Link to original report: https://www.parliament.nsw.gov.au/lcdocs/inquiries/2988/Report%20No%2084%20-%20Law%20and%20Justice%20-%202023%20Review%20of%20the%20workers%20compensation%20scheme%20-%205%20December%202023.pdf

Executive Summary

The Standing Committee on Law and Justice conducted a review of the NSW workers compensation scheme, focusing particularly on the increase in psychological injury claims. Key findings and recommendations include:

  1. The scheme is facing financial sustainability challenges, with declining return to work rates and rising costs, especially for psychological claims.
  2. The workers compensation system, originally designed for physical injuries, may not be fit for purpose in dealing with complex psychological claims.
  3. There is a need for better data collection, particularly on secondary psychological injuries.
  4. Improvements are required in claims management processes, including reducing case manager turnover and minimizing delays in treatment.
  5. A comprehensive review of the entire workers compensation scheme is recommended.

Background

The workers compensation scheme in NSW is the largest defined benefit scheme in Australia, covering over 4.7 million workers. Key bodies include:

  • Insurance and Care NSW (icare): Manages the Nominal Insurer and Treasury Managed Fund
  • State Insurance Regulatory Authority (SIRA): Regulates the scheme
  • SafeWork NSW: Workplace health and safety regulator
  • Independent Review Office: Handles complaints and provides legal assistance

Recent developments include the implementation of recommendations from the 2021 McDougall review and ongoing reforms by icare and SIRA.

Scheme Performance

1. Claims Volume and Payments

  • 110,223 new reportable claims in 2022-23
  • $4.5 billion paid on all claims in 2021-22
  • Total payments increased by 51.1% between 2018-19 and 2022-23

2. Return to Work Rates

  • Overall, 69% return to work within 4 weeks, 82% within 13 weeks
  • Rates are significantly lower for psychological injuries

3. Financial Sustainability

  • Concerns about the financial position of the Nominal Insurer and Treasury Managed Fund
  • Funding ratio for Nominal Insurer was 94% as of June 2022
  • Premium increases implemented to address financial challenges

Psychological Injury Claims

1. Volume and Cost

  • 8,831 primary psychological claims in 2022-23 (8% of all new claims)
  • Active primary psychological claims increased by 15% since 2020-21
  • Average yearly payment: $52,000 for primary psychological claims vs $14,000 for non-psychological claims
  • Higher prevalence in public administration, healthcare, and education sectors
  • Treasury Managed Fund (public sector) has a disproportionately high number of psychological claims

3. Causes of Primary Psychological Injury

  • Work pressure, harassment/bullying, and workplace violence are common causes
  • Exposure to traumatic events more prevalent in emergency services

4. Factors Driving Increase

  • Greater prevalence of mental ill-health in society
  • Changing nature of work and workplace conditions
  • Increased awareness and reporting of mental health issues

5. Fit for Purpose?

  • Debate on whether the current scheme is suitable for psychological injuries
  • Some stakeholders suggest a separate stream or scheme for psychological claims

6. Strategies to Reduce Volume and Cost

  • Mentally Healthy Workplaces Strategy
  • Code of Practice: Managing psychosocial hazards at work
  • Amendments to Work Health and Safety Regulation

Claims Management and Return to Work

1. Issues in Claims Management

  • Adversarial nature of the process
  • Multiple case managers and need to retell injury story
  • Delays in treatment approval

2. Return to Work

  • Declining rates since 2006
  • Early intervention crucial for better outcomes
  • Workplace rehabilitation providers can improve return to work rates

3. Independent Medical Examinations

  • Concerns about multiple examinations, especially for psychological claims
  • Potential for exacerbating injuries

4. Commutations

  • Calls for increased access to commutations, especially for psychological injuries
  • Debate on appropriate safeguards and restrictions

5. Provisional Liability

  • Benefits of early financial support for injured workers
  • Concerns about application of “reasonable excuse” exception

6. Whole Person Impairment

  • Debate on appropriateness as a threshold test
  • Different thresholds for psychological (15%) vs physical (10%) injuries

Recommendations

  1. Implement remaining McDougall review recommendations.
  2. Address declining return to work rates.
  3. Improve collaboration between SafeWork NSW, SIRA, and icare.
  4. Review SIRA’s “significant matter” policy and improve reporting to the committee.
  5. Implement better data collection on secondary psychological injuries.
  6. Develop a whole-of-government return to work strategy for injured public sector workers.
  7. Investigate factors driving high psychological claims in public sector agencies.
  8. Conduct a forensic investigation into psychological claims in the education sector.
  9. Research options for dealing with psychological claims, including as a separate stream.
  10. Develop and implement more programs to manage psychosocial risks in workplaces.
  11. Improve collaboration between research functions of SafeWork NSW, SIRA, and icare.
  12. Implement measures to minimize impacts of case manager turnover on injured workers.
  13. Investigate treatment delays and potential compliance measures.
  14. Consider amendments to require only a single agreed independent medical examination.
  15. Consider increasing access to commutation settlements with appropriate safeguards.
  16. Consider amendments to allow reassessment of whole person impairment and consistent thresholds.
  17. Review use of the Psychiatric Impairment Rating Scale for assessing impairment.
  18. Conduct a comprehensive review of the entire workers compensation scheme.

Conclusion

The NSW workers compensation scheme faces significant challenges, particularly in managing the increasing volume and complexity of psychological injury claims. The committee’s recommendations aim to improve the scheme’s effectiveness, efficiency, and responsiveness to the changing nature of workplace injuries. A thorough review of the entire scheme, with input from key stakeholders, is crucial to ensure it meets the needs of injured workers in modern workplaces.