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Workers Compensation Self-Insurance

On 3 August 2004 Kevin Andrews tabled in the Federal Parliament a declaration (signed by Minister Andrews on 7 July 2004) to allow Optus Administration Pty Ltd (Optus) to apply for a workers' compensation self-insurance licence under the Comcare scheme.

Section 100 of the Safety, Rehabilitation and Compensation Act 1988 (Commonwealth) gives the Minister a discretionary power to declare a corporation as eligible to be granted a licence if it:

  • is, but is about to cease to be, a Commonwealth authority; or
  • was previously a Commonwealth authority; or
  • is carrying on business in competition with a Commonwealth authority or with another corporation that was previously a Commonwealth authority.

If ultimately granted a self-insurance licence under Comcare, Optus would be the first such self-insurer that is not a current or former government owned agency.

In its June 2003 submission to the Productively Commission inquiry into National Workers Compensation and Occupational Health and Safety Frameworks, Optus submitted the following:

  • A number of workers' compensation schemes are under financial pressure because their premiums do not sufficiently fund their claims. These funds are increasing their premiums. Employers with a track record of effective claims management and relatively lower overall claims are seeing their premiums rise.
  • The costs of the state and territory-based workers' compensation schemes are becoming expensive for these employers. Optus expects to pay over $6 million in workers' compensation premiums in 2003/04. This is approximately 0.9% of its wages costs.
  • If Optus received a national licence to become a self-insurer at or before 1 July 2003, the savings to Optus would be minimal in year one. In this year Optus would need to fully provide for claims received plus potential injuries incurred but not reported as well as provide for a prudential margin. The margin would ensure that Optus had no financial exposure if it suffered unexpected adverse claims. However, after year one Optus would expect savings of some $2 million per annum.

VTHC wrote to the Victorian WorkCover Authority 11 August 2004 regarding this matter and requested information on details of the Authority's assessment on the effect on the Victorian WorkCover scheme if Optus was to become self-insured under Comcare and the implications for both the Victorian workers compensation and OHS systems if Optus is granted a self-insurance licence.

The Victorian Government is of the view that if left unchecked, the expansion of Comcare is likely to lead to:

  • increases in premium for small business through the loss of cross-subsidies from larger employers, undermining the recent reforms to the premium system
  • increasing costs for all remaining employers who will have to cover a reduction in funding for the VWA's health and safety regulatory system.
  • a loss of access to common law damages for injured workers under Comcare, and cherry-picking by lawyers who target VWA for lump-sum compensation claims by these workers even though their employer has fled the scene and is not contributing
  • less chance of rehabilitation of injured workers by management within these companies given there are no financial incentives to manage their pre-exit claims.

These move by Optus has the support of the Federal Minister, who has neglected to apply his own guidelines governing this process by not consulting Victoria or any other State about the impact that these decisions may have on the States' schemes.

The Victorian Minster has written twice to the Commonwealth, outlining the concerns of the Victorian Government and asking that they not take any further action prior to consultation.

Optus were approved by the Safety, Rehabilitation and Compensation Commission for Comcare self-insurance on November 1 2004 to take affect from 1 December 2004.

The Victorian WorkCover Authority issued proceedings in the Federal Court seeking an injunction on administrative law grounds to stop the Commonwealth from taking any further action on Optus' application prior to meaningful consultation. The matter was heard in early November 2004 and is set down for trial on 25 November 2004.

It is difficult to make an assessment of the impact on workers and the state systems of major companies moving to a federal self insurance scheme without the information we have requested. Our added concern is that once one company gets through many more will follow.

The Victorian Government believes that certain Toll Group (Toll North, Toll transport and Toll IPEC) have preliminary approval for federal self-insurance from Kevin Andrews.

Under the rules of Comcare, during the Self Insurance Licence Application Evaluation, Comcare must take into account the attitude of workers and list how Comcare will assess the views of workers

Workers Compensation National Self-Insurance

Update 6th December 2004

The Victorian WorkCover Authority issued proceedings in the Federal Court seeking an injunction on administrative law grounds to stop the Commonwealth Government from taking any further action prior to meaningful consultation on the Optus application for National workers compensation self-insurance.

The matter was heard in early November 2004 and was set down for trial on 25 November 2004.

On November 1 2004, the Safety, Rehabilitation And Compensation Commission approved the Optus application and granted Optus a self-insurance license to take affect from 1 December 2004.

As the Federal Court trial date approached Optus advised Comcare that it would now postpone its move to the national system and would not take up its license until 1 March 2005.

At the resumption in the Federal Court the VWA additionally launched a constitutional challenge, arguing that the Commonwealth's laws infringe s.51(xiv) of the Constitution which prohibits the Commonwealth from making laws that cover State insurance matters. A decision on both the administrative law and constitutional points will be made after the next listed hearing on 28 January 2005.

On the administration matters the court accepted that the Federal Minister's declaration affects the VWA's interests, and it doesn't matter about the magnitude of that affect- $1 or $100.

The court was keen to understand the impact on workers despite arguments form the Commonwealth and Optus that they didn't matter.

The Court commented that "it would be a strange consequence if employees lose a right to bring a common law claim without being asked 'what do you think?'." "To make sense of this I have to find out where and when employees have a right to be heard".

With regard to Occupational Health and Safety regulation we understand that several large national employers have approached the Commonwealth Government about the possibility of establishing a national OHS jurisdiction for employers self-insured under Comcare. We understand that the Commonwealth Government is exploring the possibility of using the external powers of the Constitution to apply OHS legislation to cover national self-insurers once Australia's obligations under ILO Convention 155 (Occupational Safety and Health Convention, 1981) commence in March 2005.



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