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THE HON BILL SHORTEN MP
Minister for Employment and Workplace Relations
Parliament House
CANBERRA ACT 2600
Dear Minister
I am pleased to provide you with a Report of my part of the Review of the Performance, Governance and Financial Framework of the Comcare scheme (the Review) in accordance with your media release of 24 July 2012.
The Review was tasked with ensuring that the Comcare scheme is exemplary in its scheme design as well as in its service delivery. It was also to ensure that the federal workers’ compensation arrangements reflect contemporary social models and best practice, taking into account arrangements within Australian and overseas accident compensation schemes.
This Report deals with my part of the terms of reference relating to:
· the performance of the Comcare scheme and ways to improve its performance; and
· the financial and governance framework of the Comcare scheme.
The Review has consulted with Comcare scheme stakeholders and considered their views in arriving at the recommendations enunciated in this Report.
In essence, the Review found the Comcare scheme to be working satisfactorily. The recent deterioration in return to work outcomes and financial performance has led to premium increases and there are issues arising from the terms of reference that require attention to restore the Comcare scheme to its rightful status in accordance with paragraph two above.
I have taken the liberty of forwarding an embargoed copy to Mr Peter Hanks QC for his consideration while awaiting your consideration of this report.
May I take this opportunity to express my appreciation for the Review Secretariat who undertook much of the research and drafting of the Report. Any errors, omissions or oversights are my responsibility.
Yours sincerely
Allan Hawke AC
7 December 2012
abbreviations and Defined terms
10PP / Ten Point Plan.ACT Government / Australian Capital Territory Government. The ACT Government is covered by the provisions of the Safety, Rehabilitation and Compensation Act 1988 and pays premiums to Comcare.
AAT / Administrative Appeals Tribunal.
ADF / Australian Defence Force.
APS / Australian Public Service.
Australian Government agencies / Includes relevant Financial Management and Accountability Act 1997 and Commonwealth Authorities and Companies Act 1997 bodies who pay premiums under the Comcare scheme.
CAC Act / Commonwealth Authorities and Companies Act 1997.
CASA / Civil Aviation Safety Authority.
CCRF / Comcare Retained Fund.
Comcare / The organisation as established pursuant to Section 74 of the Safety, Rehabilitation and Compensation Act 1988.
Comcare scheme / All arrangements covered by the Safety, Rehabilitation and Compensation Act 1988, including self insurance arrangements.
CRF / Consolidated Revenue Fund.
CSO / Claims Service Officer.
DAKPI / Determining Authority Key Performance Indicator.
DEEWR / Department of Education, Employment and Workplace Relations.
DVA / Department of Veterans’ Affairs.
Disease claims / Claims usually arising from repeated or long term exposure to an agent or event, including mental disease/stress claims.
FMA Act / Financial Management and Accountability Act 1997.
FTE / Full Time Equivalent.
Licensees / Corporations granted a self insurance licence pursuant to the provisions of the Safety, Rehabilitation and Compensation Act 1988.
LIP / Licensee Improvement Program.
MRCA / Military Rehabilitation and Compensation Act 2004.
MRCC / Military Rehabilitation and Compensation Commission.
Premium payers / Australian Government agencies and the ACT Government who pay premiums to Comcare.
Premium scheme / That part of the Comcare scheme that deals with the premium payers.
PSE / Project Service Excellence.
RSSG / Recovery and Support Services Group.
RTW / Return to Work.
SRC Act / Safety, Rehabilitation and Compensation Act 1988.
SRCC / Safety Rehabilitation and Compensation Commission.
SRCOLA Act / Safety, Rehabilitation and Compensation and Other Legislation Amendment Act 2007.
WHS Act / Work Health and Safety Act 2011.
