Delays getting access to health services one factor behind $7.2b ACC deficit
Wednesday, 16 October 2024
Accident insurer ACC has reported a $7.2 billion annual deficit for the year to the end of June.
The deterioration in its books from a $911m surplus last year was mostly due to an increase in the number and expected cost of claims, which in part resulted from adverse court rulings that meant people were entitled to more compensation.
The latter included a bill of more than $3b that is expected to result from a Court of Appeal ruling that victims of sexual abuse are entitled to compensation for loss of earnings from the time they were abused, rather than the date they sought treatment.
Deputy chief executive Stewart Robie said that meant victims could be entitled to weekly compensation “potentially going back 40 years”.
New injury claims rose 3.6% on the previous year.
But ACC chief executive Megan Main said its ability to get people back to work quickly did not meet expectations and contributed to its deficit.
On average, people receiving weekly compensation from ACC for less than a year were off work for 73 days, up from 70 days at the start of its financial year.
That was partly due to factors outside ACC’s control, including “pressures in the wider health sector and access to services”, Main said.
“The wider health sector continues to experience workplace pressures, which can adversely impact rehabilitation performance and the delivery of injury prevention programmes,” ACC stated in its annual report.
“Timely and regular access to primary, secondary and tertiary care is critical to rehabilitation,” it said.
“External pressures like health sector pressures led to delays in access to services, timeliness between consultations and changes to medical certification processes which all influence rehabilitation timeframes.”
Health Minister Shane Reti noted pressures on the health system were “one of many factors impacting the performance of ACC”.
“ACC have also noted that the most significant increases have been in the ‘outstanding claims liability’, and the estimated provision for policy changes following the outcomes of the two Court of Appeal rulings.”
ACC Minister Matt Doocey said in a forward to ACC’s report that he had “challenged ACC to deliver rehabilitation more efficiently”.
ACC’s overall financial position is not just driven by consistent long-term trends and can swing around due to factors such as changes to forecast interest rates, which frequently reverse.
The insurer made clear claimants should not be alarmed by the deficit, but said there was a risk that the cost of meeting claims could shift on to future generations, which is something ACC’s funding arrangements are designed to try to avoid.
Last month ACC asked the Government to approve steep hikes to its levies on vehicles, employers and workers to help plug its funding gap.
It has estimated those proposals would see the total cost of ACC levies for a family with a household income of $85,000 and two vehicles rise to $28.48 a week from July, from $27.16 currently, and to $31.48 a week from July 2027.
Main said it had been aware of the financial position outlined in its annual report when it released those proposals for consultation, so in that sense it did not include fresh surprises.
The deficit was also reflected in the government accounts released by the Treasury last week, she said.
The value of the fund ACC maintains to meet the cost of future claims rose 7.6% to $51.6b.
But it failed to achieve its goal of delivering a 0.15% higher return that it would have received had it invested its assets passively, after costs, instead undershooting its benchmark by 0.11%.
Chief investment officer Paul Dyer said the “tech bubble” in the United States had been a factor.
The NZ Super Fund also failed to its achieve its benchmark investment return in the year to June, for only the fourth time in 14 years, making bonuses its staff might otherwise expect in the two years ending June 2027 much harder to achieve.