Safety, Rehabilitation and Compensation Legislation Amendment Bill 2015
It gives me great pleasure to rise this evening to speak on the Safety, Rehabilitation and Compensation Amendment (Exit Arrangements) Bill 2015. By way of background for those listening and for those reading this later, Commonwealth authorities—for example, the ACT government—and entities including an agency or a parliamentary department are premium payers under the Comcare scheme. Licensees and some Commonwealth authorities who hold a licence self-insure and, accordingly, do not pay premiums to Comcare. Comcare is responsible for paying liabilities associated with injuries sustained by employees of premium payers from Comcare-retained funds under section 90C of the act. Comcare-retained funds should be adequate to meet current and prospective liabilities from year to year. The amendments made by the bill will clarify this intention as well as ensure mechanisms are in place to support Comcare to manage its liabilities in Comcare-retained funds.
On 26 February 2015 the ACT government announced that it is consulting its workforce on plans to leave the Comcare scheme. Consultations were completed on 8 May 2015, only a week ago. If a premium payer as large as the ACT exits the scheme without paying an amount to cover unfunded liabilities, this would further diminish the capacity of Comcare-retained funds to be sufficient to meet liabilities. The associated risk of underfunding would be borne by remaining premium payers or the Commonwealth. This bill proposes to amend the Safety, Rehabilitation and Compensation Act of 1988 to provide for financial and other arrangements for a Commonwealth authority to exit the Comcare scheme.
Firstly, the framework will enable Comcare to determine and collect exit contributions from former Commonwealth authorities and successors of former Commonwealth authorities. This will ensure that an employer does not leave the Comcare scheme without contributing an appropriate amount to cover any current or prospective liabilities that are not funded by premiums the employer has paid before exit.
Secondly, the framework will ensure that employees injured before an employer leaves the scheme continue to be supported by an appropriate rehabilitation authority.
Thirdly, the framework will enable Comcare to determine and collect ongoing regulatory contributions from exited employers or successor bodies.
Fourthly, the framework will clarify that premiums for current Commonwealth authorities and entities such as government departments should be calculated having regard to the principle that current and prospective liabilities should be fully funded by Comcare retained funds and so much of the consolidated revenue fund as is available under section 90C of the act.
Fifthly, the framework will allow Comcare to agree to instalments of an exit contribution being paid over a period of up to seven years after the day on which the determination is made, to allow for run-off of liability estimates.
Sixthly, the framework will provide for Comcare to refund all or part of an exit contribution if an assessment reveals that the amount of available scheme funds attributable to an exited employer exceeds Comcare's liabilities. Determinations of a refund may only be made within the seven-year period immediately after an employer exits the scheme.
Finally, the framework will provide for Comcare to remit the whole or part of an unpaid instalment of an exit contribution if a later assessment reveals that the amount of available scheme funds that is attributable to the exited employer exceeds Comcare's liabilities. The amendments will also make minor contingent amendments related to the Safety, Rehabilitation and Compensation Legislation Amendment Bill 2014—part 2 of schedule 1. Schedule 2 of the bill amends provisions in the act related to the Safety, Rehabilitation and Compensation Commission to streamline appointment processes and ensure appropriate membership of the commission.
That was a little bit of background. This is a straightforward and logical bill that simply takes account of what can and should happen should any premium payer or licensee decide to leave the Comcare scheme. It is important to have such arrangements in place, especially given that the ACT Labor government have indicated that they are looking at a potential departure from the scheme, citing it is as burdensome for claimants and for their employers. They have said:
The Comcare system is quite burdensome, not only for claimants but for their employers ….
Employees injured before a Commonwealth authority leaves the Comcare scheme will continue to receive compensation and rehabilitation under the act. The bill will ensure stability for workers, employers and the Comcare scheme when a Commonwealth authority exits the scheme. The bill also amends the act to clarify that premiums for current premium payers should be calculated having regard to the principle that current and future liabilities should be fully funded by Comcare-retained funds and so much of the consolidated revenue as would be available under the act.
The question is: why are these amendments important? The act is being amended to protect injured employees who remain in the Comcare scheme as well as to ensure the future financial viability of the Comcare scheme. Since 2013-14, Comcare has been progressively restoring the funding position of the scheme. The bill will support existing measures put in place by Comcare to restore funds to adequate levels to meet estimated liabilities. The bill will also ensure that Commonwealth authorities do not exit the Comcare scheme without paying an appropriate amount to cover any unfunded liabilities arising from claims that will continue to be managed by Comcare into the future. This will protect premium payers who remain in the scheme.
