Workers compensation system explanatory note December 2019
About this month’s system performance results
Effectiveness
RTW rates continue to decline
RTW is a key indicator of the Workers Compensation system performance and health. Research has indicated that returning to work to recover at work makes an important contribution to a worker’s recovery.
Across the system the RTW rate is measured using work status codes at time intervals of 4, 13 and 26 weeks. As shown in the following table the RTW rate at 4 weeks has dropped by 1.8 percentage points since December 2018, at 13 the week time interval for the same period this deteriorated by 4.4 percentage points and at 26 weeks by 5.4 percentage points.
This month, the RTW rates continued to deteriorate however it appears that the rate of decline is not as steep as we have seen in previous months. Compared with the year on year analysis reported in September 2019, the rate of deterioration appears to be slowing, however the current RTW calculation is an historic metric looking back at the RTW journey of customers and as such is slow to react. In the September results, the decline was more significant at 4, 13 and 26 weeks with 6.8 percentage points, 6.5 percentage points and 7 percentage points decline year on year respectively.
Table 1 - RTW performance – timeseries
RTW rates | December 2019 | December 2018 | Percentage points change between December 2018 and December 2019 |
|---|---|---|---|
4 weeks | 63.7% | 65.5% | - 1.8 |
13 weeks | 75.9% | 80.3% | - 4.4 |
26 weeks | 81.3% | 86.7% | - 5.4 |
The following table shows the significant differences across the insurer types for RTW performance. At 4, 13 and 26 weeks the performance in delivering RTW effectiveness by the NI was lower than the other insurer types and lower than the overall scheme performance.
Table 2 RTW performance – by insurer type
| RTW rate | RTW rate | RTW rate |
|---|---|---|---|
Scheme | 64% | 76% | 81% |
Nominal insurer | 61% | 73% | 79% |
Government self-insurer (TMF) | 70% | 82% | 87% |
Specialised Insurers | 72% | 83% | 86% |
Self-insurers | 70% | 79% | 83% |
Efficiency
Weekly benefits costs are increasing
In addition to the RTW rates being calculated using work status code data, SIRA has analysed the system’s effectiveness at returning workers to work based on the costs and number of workers who were off work and receiving weekly benefits each month. The rationale for this is that if the worker is off work, they should be receiving weekly benefits. Using this methodology, in December 2019, there were 34,110 workers off work receiving $133M in weekly benefit payments. Compared to the same time last year this is an increase of 24.8% (6,782) in the number of workers off work and on weekly benefits. In December 2018 the weekly benefits bill was $102M. Looking at the December 2017 figures, the changes were more significant with a 43.9% (10,406) increase in the number of workers on weekly benefits.
In December 2019 the weekly payments represented 42.4% of the total payments made during the month. For December 2018, the weekly payments were 38.3% of all payments. The average duration a worker was receiving weekly benefits in the first 6 months of their claim in 2013/14 was 23.3 days. This has steadily increased to 27.8 days in 2018/19 confirming the decline in performance across the scheme in returning workers to their employment.
The NI performance in relation to weekly payments is showing a level of cost increase which is unprecedented for December 2019 and one which poses a significant risk to the scheme viability. This increase can be seen in the following graph
Graph 1 NI weekly payments
December 2019 had an increase of 3.9% in the number of reportable claims however, the number of active claims increased at a higher rate with increases of 13%. This suggests that whilst there are modest increases in the number of new claims being reported month on month, the number of claims with recent payments is increasing as is the duration over which payments are made for claims.
The impacts of the COVID-19 pandemic on the NSW Workers Compensation scheme are not yet clear. SIRA is monitoring the scheme and is focused on responding to the impacts and potential impacts on its schemes and customers. There have been some regulatory changes in the last few weeks. Information about these changes can be found on the SIRA website. For more information on COVID-19 claims advised to SIRA by the insurers, please use this link.
