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A clear choice on ACC

Written By: - Date published: 9:59 am, October 29th, 2008 - 48 comments
Categories: ACC, act, election 2008, greens, health, labour, national, progressives, united future, workers' rights - Tags:

If you vote National, United Future, or ACT, you will be voting for the ACC system to be privatised. Consequences of this include:

– $200 million in profits flowing offshore, according to John Key’s former employers Merril Lynch
– higher levies on most workers, as private insurers cherry-pick the most profitable for themselves, leaving the rest to be carried by the public insurer
– currently, the work account subsidises accidents that fall under other accounts. Privatisation will mean these claims have to be funded entirely from tax and other levies like car registration.
– less certain coverage. Private insurers make their money by not paying out claims
– less money for accident prevention. As a monopoly, ACC benefits from accident prevented, so it invests heavily in accident prevention. Private insurers would only have a fraction of the market each, so would only receive a fraction of the benefit from investment in accident reduction. A ‘tragedy of the commons’-type situation.
– more complexity in changing jobs. Different employers will have different insurers, changing obs will require changing insurer.
– getting a job may be more difficult if you are more likely to have an accident if that means higher levies for your prospective employer, eg if you are a young male or overweight.
– private insurance increases the administrative burden for healthcare providers.
– private insurers will try to minimise payouts and force other insurers to make the payouts instead. These boundary issues lead to more court cases. This type of personal injury litigation has choked the US court system.
-if your insurance company collapses when you have an ongoing claim, what will happen to your payments?

If you vote Labour, Green, Progressive (and, presumably, Maori), you will be voting to keep ACC in public ownership and this world-leading system intact. By moving out the point when the pubic system takes over liability for accidents that were covered by private insurers during the brief privatisation period in the 1990s, Labour will reduce the cost of ACC, allowing employer levies and car registration to drop 20% from next year.

48 comments on “A clear choice on ACC ”

  1. the sprout 1

    The worst thing I found with the privatization of ACC was the massive reduction in accountability. With private ‘providers’ there are only the accountants and PR people to decide which discretions should be granted; unlike state provided ACC where there is political and moral accountability that can also be brought to bear on a case.

    When it comes to ACC privatization means much much less accountability for providers.

  2. Tim Ellis 2

    SP said:

    – higher levies for most workers, as private insurers cherry-pick the most profitable for themselves, leaving the rest to be carried by the public insurer

    No there won’t be SP. Workers pay into the Earners’ account, which isn’t proposed to be opened to competition.

    – currently, the work account subsidises accidents that happen at home, during sports, etc. Privatisation will mean these claims have to be funded entirely from tax and other levies lie car registration.

    No it doesn’t. The Earners’ account is self-funding. It isn’t subsidised by the Work account. I suggest you have a look at the ACC website on how ACC is funded.

    – getting a job may be more difficult if you are more likely to have an accident, eg if you are a young male or overweight.

    Why? I don’t understand your point. Young males or overweight people are no more likely to have a work accident than middle-aged females or skinny people. Work accidents are related to work risks. If you are a factory shop machinist, you are more likely to have an accident than as a secretary. The premium is paid by the employer on the risk of the work performed.

    – private insurers will try to minimise payouts and force other insurers to make the payouts instead. These boundary issues lead to more court cases. This type of personal injury litigation has choked the US court system.

    No they won’t. The definition of a work accident won’t change. Whether an accident is work-related is defined in legislation.

  3. Pat 3

    Why did it take 9 years before Labour thought about reducing ACC premiums?

  4. Lew 4

    TE: All these things will change as a necessary consequence of privatisation, which is a necessary consequence of opening the account up to competition.

    If you can rebut my initial competition = privatisation logic challenge here, we might have the basis for an argument. It’s been up since June, and still, nobody has.

    L

  5. randal 5

    so its just another crummy money making scheme for another crummy faceless gang of accountants in australia. hmmmmm

  6. ghostwhowalks 6

    What happens when a private insurer collapses, they after all invest the money for future claims in fancy derivatives and so on.

    HIH went bankrupt a few years ago in Australia and they were among the biggest workers compensation firms.