We should be aware—this has been touched upon by a couple of senators who have spoken prior to me—that there are two bills here at the moment. The Safety Rehabilitation and Compensation Legislation Amendment Bill 2014 passed the House of Representatives on 26 November 2014, and is currently before the Senate. That bill is focused on expanding the coverage of the Comcare scheme for national employers as self-insurers. The bill excludes coverage for recess breaks where a person is injured during an ordinary recess break away from their employer's premises, unless the injury arises from employment. The bill also excludes an injury arising from serious and wilful misconduct, where it results in death or serious and permanent impairment.
The Safety, Rehabilitation and Compensation Legislation Amendment (Exit Arrangements) Bill 2015 is not, in any way, related to these reforms. That said, given the opposition's obsession with opposing any meaningful reform in this space I do want to briefly touch on the other bill that is currently being considered.
The Comcare scheme generally operates effectively. It achieves relatively high safety and return-to-work outcomes, and it is almost the only scheme in Australia to provide income replacement to retirement age and medical support for life. The legislation underpinning the scheme has not changed much since it was introduced 27 years ago. Workplaces and working conditions, health care and rehabilitation practices, technology, social behaviour and expectations have all changed in that time. Various court decisions have also affected the way the act is applied in practice. To keep pace with the modernisation of work and health practices the scheme needs to be updated. There are also signs that the scheme is coming under pressure. For example, while Comcare's return-to-work rates are better than average, they are actually falling. Some medical treatments are failing to make people better in the long term and employers face rising premiums and other costs.
The proposed amendments aim to do the following: improve return to work outcomes for injured workers; put the focus on early intervention and health outcomes of injured workers; and improve the operation of the system by excluding injuries sustained in non-work activities outside work, excluding secondary psychological injuries, and removing payment for non-traditional treatments. That package of reforms, which will be considered by this place in due course, is important in providing a strong and sustainable scheme into the future to ensure the continuation of Australia's only remaining long-tail workers compensation scheme. Further—and I want to stress this because it is important—in an unprecedented submission to the Senate committee, that package of reforms has been supported by departmental secretaries and agency heads. It has been supported by licensees, and it has broad support in the community.
Submissions from stakeholders, which were picked up by the opposition in its additional comments, related to a different bill. These are falsities, which have been repeated by the opposition, that this bill will impact on state and territory workers compensation schemes. This bill has no impact on states and territories as it only applies to Commonwealth authorities if they exit the Comcare scheme, and it has no impact on premium payers under the state schemes. Concerns have been raised, however, about the impact of another bill currently before the parliament—the Safety, Rehabilitation and Compensation Legislation Amendment Bill 2014—on the viability of state and territory work, health and safety and workers compensation schemes due to the potential exodus of employers, particularly large employers, from those schemes. The concern is that, if large employers with better safety records move to the Comcare scheme, premiums will increase for employers remaining in the state and territory schemes.
The 2004 Productivity Commission inquiry into national workers compensation and occupational health and safety frameworks specifically noted that concern about exiting premium payers from state schemes would lead to volatility in premium rates was not supported by the evidence. Actuarial assessments commissioned by the 2004 Productivity Commission inquiry, and for the 2008 review of self-insurance arrangements under the Comcare scheme, indicated that the impact on those schemes or on remaining employers of the exit of corporations from state based schemes would be minimal. Taylor Fry, in their actuarial report to inform the 2008 Comcare review, concluded that the financial impact of exits to the Comcare scheme from the other Australian jurisdictions had been insignificant.
Assessments commissioned by the Productivity Commission concluded that: the larger the employer, the closer the premium is to the 'true' cost of claims and expenses, such that the exit of large employers would be relatively neutral to the state and territory schemes; and the percentage of exiting employers from state schemes would represent less than 10 per cent to scheme revenues and probably less than five per cent of scheme revenues. In the government's assessment the circumstances have not changed since 2004 and the impact will remain minimal. But, again, I say to the opposition: stop the dishonesty and focus, please, your attention on the bill before the Senate as we speak and not on the other bill.
In conclusion, the bill will ensure that Commonwealth authorities exiting the Comcare scheme cover the costs of their liabilities. This will protect premium payers remaining in the scheme and ensure that injured workers are supported. Any senator voting against this bill is voting against ensuring that injured workers have a safety net should their employer leave their scheme.