Viability
Claim payments are increasing
Like the number of claims, the payments data is also relatively volatile on a month to month basis. Whilst SIRA values transparency and timeliness of reporting, there may be claims volumes and payments reported which are understated. SIRA retrospectively adjusts the data based on insurer submissions and/or corrections in insurers subsequent month’s reporting.
Overall claim payments continued to increase this month, with payments totalling $3.2B in the 12 months to 31 December 2019. The increase for the 12 months to December 2019 compared with the 12 months to December 2018 is 12% or $380M. The primary drivers for this increase were the weekly payments (as referenced above) and the medical payments. December 2019 weekly payments are a 23% ($254M) increase on the December 2018 figure. The December 2019 medical payments are a 9% ($82M) increase on the December 2018 payments.
Further analysis of medical payments shows that private hospital expenditure increased by 8% ($10M), whilst surgery expenses increased by 4.6% ($5M). Orthopaedic surgery (excluding spinal surgery) constituted 60% of the total surgery expenses.
Payments increased for psychological services by 31% for these services. Year on year the number of psychological claims reported has risen by 13% or 62 claims.
Rehabilitation services payments declined by 13% ($22M), which may be contributing to the declining return to work rates. This trend varies across the insurer types with Government self-insurers (TMF) paying an additional $6M for an additional 21% of their claims whilst the NI reduced payments by 29% across 10% fewer claims.
Active claims
Active claim numbers are 13% higher than in the same reporting period last year
The stability of claim numbers and claim costs is an important measure of the Workers Compensation system stability and viability. An indicator of this stability is the number of active claims in the system (where an active claim is defined as a claim with payment activity within the last 3 months).
In December 2019 there were 101,991 active claims reported which is 13% (11,690) more than in December 2018.
The NI has the largest market share of the Workers Compensation insurance scheme in NSW (74%) and their active claims rate continues to increase which is of concern to the regulator. This month however it would appear that there is some flattening of the rate of increase as can be seen in the following graph.
Graph 2 NI increases in active claims rate
The continued increase in the number of active claims across the scheme combined with other performance results e.g. the increased duration and numbers of workers on weekly benefits, the increased costs of weekly benefits and medical costs and the additional potential impact of the current COVID-19 pandemic and the associated economic downturn represents a significant risk to the scheme viability.
Customer experience
Enquiries, complaints and disputes decreased in December 2019
SIRA and WIRO received 2,493 complaints and enquiries in December 2019 which is a decrease from the previous month where 3,211 enquiries and complaints were received. This downward trend in December is a consistent year on year trend observed across the past 3 years.
From January 2019, all complaints and enquiries from workers were serviced by WIRO. Following this change the number of complaints serviced by WIRO has increased significantly with enquiries rising from 217 in December 2017 to 756 in December 2019. Similarly, the number of complaints serviced by Workers Compensation Independent Review Office (WIRO) rose from 247 in the same period to 589.
There were also fewer disputes this month with 556 disputes being received by insurer and the Workers Compensation Commission, compared with last month. As with enquiries and complaints a seasonal downturn in the number of disputes lodged for the month of December has been observed. The dispute rate for December 2019 is 0.5% based on the 101,991 active claims in the system.
Feedback on these reports
This monthly dashboard includes several enhancements, feedback and comments on the dashboard reports are welcome. Please email us at: [email protected]
About the data in this report
The dashboard reports data from multiple sources to provide insights into the system performance of the NSW Workers Compensation system. The report is structured on SIRA’s performance framework, reporting on performance measures of effectiveness, efficiency, viability, affordability, customer experience, and equity.
SIRA as the regulator of the NSW Workers Compensation system monitors the system regularly. From time to time there are discussions and presentations from providers within the Workers Compensation ecosystem including insurers, medical and therapeutic providers etc about these metrics.
Methodology, data notes and data sources
The data presented in this report are derived from monthly claims submission data, annual declarations provided to SIRA from NSW workers compensation insurers, the Workers Compensation Commission and the Workers Compensation Independent Review Office and SIRAs complaints and enquiries services.