    The state had to step in , as it seems to do on a weekly basis nowdays.

    But isnt it funny that they want competition for the employers premiums but keep the very highly regulated ( no suing) payments for workers

  7. the sprout 7

    “What happens when a private insurer collapses”

    umm, if you’re lucky the State picks up the pieces.
    Like I said, privatized ACC means much less accountability.

  8. When you get the basics right, then i’ll consider your arguments.

    Opening up to competition isn’t privitisation.

    By your logic, Kiwibank has already been privitised because there is competition from other banks.

  9. Greg 9

    To rebut……….. (slightly differently from Tim)………

    “$200 million in profits flowing offshore, according to John Key?s former employers Merril Lynch”

    Maybe – but billions saved by Kiwi consumers and businesses. Do you want to spite overseas investors by taking money off Kiwi’s?

    “higher levies on most workers, as private insurers cherry-pick the most profitable for themselves, leaving the rest to be carried by the public insurer”

    In saying this your already conceding your own point. Higher levies will mean workers will move away from the public insurer. As long as total marginal profit exceeds total marginal cost insurers will continue to insurer people and in a competitive market every Kiwi will be insurered aty a competitive price – as oppose to the current state monopoly.

    “currently, the work account subsidises accidents that fall under other accounts. Privatisation will mean these claims have to be funded entirely from tax and other levies like car registration.”

    Fully privitise ACC and you won’t have this problem.

    “less certain coverage. Private insurers make their money by not paying out claims”

    Private insurers lose customers by not paying out claims. Resisting claims costs far more than accepting valid claims. Insurers know this – it won’t happen.

    “ess money for accident prevention. As a monopoly, ACC benefits from accident prevented, so it invests heavily in accident prevention. Private insurers would only have a fraction of the market each, so would only receive a fraction of the benefit from investment in accident reduction. A ?tragedy of the commons?-type situation.”

    But their costs are a fraction of ACC, so that fraction of benefit has the same benefit. Private insurers are strongly incentivised to prevent accidents – it increases their profits!

    “more complexity in changing jobs. Different employers will have different insurers, changing obs will require changing insurer.”

    The total marginal benefit of the lower costs far out weights the total marginal cost of filling out a form. Don’t cha think?

    “getting a job may be more difficult if you are more likely to have an accident if that means higher levies for your prospective employer, eg if you are a young male or overweight.”

    And the reverse – lower levies for people who are less likely to have an accident. Why should those who are less likely to have an accident subsidise those who are more likely to have an accident???

    “private insurance increases the administrative burden for healthcare providers.”

    Why don’t you have a chat to healthcare providers about the administrative burden of ACC. Private businesses are more efficient. Privitising ACC will lower beaurocracy.

    “private insurers will try to minimise payouts and force other insurers to make the payouts instead. These boundary issues lead to more court cases. This type of personal injury litigation has choked the US court system.”

    Same response as your ‘private insurers make money by not paying out’ theory.

    “if your insurance company collapses when you have an ongoing claim, what will happen to your payments?”

    Reputable insurence companies insure themselves. Companies that aren’t reputable struggle to find customers and go under.

  10. Lew 10

    Greg: In order to justify scrapping ACC for a privatised system, you’re going to have to expound the benefits of such a system over the one we have now, which (as has been pointed out innumerable times) is the envy of the modern world – for everyone except a small group of very low-risk employers and the insurance industry itself.

    Until then, it’s a non-starter. Because it’s a non-starter, nobody credible is prepared to sign their name to such a policy. Not even National – even if they do plan on doing it by stealth and calling it `the success of the market’.

    L

  11. Tim Ellis 11

    I regret I missed this statement from SP:

    – more complexity in changing jobs. Different employers will have different insurers, changing obs will require changing insurer.

    This also is wrong. The only time when you would have contact with an insurance company in a competitive environment is if you had accident at work. The point of contact isn’t when you change jobs, but when you have a work accident. It doesn’t make changing jobs any more complex.

    Is it more complex to change jobs if your employer uses a different motor vehicle insurer to your previous one? Is it more complex if your employer has a different bank? A different local authority? A different IT company? I think you are really stretching on this point SP.

