'Review' of ACC announced as Government confirms steep levy rises

Thursday, 12 December 2024

Labour fears a bigger problem is building in an ACC account funded directly by the Government.

ACC levies on workers and employers will rise by about 5% in each of the next three years – more than double the expected rate of inflation – the Government has announced.

A worker earning $70,000 a year will see $1113 deducted from their pay for ACC levies in the year ending June 2028, up from $973 currently.

The levy on petrol cars will jump from $42.09 currently to $64.26 in three years’ time, while the levy on EVs will rocket from $42.09 to $122.24 – reflecting them not being affected by ACC levies on fuel.

The annual levy on motorbikes with an engine size of 500cc or more will leap from $297.71 to $532.89 over the same period.

Steep levy increases were proposed by ACC in September, shortly before it reported a $7.2 billion deficit in the funds it had to meet the future costs of current injuries.

ACC Minister Matt Doocey said the levy rises were needed to meet the rising costs of the scheme.

The main change the Cabinet had made from ACC’s proposal was to reject its recommendation for a 2.3 cent increase in the 6c-per-litre ACC levy on petrol and make up the difference with annual levies, he told The Post.

“We just didn't think it was right to tag an increase to a specific type of vehicle.”

But he also announced an “independent review” of ACC, reflecting the Government’s concern that its record in getting people back to work quickly after injuries had been deteriorating.

“ACC’s performance has been declining for a decade,” he said.

ACC Minister Matt Doocey says independent review of ACC’s performance needed.

“Rehabilitation rates are down, weekly compensation costs are up and average costs per claim are up.”

The review would look at whether ACC had “the right interventions and settings in place to support accident claimants to return to independence as quickly as possible”, Doocey said.

The Government expected to appoint a reviewer by the end of the year and for them to complete their report within six months.

Doocey said he was concerned by “ballooning” social rehabilitation costs, which refer to the costs ACC incurs helping claimants regain their independence in their daily lives.

Hugh Donald has battled with ACC for many years, which he says has taken a heavy toll.

“The advice I've seen is that personal preference has overridden cost effectiveness.”

Hugh Donald, an ACC claimant who believes the system has failed him for four decades, said an independent review was not sufficient to identify the many and wide-reaching deficiencies.

Donald was left with damaged lungs from working at the Tiwai Point smelter in the early 1980s, and has been involved in multiple - and at times highly publicised - battles with ACC over 40 years.

He started a petition recently delivered to Parliament, demanding a Royal Commission of Inquiry into “miscarriages of justice” by ACC to claimants.

Donald pointed to a review done into ACC’s performance in 2014, which he said did not spark any much-needed change. “ACC is long overdue for a thorough review from top to bottom” and a Royal Commission would achieve that, he said.

ACC chief executive Megan Main said health and social insurance schemes around the world were facing similar challenges dealing with rising healthcare costs and increases in the range of assistance they were expected to provide.

Labour’s Rachel Boyack says ACC’s biggest issue is the deficit in its government-funded non-earners account.

“We hope any findings will further help us improve our rehabilitation performance,” she said.

Labour ACC spokesperson Rachel Boyack said the Government needed to invest more in injury prevention.

“That is ultimately the best way to keep levies as low as possible and prevent hard to workers.”

In addition to the gap between the levy income ACC receives and the funds it needs to set aside to pay for current claims, a wider gap has emerged in its so-called “non-earners account”.

The non-earners account pays for the cost of claims from people who are not in work and is directly funded by the Government.

ACC’s deputy chief executive Stewart McRobie told a select committee last week that account had dropped from being 84% pre-funded at the end of 2023 to only about 48% pre-funded at the end of June.

The main reason was the expected $3.4b cost of a Court of Appeal ruling that abuse victims should be compensated for loss of earnings from the time they were abused, rather than only from when they sought treatment from ACC.

ACC chair Tracey Batten told the Education and Workforce select committee that the vast bulk of that cost was likely to fall on to the non-earners account.

She also said during that meeting that the amount of time claimants were taking off work to recover from injuries had stabilised in the first five months of ACC’s new financial year.

Doocey said the Government was working on the assumption it would need to continue increasing its funding to ACC by 7.5% a year, the current cap on increases.

It would wait until the independent review was complete and the outcome of ACC’s current efforts to improve case management before looking at the case for any further actions.

Boyack questioned whether annual 7.5% increases in government-funding would be enough, given the Court of Appeal ruling.

“The Government needs to do an urgent assessment of what the call on the non-earners account will be,” she said.