The financial and cost information in this report is presented in original dollar values with no indexation applied. Costs in the workers compensation scheme are subject to a variety of potential inflationary factors including wage and salary rates, medical fee schedules, statutory benefit indexation and general price inflation. As there is no single index which adjusts for all potential factors, costs have been shown in their original dollar values for simplicity.
The premium value used for the Nominal Insurer in this report is calculated as total premium payable net of GST and levies, such as the dust disease levy and mine safety levy. Premium for self-insurers is deemed premium, calculated as wages covered multiplied by the premium rate applicable for the appropriate industry class. Premium for Government self-insurers (TMF) is the value of the deposit contributions made by each member agency. Premium for specialised insurers is the gross written premium, net of GST and levies, such as the dust disease levy and mine safety levy.
Insurers regularly update claims data based on the progression of a claim. This may result in changing claim details month to month.
Glossary, business terms and data source information
Standard terms | Definitions |
|---|---|
Active claim | An active claim is a claim that has had any payment activity in the three months as at the end of the same reporting month. |
Affordability | A reflection of the cost of premiums for workers compensation as a percentage of the reported NSW wages bill. The premium value used for the Nominal Insurer is calculated as total premium payable net of GST and levies, such as the dust disease levy and mine safety levy. The premium for self-insurers is deemed premium, calculated as wages covered multiplied by the premium rate applicable for the appropriate industry class. The premium for Government self-insurers (TMF) is the value of the deposit contributions made by each member agency. The premium for specialised insurers is the gross written premium, net of GST and levies, such as the dust disease levy and mine safety levy. Premium information is updated annually. |
Benefits paid directly to workers | Includes weekly payments, common law, s66, death benefits, commutations and miscellaneous payments. |
Benefits paid for services for workers recovery and return to work | Includes medical costs, allied health services e.g. rehabilitation payments to support claimants. |
Bodily location of injury / disease | The bodily location of injury/disease classification is intended to identify the part of the body affected by the most serious injury or disease. Only 1-digit bodily location of injury is used. |
Claim payments types | Claims reported in the reporting month, classified as either 'psychological injuries' for mental disorder claims or 'all non-psychological injuries' for all other claims |
Claim payment development | This chart shows claim payments by accident year. That is, comparing payments of accidents occurring in the 2019/20 financial year with the prior accident period at the same stage of development. This chart allows for like for like comparisons across financial years and is presented in original dollar values with no indexation applied. The financial and cost information in this report is presented in original dollar values with no indexation applied. Costs in the workers compensation scheme are subject to a variety of potential inflationary factors including wage and salary rates, medical fee schedules, statutory benefit indexation and general price inflation. As there is no single index which adjusts for all potential factors, costs have been shown in their original dollar values for simplicity. Note the customer impacted by Section 39 of the act that exited the system up to June 2018 are excluded |
Common Law (WID) payments | Lump sum payments for damages and common law legal expenses incurred by the worker or agent/insurer, pursuant to Part 5 Common Law remedies, Sections 149 to 151AD, Workers Compensation Act 1987 and Section 318H, Workplace Injury Management and Workers Compensation Act 1998. WID stands for ‘Work injury damages’ and this term is used interchangeably with ‘common law’ |
Commutations | The actual gross amount of commutation awarded or agreed upon for the claim. This refers to compensation where a commutation of the claimant's right to compensation has been made by the insurer. The up-front lump sum payment is made to an injured worker in place of continuing weekly compensation award and future medical and hospital expenses, pursuant to Part 3, Division 9 Commutation of compensation, Sections 87D to 87K, Workers Compensation Act 1987. |
Complaint data | Is derived verbatim from reports from customers. Whilst some data cleansing processes are undertaken by SIRA the reporting is verbatim from customers and may from time to time reference an incorrect insurer and/or insurer type. The number of complaints received in the reporting period. |
Complaint types reported to SIRA | Complaints received in the reporting period, split by complaint type. |