  12. Phil 12

    Lew,

    I’m supposed to be working, so this will have to be quick…

    Your six point argument has a weakness at step #5.

    The first four points (which are about those who can/choose to pay, will do so. Those that can’t/choose not to, are provided a government ‘safety net’) are common across many of aspects of our lives – be it health, education, transport, and even banking, sort of. In all these sectors the relationship between private and public entities can be strained, but generally works pretty well.

  13. burt 13

    Steve P.

    So is there the same problem with KiwiSaver?

    Did big business investment firms get special policy considerations from the Labour party and that is why there is no “state provided” KiwiSaver scheme ?

    Surely if National are cash for policy for the insurance industry then Labour are cash for policy with the investment industry?

  14. Lew 14

    Phil: In all the industries and sectors you cite, under any governmental system other than the ACT freemarketocracy there must out of necessity remain a default government provider of an acceptable standard, for those who can’t pay full market rates or who are otherwise excluded from the market for those services. The Ministry of Education’s state school system, the Ministry of Health’s DHBs, the Ministry of Transport’s NZ Transit Agency and LTSA are the corresponding examples here. The key difference about these agencies is that they bear special responsibilities which can’t be fully devolved to the private sector because the private sector retains the right to decline clients for its own reasons. Such as fulfilling the requirement that children must attend school, that people are entitled to healthcare, to regulate road construction, standards, safety regulations, taxes, etc.

    In insurance, there’s no viable fall-back position because the entire business model works on cross-subsidisation. The flight of low-risk, low-demand industries to the private sector weakens the default provider in a way that means it will either lose money or its performance will suffer. Since ACC provides no service that couldn’t (in principle) be devolved to the private sector other than the requirement that it cover everyone in every industry, partial competition will allow cherry-picking which will cause it to wither until there remains no practical use for the service except as a last resort.

    Private insurance could work if the government mandated definitions, maximal levy rates per industry, and directed insurers to accept all comers, from whatever industry they chose. But that would never happen, because the insurers would never allow it to happen. They would simply refuse to participate, because it breaks their business model.

    L

  15. Lew 15

    burt: The whole argument (as I’ve explained to you before) is that different rules apply to ACC than to other things. The problem with privatisation and competition in this case rests not on principles, but on the particulars of the industry.

    L

  16. randal 16

    oh you mean aussie frirms will get $200,000,000 more a year and coverage will go down in New Zealand?

  17. burt 17

    Lew

    Yes that’s right, we are talking insurance not investment.

    Just like State Insurance was set up as a state watchdog over evil insurance companies in early settler NZ days, and has made a good profit and provided excellent cover for millions of “low value” NZ clients. Naturally the same could not occur with accident insurance because… ummm errrr…. remind me again why accident insurance is so different from insurance.

  18. Matthew Pilott 18

    Did big business investment firms get special policy considerations from the Labour party and that is why there is no “state provided’ KiwiSaver scheme ?

    Burt – didn’t you embarrass yourself by trying to argue that the government should set up bank accounts for healthy stuff to mimic the Activa card?

    Surely you don’t think that “everything is the same as everything else”, because that’s the simplicity of your argument – “Insurance is the same as Investment. Since SP said X about Finance, the exact same MUST apply to Investment”. Wow – what insight. I would like to point out that there is a Kiwibank Kiwisaver scheme – I suppose they could have made it mandatory, but unlike what the Right seems to think happens, Labour doesn’t seem do such things unless there is a good reason for it.

    So as you point out, Labour could have gone with compulsion, but did not do so because there was no need. What good sorts. Enjoy your choice, Burt.

    Labour are cash for policy with the investment industry?

    Actually, fella, you’re kind of right here. Not cash for policy – there’s no connection between Labour and the investment industry that you can point to, whereas National seem to be making deals with the insurance industry, but Labour did want to encourage savings. Encouraging savings will, naturally help the savings industry – but all Labour got out of it was that people save more – a good outcome for the public in this case.

    $200m going to Australian insurers and the undermining of ACC – how does that help the public again?

    So I guess there’s more to your analogy than I first thought (well that one line of it) – Labour helps the public, National screws them. Good illustration, Burt.

