Four years ago, South Australia (SA) was languishing at the bottom of the workers’ comp pile, with the worst RTW outcomes and financial management in Australia.

In 2005-06, return to work rates in South Australia were 10% below the national average and durable return to work rates 13% below the national average.

In 2005, the average premium rate in SA was 3%. This was the highest in the country, compared to 1.43% in Queensland and close to 2.5% in Tasmania, NSW and WA.

In June 2005, South Australia's funding ratio (ratio of assets to liabilities) was 63%, the lowest rate of publicly managed schemes in Australia and New Zealand.  Most schemes aim to be fully funded, i.e. to have a funding ratio of 100%.

Problems with the SA scheme were widely recognised, leading to the Clayton and Walsh review of the SA scheme in 2007. To quote from the review:

"There is one issue concerning the current South Australian workers’ compensation system upon which there is widespread agreement. That is the judgment that the scheme is failing to fulfil a number of the objects of the Workers Rehabilitation and Compensation Act 1986 ..... to provide “for the effective rehabilitation of disabled workers and their early return to work” (section 2(a)(ii)).”

The consequences of this is that the scheme has been deficient in reducing the “overall social and economic cost to the community of employment-related disabilities” (section 2(a)(iv)) and in ensuring “that employers’ costs are contained within reasonable limits so that the impact of employment-related disabilities on South Australian business is minimised” (section 2(a)(v)).

The terms of reference for the review included the objectives:

• Injured workers should receive fair and equitable financial and other support that should be delivered efficiently and equitably and enable the earliest possible return to work;
• The average employer levy rate should be reduced and contained within the range of 2.25% to 2.75% by July 1 2009; and
• The scheme should be fully funded as soon as practicable having regard to the above objectives.

Objectives also included a balance between equitable provision for the needs of injured SA workers and scheme affordability for SA employers, as well as the adequacy and efficiency of incentives for employers for injury and illness prevention and the effective rehabilitation and return to work of injured and ill workers.

The Clayton Walsh review noted that 30 percent of claimants in New South Wales and Victoria in receipt of weekly benefits at four months post-injury were still on such benefits two years post injury.  However, in SA around 80 percent of claimants receiving weekly benefits at four months post injury were still receiving them two years post injury.

The review also noted the average weekly benefits in NSW and Victorian schemes were in the range $20,000 to $25,000. In SA, the scheme paid an average of $30,000  – 20 percent to 30 percent higher.   And, in SA the ratio of total weekly compensation payments to $billion wages earned in the state was three to four times that of Victoria and NSW.  

The review recommended a number of changes to the scheme, some that would come through changes to the rules (legislation) and some through fostering return to work improvements.  

Changes to the scheme included.

1. Reduction in the wage replacement paid to workers, down to 80% at 26 weeks.
2. Payments would only be beyond 130 weeks if the worker did not have a work capacity.  This was a major change in SA.  
3. Changing the lump sum compensation system to use the AMA guides, and introduction of a threshold level of impairment before a lump sum payment is made.
4. Under the former legislation, workers who disputed a decision to stop or reduce their weekly payments continued to be paid their full weekly payments while the dispute was in progress.  The approach of other systems to stop payments during a dispute of this type to ensure the focus returns to recovery and rehabilitation activities was adopted.
5. The use of redemptions (that is, a one-off payment from WorkCover) to finalise claims from the Scheme where there has not been a return to work was restricted to very limited circumstances.  While figures have never been released, it is thought that a significant proportion of people who received a redemption returned to full time work once their claim was settled.  
6. Employers with 30 or more workers need to appoint a rehabilitation and return to work coordinator. The coordinator must be an employee of the employer and based in South Australia, and coordinators need to be trained and accredited.
7. The employers’ obligation to provide suitable employment was enhanced with increased penalties for breaches.
8. An incentive for early reporting of claims was introduced, where reporting of claims within two business days would result in waiver of the employer's liability to pay the first two weeks of wages.
9. Provisional acceptance of claims was introduced, with liability being accepted unless there was a “reasonable excuse.”

So what happened as a result?

As seen in our analysis of the Return to Work Monitor results, SA continues to perform below the national average for RTW results.  However, there have been significant improvements in RTW rates over the last two years.

This year there has been further improvement in the durable RTW rate. 72% of SA workers were back at work at the time of the interview, described in the Monitor as "durable RTW". This increase builds on the improvement in durable RTW noted in 2008-09.

Over the last three years has been a notable reduction in the proportion of SA workers receiving compensation benefits at the time of Monitor interview.  The proportion of workers still receiving weekly payments from South Australian WorkCover has dropped from 48% in 2007-08 to 35% in 2009-10.

The proportion of SA workers receiving workers compensation payments remains significantly higher than the national average.

The proportion of SA workers identifying someone as making RTW harder has dropped, albeit to a modest degree.    And whilst it has increased since last year, there’s still a substantial drop in the proportion of workers who say their employer made RTW harder, when compared to two years ago.

In terms of the finances, from July 2010 WorkCover levies were reduced for most South Australian employers, with the average premium reduced from 3.00 per cent to 2.75 per cent.  As yet there has not been a major improvement in unfunded liabilities reported.  

At this stage there has been significant improvement in the South Australian scheme. Our interests are not so much in the financial area, but in improving return to work outcomes.

As we have previously said:

When the costs of a workers' comp scheme blow out a financial turnaround is often achieved by simply moving the long-term and most expensive claims off the system.

There are sound medical reasons for preventing long-term dependence on a compensation system, however, to simply move people off the system is not a way to improve health outcomes.

Not managing return to work well entrenches people in long-term disability, to then simply 'move them on' from the system is socially irresponsible. Yet this is approach has commonly been taken by Australian jurisdictions to get out of financial difficulty.

Reducing someone's pay level from 90 to 80% has an impact on their lives, and WorkCover SA has come under fire in this regard. A much greater impact occurs when people lose their job, their sense of self worth, and ultimately their ability to contribute and be integrated within a workplace.

The improvements in RTW in SA are heartening, particularly the reduction in the number of people saying that someone is making their return to work more difficult.

Who knows what changes have actually made a difference? Is it the addition of rehabilitation and return to work coordinator? Is it greater incentive to get back to work with an awareness that compensation payments may not continue into the long term?  Are reduced levels of pay impacting the need to return to work? Or is it the training in working with people now provided to coordinators?

We’d love to hear from our South Australian members, to help us understand what is working with the new changes, as well as whether they're aware of are any costs.