Review of the Comcare Scheme’s Performance, Governance and Financial FrameworkPage i
Contents
Executive Summary 1
Recommendations 3
Chapter 1 – Background to the Review 9
Safety, Rehabilitation and Compensation Act Review - Terms of Reference 9
Scope of the Report 10
The Review Process 10
The Comcare Scheme 11
Moratorium on Granting Self Insurance Licences 12
Role of the Safety, Rehabilitation and Compensation Commission (SRCC) 13
Comcare’s Role 14
Department of Veterans’ Affairs (DVA) 16
Employers 18
Australian Government 18
ACT Government 18
Licensed SELF Insurers 18
Employees 19
International Comparisons 20
Chapter 2: The Comcare Scheme’s Performance and Ways to Improve its Operation 23
Comcare Scheme Performance 23
History of Scheme Performance 23
Scheme Regulation Overview 25
SRCC Membership 28
Self Insurance Regulatory Framework 29
The Performance of Determining Authorities 35
Rehabilitation Management Systems 44
A National Rehabilitation Framework? 45
Comcare’s Recovery and Support Services 46
Comcare’s Performance as a Premium Paying Employer 46
Key Issues Impacting recent Premium Scheme Performance 51
Recent Comcare Initiatives 53
Project Service Excellence 53
The Ten-Point Plan 57
Audit 59
Improvements to the Delivery of Comcare's Recovery and Support Services 61
An Effective Claims Management System 63
Ongoing Claims Management 64
Incapacity Payments 65
Chapter 3 – Comcare’s Governance 66
Governance Arrangements 66
Background of CAC Act and FMA Act bodies 66
Comcare as a CAC Act Body 67
Establishment of a Comcare Board 68
Chapter 4 - Financial Framework 73
Comcare’s Funding Sources 73
Prudential Management 74
The SRCC and Comcare’s Management ofFinancial Risk Associated with Licensees 79
The Premium Framework 80
Legislative Provisions and SRCC Guidelines 80
The Premium Process 81
Recent Premium Increases 84
The Financial Viability of the Premium Funded Scheme 86
Annexes 88
Annex A - Safety, Rehabilitation and Compensation Act 1988 (SRC Act) Review - Terms of Reference 89
Annex B - List of Consultations 90
Annex C - SRCC’s Accountability responsibilities under the SRC Act and WHS Act 92
Annex D - List of Current Licensees 94
Annex E - Premium Sector KPI Scorecard 96
Annex F - Comcare Scheme and Headline KPIs 98
Annex G - Comcover – an Insurance Scheme Within an FMA Act Agency 102
Annex H - Civil Aviation Safety Authority – A CAC Act Body 103
Review of the Comcare Scheme’s Performance, Governance and Financial FrameworkPage i
Executive Summary
The Hon Bill Shorten MP, Minister for Employment and Workplace Relations’ media statement of 24 July 2012 announced that the Federal Workers’ Compensation Scheme was to be reviewed and modernised. The aim of the review is to modernise the federal workers’ compensation scheme to ensure injured workers are given every opportunity to return to health, independence and work as quickly as possible after a workplace injury.
This Report covers issues announced as part of the review, relating to the Comcare scheme’s:
· performance and ways to improve its operation; and
· financial and governance framework.
The Review found that the Comcare scheme is working satisfactorily. Recent deterioration in return to work and financial performance has led to premium increases - something that has been a feature of most other workers’ compensation schemes in Australia in recent times. The recommendations included in this Report focus on identifying opportunities for improvement. Implementing these recommendations will assist the Comcare scheme in its efforts to improve overall performance and achieve best practice in workers’ compensation arrangements in Australia.
The Report comprises four Chapters.
Chapter One provides an overview of the roles and responsibilities of the various parties involved in the Comcare scheme’s operation.
Chapter Two examines the regulatory arrangements of the Safety, Rehabilitation and Compensation Commission (SRCC) and Comcare, and examines the challenges that exist with regulatory roles being shared by SRCC and Comcare. Recommendations are aimed at improving and strengthening the regulatory arrangements for the Comcare Scheme.