  19. Matthew Pilott 19

    remind me again why accident insurance is so different from insurance.

    They can deny high-risk customers.

  20. Lew 20

    burt: You’re right, it’s not that we’re talking about insurance, it’s that we’re talking about accident insurance.

    Possessions insurance is optional. This is partly because risk is broadly spread – you’re unlikely to lose your home, your car, all your financial assets, and your ability to work all at once. If any or some of the above remain, chances are you can get back on your feet without being condemned to a lifetime of begging on the street. Accident insurance is different because you only have one body. If it gets broken, it needs to be fixed.

    L

  21. Lampie 21

    “Since ACC provides no service that couldn’t (in principle) be devolved to the private sector other than the requirement that it cover everyone in every industry, partial competition will allow cherry-picking which will cause it to wither until there remains no practical use for the service except as a last resort. ”

    a good point

  22. burt 22

    Matthew Pilott

    I thought life and car insurance had different levels of risk and premium based on a whole pile of factors. Oh well silly me. One size fits all. Imagine how stupid I must be – I thought my premiums for my 14 year old Audi worth $2K were less than the new $150K BMW my neighbour has…. Silly me.

  23. burt 23

    Lampie

    State Insurance was originally set up as a last resort for people who were not offered, or could not afford, the price the foreign insurers were charging. It’s called competition…. The rich clients had been cherry picked by the foreign insurers and State was set up to cover the people who were not “nice cherries”.

    Until such time as Steve P suggests all insurance should be done via a single state monopoly then all this crap about ACC being a special case is just partisan noise.

  24. Matthew Pilott 24

    Hey Burt – State can deny high risk customers. Since that’s the point I made, perhaps you’d like to address it, instead of putting the boot into that teeny little straw-man you made.

  25. Lew 25

    burt: “all this crap about ACC being a special case is just partisan noise.”

    What’s my post – chopped liver?

    L

  26. burt 26

    Matthew Pilott

    Stae can deny high risk customers… So they need to change their life style rather than expect to be subsidised by others….

    You socialists expect to be able to do what the hell you want and have somebody else pay for it – this is the problem with ACC. No Fault…. Luxury fantasy land stuff that makes low risk people subsidise high risk people – it’s ass about face.

  27. Vanilla Eis 27

    “it’s ass about face.”

    What, you think that high-risk workers should subsidise low-risk ones?

  28. Matthew Pilott 28

    So they need to change their life style rather than expect to be subsidised by others

    So you’ve got a low-paid but very dangerous job. That’s the thing with you righties – you talk in tehse high and mighty principles without giving a damn about the realities of their implementation.

    Thank you, though, for having the grace to conceed the point that your attempt to treat ACC as any other type of insurance was based upon a flawed premise.

    What, you think that high-risk workers should subsidise low-risk ones?

    Basically – that’s what he’s saying. Low risk people should be able to choose their own cheap scheme, and rely on high-risk workers taking that risk doing the dirty work for them.

  29. burt 29

    Vanilla Eis

    Ass about face was possibly a sloppy use of phrase. It’s wrong that low risk people are paying more then their share so that high risk people can pay less than their share.

    Next thing you know Steve P. will be campaigning that smokers shouldn’t need to pay higher life insurance premiums compared to non smokers, recidivist drink drivers cannot be denied insurance and pay no more than people with a perfect driving record. People with $150K of home contents pay no more than people with $10K of contents etc. Hey everybody could get the benefits of one person installing a burglar alarm because their personal risk is lower and it’s not fair that people who can’t afford a burglar alarm need to pay higher premiums.

    All looks pretty insane when you view it like that eh.

  30. burt 30

    Matthew Pilott

    So you’ve got a low-paid but very dangerous job.

    Dangerous jobs should not be low paid, address that issue rather than hide behind the fact ACC allows this situation to continue.

  31. Matthew Pilott 31

    Burt, you’re not talking about lifestlye choices, you’re talking about people’s jobs.

