Public sector fuels surge in compensation claims

Rising public sector costs, combined with a huge mental health bill, are crippling Victoria’s workers compensation scheme.

The Andrews government has rejected higher premiums as it prepares to fight its first election in November since the pandemic broke out at the start of 2020.

A sharp rise in public sector costs is helping drive the dysfunction in Victoria’s workers compensation scheme, with a confidential report also warning that premiums have been too low for many years.

Victoria’s WorkSafe board ­received a paper on the financial sustainability of the scheme at the start of last year, which outlined how public sector annual costs had doubled over five years.

The report by the strategic ­analytics firm Finity found that the scheme was heading for trouble because of a conjunction of negative circumstances, including high mental health claims, ­deteriorating trends in returning to work, limitations in the ability of agents to drive positive outcomes and risks associated with current funding ratio projections.

The report has never been made public, but was referred to in board minutes on February 23 last year and contributed to the push by management and the board to back higher premiums.

But the Andrews government has rejected higher premiums as it prepares to fight its first election in November since the pandemic broke out at the start of 2020.

The minutes show that the board was briefed by Finity, ­describing the report as a “cabinet-in-confidence” item and that it was told the financial trajectory of the WorkCover system was ­unsustainable. “And will require a range of immediate and longer-term interventions in order to protect the sustainability of the scheme,” WorkSafe reported.

“Finity provided recom­mended areas of focus in order to arrest identified trends, noting that claims management changes will not, on their own, be sufficient to address the financial risks to the scheme.”

Under the Victorian system, both the private and government sectors contribute premiums to help fund the workers compensation system.

Opposition Treasury spokesman David Davis said the blowout in public sector costs represented a double standard. Picture: Mark Wilson

But the system, overseen by WorkSafe, is in dire trouble, having received $850m in taxpayer bailouts in the past year, with more expected to follow.

The Australian revealed this week that WorkSafe management had told the board last year that premium increases of up to 20 per cent were needed to stabilise the scheme’s finances. The compensation scheme is known as WorkCover.

Opposition Treasury spokesman David Davis said the blowout in public sector costs represented a double standard. “(Premier) Daniel Andrews, (Treasurer) Tim Pallas and the WorkSafe ministers have lost control of the public sector component of the WorkSafe scheme, with huge surging costs over the last five years. This clear incompetence and mismanagement predates Covid by years,’’ he said.

“Why does a double standard apply to the failure of occupational health and safety in the public sector?’’

At the February 23 meeting the board discussed that there needed to be an urgent overhaul of the system. It said mental injury claims were having a heavy ­impact on the insurance sector.

A WorkSafe spokesman said mental health claims were fuelling the increased costs.

“Increased costs to the WorkCover scheme are being driven by the rising number of workplace mental injuries, which often require more complex services and longer treatment,” the spokesman said. “This includes the costs incurred by the public sector, which employs many of Victoria’s frontline workers.”

It is forecast that in 2022-23, 50 per cent of all weekly income support paid by the WorkCover scheme to injured workers is ­expected to be for mental ­injury claims.

A government spokeswoman said: “While it’s positive that workers are putting their hand up to get help, we know that growing numbers of mental health injuries are putting pressure on our WorkCover scheme.”