Chapter Two further discusses the role of the SRCC in monitoring the performance of determining authorities, including Comcare, under the Comcare scheme, and the challenges the SRCC faces in providing regulatory oversight of Comcare in particular. This is important as both the SRCC and Comcare share the scheme regulatory role and the SRCC relies on Comcare to carry out its regulatory functions. This Chapter also reviews the regulatory framework for licensees and compares it to the framework for Comcare as a determining authority for the premium paying scheme. The performance of the Comcare scheme is examined and the performance outcomes of the premium paying scheme are compared to that of the licensees. The effectiveness of Comcare’s recovery and support services are also reviewed.
As a Commonwealth Authorities and Companies Act 1997 (CAC Act) body, Comcare is unique as its functions centre on both service delivery and regulation, compared with the entrepreneurial or commercial activity typical of such bodies. Chapter Three reviews Comcare’s governance structure and current status as a CAC Act body. The respective attributes of CAC Act and Financial Management and Accountability Act 1997 (FMA Act) bodies are analysed and opportunities for improving Comcare’s governance structure are identified.
Chapter Four discusses Comcare’s financial arrangements. Comcare recently reported a considerable operating loss, which led to significant increases in the premiums payable by Australian Government agencies and the Australian Capital Territory (ACT) Government (the premium payers). This increase is intended to put Comcare in a better financial position to meet outstanding claims liabilities in coming years. In light of this, Chapter Four addresses Comcare’s premium framework, including how premiums are determined and distributed across premium payers and when they are notified and required to pay. At present, premium payers report conflicts between the timing of the development and finalisation of Comcare’s premiums and finalisation of their financial year budgets, which presents a budgeting challenge for them. Similar issues are reportedly experienced by self-insured licensees in relation to the licensing fees paid to Comcare.
Finally, Chapter Four explores Comcare’s prudential management arrangements for the premium-funded scheme. Unlike insurance companies operating in the private insurance sector who are subject to the requirements of the Australian Prudential Regulation Authority (ARPA), Comcare is not subject to the supervision of a specific regulatory body in this area and so it needs to establish its own prudential framework.
Recommendations
Recommendation 1
That the Minister for Employment and Workplace Relations confer with the Minister for Veterans’ Affairs to appoint the CEO of Comcare as an ex-officio member of the Military Rehabilitation and Compensation Commission (MRCC) or a non-ADF member of the Department of Defence, with responsibilities to liaise with Comcare.
Recommendation 2
The Department of Employment and Workplace Relations (DEEWR) should provide administrative support to the Safety Rehabilitation and Compensation Commission (SRCC) to provide a separation of powers from the body (Comcare) that the SRCC is regulating.
Recommendation 3
The SRCC should establish a more robust regulatory framework to monitor the claims management performance of Comcare as a determining authority, using relevant aspects of the arrangements currently in place for licensees.
Recommendation 4
4(a): The Minister appoint a member other than from DEEWR to represent the Australian Government premium payers on the SRCC.
4(b): DEEWR continue to be an SRCC member in its capacity as the policy “owner” of the SRC Act.
Recommendation 5
The SRCC should establish a consistent year-to-year approach to the methodology it uses for setting the licence fees for each tier status under the Licensee Improvement Program (LIP) and engage in an education campaign to explain this to the licensees.
Recommendation 6
The Safety, Rehabilitation and Compensation Act 1988 (the SRC Act) should be amended to allow the SRCC to grant group licences to companies of licenced self-insurers with more than one entity, subject to satisfying all prudential requirements, in order to reduce administrative costs for scheme participation.
Recommendation 7
The moratorium and competition test should be lifted, allowing national employers to join the Comcare scheme.
Recommendation 8
The SRCC should establish a process to satisfy itself that each applicant for self insurance under the SRC Act meets the criteria associated with determining that they are a national employer.
Recommendation 9
The SRC Act be amended to allow the ACT Government and other SRC Act premium payers to apply and be approved as a determining authority, subject to meeting the same audit and performance reporting requirements for licensees under the Comcare Scheme.