Without the help of third-party administrators (TPAs), the proposed New Zealand Income Insurance Scheme (NZIIS) might not produce optimal results – that is the view of workplace claims management firm Howden Care New Zealand, which has warned of possible delays and increased costs.
As previously announced, NZIIS will be administered by the Accident Compensation Corporation (ACC), which runs the country’s no-fault scheme covering accident injuries. Howden Care, in response to the proposal, pointed to a ‘deteriorating’ performance.
“ACC’s performance has significantly worsened,” noted the rehabilitation and wellness arm, which is part of the global Howden Insurance Group. “In 2016/17 ACC’s performance resulted in 68.4% of injured workers back to work within 70 days.
“In 2020 this had deteriorated to 63.3%. The direct impact for longer durations has seen 2016/17 performance at an average cost per claim of $20,876 vs 2019/20 at $25,723 per claim.”
What we were seeing, according to Howden Care, was not only more claims but also higher costs and longer time off work per claim.
“Both medical providers and NZ businesses are frustrated with ACC’s performance and ability to manage these claims,” the business went on to state. “This is highlighted by the net promoter scores in ACC’s 2021/22 quarterly report.”
The suggestion is that TPAs will have an important role to play for NZIIS to have a chance of success.
“Currently,” said Howden Care, “third-party administrators are contracted by ACC to manage non-work injuries that occur to employees. ACC makes the cover decisions but the TPAs manage the claim. When done this way, the results are improved return-to-work rates and equivalent or higher injured worker satisfaction results.”
Better results were partly attributed to the benchmarking and performance comparison information that is provided back to TPAs.
The Howden unit stressed: “All TPAs have product expertise in managing claims that are similar to the proposed social insurance scheme. Rather than being managed 100% by an inexperienced ACC, TPAs could continue to be utilised to ensure best possible outcomes, and provide the essential benchmarking in a new scheme costing employers and employees $3.54 billion per annum.
“If the scheme intention is to purely pay for loss of income at 80%, the scheme will likely see increases in duration and cost in future years. Simply paying income replacement without the ability to pay for, or enable quicker access, to required specialists is delaying return to work opportunities and will increase scheme costs.”
It added: “ACC’s current experience and the ability for TPAs to leverage off existing relationships and medical providers, has provided better results for all injured workers and significant cost savings for ACC and employers.”
Meanwhile mixed views, as well as questions, have been expressed by several camps ahead of the scheme’s consultation deadline today (April 26) at 5pm.
While the likes of the International Monetary Fund – which believes NZIIS will fill an important social protection gap – and trade union FIRST Union have voiced support, groups including Auckland Action Against Poverty, NZ Disability Advisory Trust, Young Greens, and Poverty Action Waikato have described the proposed scheme as exclusionary.
Other considerations, such as the possible timing of the scheme rollout, have also been put forward. For consultancy giant Deloitte, the NZIIS timetable is pretty ambitious.
Deloitte NZ tax partner Robyn Walker previously pointed out: “Bearing in mind that there are several really difficult issues to grapple with in creating a scheme that is widely supported and sustainable, are the timeframes for implementing a New Zealand Income Insurance Scheme long enough? It is proposed that legislation is introduced in 2022, with the scheme applying from late 2023, a potential 23-month window from discussion document to application.
“A more generous timeline for the New Zealand Income Insurance Scheme may allow more time for upfront policy design and robust scrutiny of the legislation through Parliamentary processes, and of course ensure there is adequate time for employers, employees, and the government itself to get ready once legislative processes are completed.”
There are said to be over 100,000 New Zealanders that either are made redundant, are laid off, or have to stop working due to a disability or health condition every year. NZIIS is being proposed by the government, Business New Zealand, and the New Zealand Council of Trade Unions in response.