    So instead of wanting one of the best workplace insurance schemes in the world, you want massive government to interference/intervention in the employment market to dictate what wages people should be paid? Hang on…are you a socialist? No, that’s a far more totalitarian regime you’re after. Ok, I’m playing with that one a bit too much – but how would you suggest we ‘address the issue’ of people in low-paid jobs being at a higher risk of injury/disability/death?

    Unfortunalely the market is a failure in most regards, and in this case does not reward people in relation to the risks they must take. In places such as the US, it penalises them, because there in competition for insurance – so people get penalised for being in risky jobs. At least we don’t have that.

  32. Janet 32

    Those people who think opening up the market is a good thing should listen to some of the doctors who got so frustrated with the paper war privatised ACC caused last time, or some of the union officials who had to fight for injured workers’ rights against reluctant insurers. They dread this new policy.

    The other aspect people who support this privatisation need to think about would be how would they feel if someone they cared about was seriously injured in a non- ACC-workplace accident but the company took a legal case to prove it was the worker’s fault. That would mean no coverage. Meanwhile the worker injured in an ACC workplace, regardless of cause, gets full medical coverage and lifelong disability support as well as rehab and income support and this can amount to several million dollars over their lifetime.

    ACC was set up by politicians who agreed they never wanted people to have to fight for accident or injury support again. We dishonour them by dismantling it. It won’t work.

  33. burt 33

    Matthew Pilott

    So instead of wanting one of the best workplace insurance schemes in the world, you want massive government to interference/intervention in the employment market to dictate what wages people should be paid?

    Not at all. I just don’t think people who hire people into dangerous jobs should pay them buttons and make good profits while people who hire people in low risk jobs subsidise the profits of the risky employers.

    Like I commented to Lew on a previous re-hash of this same theme by Steve P. I paid a few thousand for my mountain bike, I have paid hundreds and hundreds for shoes, clothing etc. It’s just great that I have no costs associated with the risk of falling off the bike because it means I can buy a cool wireless speedo rather than a cheaper one with a wire to the sensor. Thanks to all the people who have chess as a hobby for subsidising the risks I take riding my mountain bike. (my motorbike, my diving, my karate & my skiing)

    Oh, the new skis I got last year, I got them in an end of season sale which saved about $450 but hey I’m still glad that chess players are subsidising the risks I take. Crikey I might have had to wait another year to buy myself some new skis if chess players were not covering the risks of me skiing as well.

  34. burt 34

    Janet

    Perhaps you could have a read of this ( History of ACC ) and have a think about how much ACC now resembles the original scheme.

    In the original scheme Injured workers also had the right to sue an employer for negligence. How much did we dishonour the politicians who designed the original scheme when we removed that basic right – the right to hold someone accountable for being negligent and causing you injury.

  35. burt. that’s the dumbest thing in the world. There was never a right to sue in negligence under ACC, there was under the Workers’ Compensation Act, which was good in 1900 but failed to provide cover in many instances. ACC replaced in 1973.

    you don’t understand what the purpose of suing is or what ACC does.

    You sue to be compensation for the damage done to you by someone’s action. That’s why the payment you receive (if you can afford to sue, if you are successful) is called damages. Usually, damages do not fully compensate for costs and exemplary or punitive damages (that make ‘an example of’ or ‘punish’) the wrong-doer are extremely rare. the US situation in that respect is exceptional, in all other common law countries punitive damages are rare. Suing someone is not about ‘holding them to account’, it is about getting compensation for what you lost.

    Now, the beauty of ACC is that you get that compensation without having to be rich enough and lucky enough to win a court case. It frees up the court system and everyone gets compensation. The incentive to reduce accidents comes from OSH, which can prosecute employers who have dangerous conditions regardless of whether accidents have actually occurred yet

  36. burt 36

    Steve P.

    you don’t understand what the purpose of suing is or what ACC does.

    Sorry can you re-post the shit you wrote after that – I switched off when you claimed to know more about my thoughts than I do.

  37. Lew 37

    burt: not about your thoughts – your opinions and beliefs are your own. Steve claimed to know more than you do about what you claim to know about. Those are matters of fact or law or policy about which the truth can be determined by rational means – so I suggest you state your claim as to why he’s wrong or concede.

