requirements.

One of the key findings from the review is that, “the Scheme shows little evidence of improved return to work performance, in spite of very heavy referrals to and cost of vocational rehabilitation compared to comparable schemes”. This is a damming finding for WorkCover particularly as the rehabilitation industry is represented on the Board of WorkCover by Ms Sandra DePoi. Ms DePoi has been a board member since July 2003 and her business interests include one of the largest providers of rehabilitation services to WorkCover.

A New Employer Payment System for the Scheme

During 2010, WorkCover commenced consultation with employers on a new employer payment system. The bonus – penalty scheme was removed from 1 July 2010 with all employers now paying the published industry rate.

We can expect WorkCover to introduce an experience rating system to replace the bonus – penalty scheme. The amount an employer can expect to pay in premium will be impacted by industry and employer experience thereby providing an incentive for employers to improve their claims experience through good OHS and injury management practices.

WorkCover is also likely to introduce a retro paid loss system in conjunction with the experience rating system and it will likely be modelled on the system introduced in New South Wales in 2009.

The retro-paid loss system would only be available to large employers with demonstrated capacity and resources to manage their OHS and injury management. The retro-paid loss methodology is designed to provide large employers with an alternative to traditional scheme insurance or self insurance.

However, there are disadvantages associated with the scheme and although designed as an alternative for self insurance I doubt that it truly competes with the financial and cultural benefits associated with self insurance and the ability to maintain complete control of the injury management process.

We will provide detailed guidance to employers who may be considering entering into the retro?paid loss system after its introduction into the Scheme has been confirmed by WorkCover.

The Review of the 2008 WorkCover Reforms

The review headed by former SA Courts Administration Authority Chief Bill Cossie and senior Price Waterhouse Coopers’ partner Chris Latham has received many submissions from employer and union groups. Criticisms are understood to have included the assertion that the new provisions were confusing, complex, unreasonable or unworkable.

I understand that the report will be tabled in Parliament and made public at the end of the month. The report following so soon after the review into rehabilitation will further highlight the poor performance of the Scheme and Patrick Conlon will have the difficult task of deflecting criticism from the role that government has played in the continued deterioration in the performance of the Scheme.

To read John Walsh's (Managing Partner, Donaldson Walsh Lawyers) March Special Report on the WorkCover Scheme and the full May Update please visit http://www.donaldsonwalsh.com.au.

To contact John directly please visit his profile page at http://www.donaldsonwalsh.com.au/our-people/john-walsh

 

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Adelaide, Lawyers, Business Law, WorkCover, Workers Compensation, Commercial Law

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