Cost to the system for weekly benefits paid per month | This graph shows the costs each month for weekly benefits payments The financial and cost information in this report is presented in original dollar values with no indexation applied. Costs in the Workers Compensation system are subject to a variety of potential inflationary factors including wage and salary rates, medical fee schedules, statutory benefits indexation and general price inflation. As there is no single index which adjusts for all potential factors, costs have been shown in the original dollar values for simplicity |
Death payments | Funeral expenses, weekly payments for dependent children and lump sum payments paid to the dependants or estate of the deceased worker, pursuant to the Workers Compensation Act 1987 No. 70 and Workers Compensation (Dust Diseases) Act 1942. |
Dispute rate | The number of disputes lodged (internal review, merit review, procedural review and workers compensation commission disputes) in the reporting month divided by the number of active claims as at the end of the same reporting month. |
Disputes lodged/finalised | Disputes lodged/finalised in the reporting period. |
Enquiry | An enquiry is defined as a customer call regarding information or advice that is general in nature. The number of enquiries received in the reporting period. |
Injury Financial year | The financial year in which the injury occurred. Starts on 1st July and ends on 30th June the following year |
Insurer expenses | Includes administration and operating expenses, regulatory costs, investigations, insurer’s legal fees etc. |
Internal review | An internal review is a review of the work capacity decision by someone within the insurer other than the person who made the decision. The source of information for the number of internal reviews is the insurers’ submission data to SIRA. |
Investigation payments | Payments for insurer and worker investigation expenses, pursuant to Sections 9A, 11A and 44A, Workers Compensation Act 1987 and Sections 45A, 330, 331, 337, 339 and 376, Workplace Injury Management and Workers Compensation Act 1998. |
Justice | Customers’ perception of how equitably, fairly and justly they were treated is an important measure of the performance of the system. The SWA 2018 RTW survey included asking workers about their perceptions of equity. Workers rated their experience across these four broad dimensions of equity and perceived justice:
Survey respondents rated their agreement with a range of specific attributes on a five-point scale. For the SWA 2018 RTW survey, a range of specific attributes were measured within each of these four dimensions, comprising some 15 attributes. A higher mean score denotes a higher level of agreement (or a higher perceived sense of justice/fairness). |
Level 1 complaints | A level 1 complaint is defined as a complaint received by frontline staff where an insurer is notified (via email) by the Customer Advisory Service on behalf of the complainant. |
Level 2 complaints | A level 2 complaint is an escalation of an unresolved level 1 complaint. |
Lost time | Monthly average, over the last 12 months, of workers who had lost time. |
Lump sum (S66 and S67) | Section 66 payments are lump sum payments for the permanent loss or impairment of a specified bodily function or limb, or severe facial or bodily disfigurement, including interest, pursuant to Section 66, Workers Compensation Act 1987 and as provided by the Table of Disabilities or whole person impairment (WPI) and Ready-reckoner of Benefits Payable. |
Mechanism of incident | Mechanism of incident applies to claims entered into the insurer’s system on or after 1 July 2011 and uses the Type of Occurrence Classification System, 3rd Edition (Revision 1) Australian Safety and Compensation Council, Canberra 2008. |
Merit review | A merit review is undertaken by an independent decision maker at SIRA who conducts a merit review of the insurer’s work capacity decision and outlines findings and recommendations. These reviews are binding on the insurers. |
Nature of injury /disease | The nature of injury/disease classification is intended to identify the type of hurt or harm that occurred to the worker. The hurt or harm could be physical or psychological. |
Number of workers receiving weekly benefits per month | Number of injured workers receiving weekly benefit payments excluding Section 39 claimants that exited the system until June 2018. |
Other payments | Payments for repair to or replacement of artificial limbs and clothing because of the workplace injury, amounts paid to any approved interpreter service for English language assistance to the claimant, transport and maintenance expenses related to travel costs incurred by the worker and shared claim payments. |
Payment data | Payments made are based on the transaction date. Payments with payment date within the reporting period. |
Procedural review | A review by the Workers Compensation Independent Review Office (WIRO) can follow a merit review by SIRA and is a procedural review of the insurer’s work capacity decision. |