    You could also try rebutting some of my arguments, which you’ve conveniently ignored once your position has become untenable.

    Come on, burt, you can do better.

    L

  38. burt. I studied tort, especially the tort of negligence, and ACC. So far, your depth of knowledge has been exemplified by mixing up the WCA and ACC, and not understanding what purpose suing serves.

  39. Macro 39

    burt
    It’s NOT shit! It is in fact the reason that ACC is as good as it is, and why it is such a damn good system, and why National are incredibly stupid to be even contemplating playing around with it. We as a country overwhelmingly rejected the National amendments to ACC in 1999. You might recall the overwhelming response to the sad state of ACC prior to National loosing control of the govt then. If you were to take off your eye patch for just a while you might see that most people in this country are perfectly happy with ACC as it is now. Yes there are one or two gliches, sometimes it takes a little while for things to grind round, and there are times when accidents don’t seem to be compensated as one might hope. But on the whole if you are unfortunate enough to suffer an accident in NZ you can be pretty sure that the system will provide treatment and pretty quickly. Not only that if you suffer an ongoing disability you can expect on going assistance. I have a friend who fell off her deck and broke her back. Her house is being refitted for her needs as a paraplegic she is living in a hotel while this is done, and there will be ongoing provision of care. Frankly I don’t see this sort of provision being provided by private providers.

  40. burt 40

    Lew

    I have had a read your posts above and essentially the only thing I disagree with is how we deliver a minimum level of cover for everybody. I don’t think a one size fits all model is the answer. I’m however all for (along with allowing private insurers into the frame) having a set govt premium much like today. General cover much like today. You can even call it ACC. Having tax deductible private insurance premiums changes the scene considerably. Same for health care & schooling. If we look at other growing economies this is generally one of the elements of how they manage the greater social good without being prescriptive in the delivery.

    Perhaps we could discuss compulsory third party motor vehicle insurance instead of ACC, I think it’s the same concept as ACC. Unless you think that all motor vehicle third party insurance must move solely to a state monopoly we can continue to debate this without the emotion that ACC seems to muster.

    Now onto Steve P. – Deep breath and start a new comment.

  41. burt 41

    Steve P.

    In your haste you completely stampeded through what I was saying to Janet and grabbed something you could bat me with. Great.

    Do you think I’m really confused about the WCA from 1900 and ACC today? Janet said “ACC was set up by politicians who agreed they never wanted people to have to fight for accident or injury support again. We dishonour them by dismantling it.”.

    The question is Steve, who are we dishonoring? How have they already been dishonored by the changing implementations and iterations of ACC? How have they been dishonoured by the proliferation of it’s collection points? It’s subtle but steady slippage to user pays and the general lack of it’s transparency to the consumer today?

    The initial system was honorable, I agree with Janet on that. Is it still an appropriate solution 108 years later – I’m not so sure.

  42. burt. ACC has not been around 108 years. The WCA and ACC are not the same thing, one is not merely an evolution of the other.

  43. Macro 43

    burt
    Private providers will never be able to deliver a system as good as we have now – end of story. Why? Because they will be looking to rip $200 million a year out of it in profit. Not my figures – but good ol JK’s mates at ML.

  44. burt 44

    Steve

    Yes I’m onto the fact one is an Act and the other is an monopoly govt administration backed by an series of Act’s. That’s not problematic for me Steve. Did you visit the link I provided? It was a ‘History of ACC’ from the ACC website. ACC kinda say they evolved from the WCA?

  45. burt 45

    Macro

    Yes yes, it’s all about John Key right now today. New policies that might stand for decades must be made up right now to stop him. His policies are evil, change is bad.

    You keep up the good fight, lets ignore what actually might work and might not and lets just have the status quo – yeah yeah yeah.

  46. Swampy 46

    “By moving out the point when the pubic system takes over liability for accidents that were covered by private insurers during the brief privatisation period in the 1990s, Labour will reduce the cost of ACC, allowing employer levies and car registration to drop 20% from next year.”

    Labour, in other words, will do smoke and mirrors or make someone else pay for an election promise, as has been done in the past with ACC. There is no free lunch.

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