In February 2010, WorkCover Queensland released a discussion paper entitled Ensuring Sustainability and Fairness. It detailed the substantial financial setbacks the state’s workers’ compensation insurer had suffered during the GFC and sought to identify ‘additional drivers’ behind what WorkCover termed an ‘emerging financial situation’.

In recent years overall claims costs have burgeoned in the sunshine state, while other sources of revenue—i.e. employer premiums—have remained stagnant.

According to WorkCover Queensland, increasing claims costs are largely attributable to increases in common law claim numbers and payouts, particularly cases where Whole Person Impairment (WPI) has been in the 0-10% range.

WorkCover’s proposed solution? Restrict worker access to common law and raise employer premiums by more than 20%, or face losses of $8.6 billion by 2018.

Within days of the release of the discussion paper, an anonymous letter containing extraordinary allegations was hitting the in-boxes of unions, lawyers, employers and lobby groups.

Faced with a dire financial situation, the letter alleges, senior figures in WorkCover Queensland decided that legislative change was required to reduce claims costs. Unable to convince government of the merits of this reform, they cleared the Common Law Department of all its legally qualified managers and instructed new staff to:

• Assess the value of the claim at the outset, “with little or no factual and / or medical evaluation”;
• Not contest claims; and
• Settle early.

This has led, the letter continues, to “significantly inflated” initial estimates, counter offers and claim settlements, and will lead to higher employer premiums.

 “The strategy was to get employers to be angry and to place pressure on the government to change the legislation,” the letter says.

Is such Machiavellian self-sabotage far-fetched?

One employer—Boral Resources—was sufficiently convinced by the contents of the anonymous letter to attach it to their submission to the discussion paper, so it is now available to be read—irony of ironies— on a Queensland government website.
 
It is certainly plausible that the Queensland government would be resistant to simultaneously raising the ire of both unions and employers by cutting worker entitlements and hiking premiums. 

In the past, Queensland Labor has gotten considerable political mileage out of the state’s unusual workers’ comp arrangements.

 “WorkCover Queensland is among the most generous for employees and offers the lowest premiums of any state in Australia,” Peter Beattie said in the lead-up to the 2007 federal election.

He was backed up by then-Minister for State Development, Employment and Industrial Relations, the Hon. John Mickel, who claimed that, “Anyway you look at it, the State scheme is the standout.”

Yet there is a case for reform.

Unlike workers in most Australian workers’ comp jurisdictions, Queensland workers have all but unlimited access to common law, with no cap on the amount of damages payable and no risk of having to foot anyone else’s legal bills if their case is rejected.

The industry perception that many of these claims are speculative and unfair is one that WorkCover seems to share. In a letter to industry heavyweight Anglo American Metallurgical Coal, WorkCover Chairman Ian Brusasco last year described such claims as “opportunistic”; an interesting spin on the generosity Peter Beattie vowed to protect.

Employer premiums, at $1.15 per $100 of wages, are significantly lower than in Victoria, New South Wales, and South Australia; which looks like an untenable status quo given the financial pressures bearing on the scheme.

During the GFC, WorkCover Queensland lost approximately $800 million in investment returns. In the same two year period, an underwriting shortfall of approximately $500 million was incurred, putting WorkCover at an operating deficit of $1.3 billion before tax.

Reform may be essential; but what kind of reform?

WorkCover’s proposed response to its financial difficulties has been focused outwards, on legislative change, rather than internally, on WorkCover processes. While there is some stakeholder support for legislative reforms (predictably, unions are all for raising premiums, while employers support limiting access to common law), many submissions to the 2010 discussion paper raise concerns about WorkCover’s internal operations. These concerns resonate with the allegations made in the anonymous letter.

The Queensland Resources Council (QRC), for instance, claims that “A number of QRC members have provided us with examples of instances where WorkCover has settled for figures as much as three times higher than what individuals were willing to accept.

“QRC also heard evidence of claims being settled regularly despite the fact that WorkCover had not contacted the employer or properly investigated the matter.”

The QRC submission also includes a delicately phrased expression of curiosity about why, in the rush to cut benefits to workers and raise employer premiums, WorkCover has not considered internal cost savings. “As a principle, a culture of enhanced efficiency is not at odds with WorkCover’s objectives,” the QRC notes.

However, when internal cost cutting has occurred at WorkCover, its efficacy is questionable.

The QRC’s  accusations of insufficient investigation and communication are backed up by the Queensland Branch of the Australian Orthopaedic Association (AOA), which argues that, in line with WorkCover’s 2008 eradication of an on-site salaried medical position, “The principle reason for the observed increase in Common Law Claim numbers and post-settlement payments seen in the last fiscal year is the lack of medical advice and / or oversight available to customer service representatives internal to Queensland WorkCover.”

The AOA alleges that WorkCover is more interested in settling claims than in ensuring that they are legitimate, or in looking after ill and injured workers.

The Queensland government seems, however, to be falling in with WorkCover. “One thing is certain,” Minister Dick told parliament in February, “action has to be taken even if the economic crisis continues to ease.”

What kind of action will Queensland opt for? And who wrote the scarlet letter?