Psychological Injury (ies) | The range of psychological conditions for which workers compensation may be paid, including post-traumatic stress disorder, anxiety/stress disorder, clinical depression and short-term shock from exposure to disturbing circumstances. |
Records submitted | All records received from insurers across NSW. This data excludes administration errors. |
Rehabilitation payments | Payments for a single workplace rehabilitation service, a suite of services provided to assist a worker to RTW with the same employer, a suite of services provided to assist a worker to RTW with a different employer or travel costs of the workplace rehabilitation provider in the delivery of rehabilitation services, pursuant to Sections 59, 60 and 63A, Workers Compensation Act 1987. Rehabilitation treatment includes the initial rehabilitation assessment, workplace assessment, advice concerning job modification, and rehabilitation counselling. Rehabilitation treatment does not include medical, hospital, physiotherapy or chiropractic treatment. |
Reportable claims | A reportable claim for workers compensation or work injury damages is a claim that a person has made or is entitled to make under the Workplace Injury Management and Workers Compensation Act 1998. Claims become reportable once they meet certain liability conditions and/or have received payments. For example, the injury or illness may be physical or psychological and employment must be a substantial contributing factor to injury, except for those claims made by police officers, paramedics, fire fighters, volunteer bush fire fighters and emergency and rescue services volunteers for injuries suffered during journeys to and from work or place of volunteering. Reportable claims include claims from workers whose employer is uninsured. Where a split by insurer segment is shown, claims of uninsured employers are included with the Nominal Insurer segment. Exclusions Reportable claims exclude administration error claims, claims closed with zero gross incurred cost, claims shared between two or more workers compensation agents/insurers and the agent/insurer is not responsible for the management of the claims, and claims with payments only for recoveries, vocational programs or invalid payment classification numbers. Reportable claims also exclude claims for:
|
Reportable claims / payments development | The reportable claims development chart shows the development of reportable claims by injury/accident financial year. |
Return to work rate | The Return to work (RTW) rate is the percentage of workers who have been off work as a result of their employment-related injury/disease and have returned to work at different points in time from the date the claim was reported (i.e. 4, 13 and 26 weeks for the SIRA Stats report). RTW rates are calculated monthly for the last 13 months up to the date of data. The cohort for each RTW measure is based on claims reported in a 12-month period, with a lag to allow for claim development (i.e., the lag for the 4-week measure is 28 days; the lag for the 13-week measure is 91 days; and the lag for the 26-week measure is 182 days). Calculation method for 4-week measure for November 2018 is given below as an example:
RTW Rate=b/a multiplied by 100 SIRA identified data quality issues with the accuracy and completeness of data submitted by the Nominal Insurer (NI). The data revealed a significant deterioration in the NI’s RTW performance. To address the data quality and potential performance concerns with the NI, SIRA carried out a Data Quality audit in December 2018 and commenced a Compliance and Performance Review in February 2019 |
RTW including medical only claimants | The percentage of workers at work at 4, 13 and 26 weeks includes medical only claims where the worker did not leave work. The methodology allows a comparison across insurer types of the percentage of workers who were at work at 4, 13 and 26 weeks intervals from the date the claim was entered into the system |
The average number of days weekly benefits are paid to workers for the first six months post injury | Compares the quarters benchmarked across the previous quarters. The chart shows the average number of days of weekly benefits paid to workers in the first 6 months of their claims. This measure uses work hours lost and injury quarter to calculate the average days Note: the data for these measures requires six months to development. |
Weekly benefits paid per month | Weekly benefit payments paid to injured workers for incapacity excluding Section 39 claimants that exited the system until June 2018. |
Weekly payments | Weekly payments paid to an injured worker for incapacity. |
Workers compensation commission | The WCC is an independent statutory tribunal that has jurisdiction to deal with a broad range of disputes. Most of the compensation dispute applications are Applications to Resolve a Dispute (Form 2) and may involve claims for more than one type of compensation benefit, including weekly payments, medical and related treatment, and permanent impairment. |