ACC privatisation plans announced

Written By: - Date published: 10:00 am, June 2nd, 2011 - 41 comments
Categories: ACC, privatisation - Tags:

National has announced plans to privatise ACC’s work account. Currently, they don’t have the numbers to get it through the House. ACT won’t vote for it because its not completely rabid and the Maori Party won’t vote for privatisation. So, this becomes another election issue: another bloody good reason to vote National out.

Now, National has been forced to make some concessions designed to blunt criticism of privatisation. One is that all ACC levies will, if National is re-elected, include a levy on the levy, which will be used to create a pool to cover claimants in the (likely) event that an ACC provider collapses. As you’ll remember, HIH, the largest private provider the last time National privatised ACC, collapsed six months after ACC was re-nationalised. The Aussie government ended up paying half a billion to cover its claimants.

So, sensible to have this insurance on insurance fund, eh? But right now we don’t need it, because ACC can’t collapse. It has huge reserves and can’t face a situation where its policyholders desert it leaving a liability book but no income because it’s a monopoly. And ACC’s levies are raised through the Crown’s sovereign power, not by a company desperately trying to make a profit and cutting corners to keep levies down. This extra cost is solely a result of privatisation.

And you know what the real kicker is? Even if you stay with ACC, the government will make you pay the levy on a levy. ACC is still basically uncollapsable but your levies will rise to subsidise the risk of others who are with private insurers.

Then there’s the boundaries issue. Only the work account is to be opened to competition. Injuries that occur outside the definition of that account will still be funded by ACC. Now, if you’re a private insurer, there’s going to be good money in getting injuries defined as falling in one of the other categories and make ACC rather than paying out yourself.

This already happens with the Approved Employer Programme (a legacy of the last privatisation, where large employers insure themselves). Most famously, an AFFCO worker was shot while on a work break. ACC said the rules said this was a workplace injury. AFFCO didn’t want to have to pay a million dollars for the injured man’s costs. The dispute dragged on for six years, with untold thousands spent on lawyers’ fess, until the parties finally split the cost.

Privatisation will mean more dragged out disputes like this and higher levies because of all the lawyers they’ll need to pay for. In the US

On top of the extra levy and all the extra legal costs, we’re also paying for marketing and private owners’ profits. All of that means a smaller percent of the money we pay in levies ends up paying for injuries. Currently, over 90% of the money raised in levies is paid out by ACC. In the US, health insurers spend less than 85% of their levies on payouts.

Pricewaterhouse Coopers calculated that insurance companies stood to make $200 a year in profit from privatisation of the ACC work account. Those profits won’t appear out of thin air. They’ve got to come either from raising less money or paying out less …

… unless you think that private insurers can magically reduce actual injury costs because people only care about stopping injuries if they can save a few cents on premiums – which is the voodoo economics that National is trying to convince us is real.

But will private insurers be dumb enough to enter the market anyway given that Labour and the Greens have pledged to reverse National’s privatisation of ACC, in the awful event that National gets a second term and the numbers to pass these reforms.

41 comments on “ACC privatisation plans announced ”

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  1. tsmithfield 1
    2 June 2011 at 10:11 am

    So, exposing TVNZ to private competition has been a bad thing, right?

    • Blighty 1.1
      2 June 2011 at 11:03 am

      Apart from the fact that the two situations are completely different (no boundary issues, no serious problem around a provider collapses, with TV), if the quality of TV in this country is something you think we should try to emulate in ACC, you’re bonkers.

      • Bored 1.1.1
        2 June 2011 at 12:15 pm

        Correct first time, TS is completely bonkers. He is not alone however, his views are commonly held amongst corporate theoretical economists (aka entrail readers and tea leaf diviners). They are the ones whose models and pet theories are exempt from any empirical evidence and analysis. The normal cause of this cognative dissonance is the existence of a salary link to those parties their particular theory favours…in TS case however I think we have an honest idiot. He should charge for it, there is a career opening TS.

    • ghostwhowalksnz 1.2
      2 June 2011 at 1:13 pm

      TVNZ gave the advertisers a “choice’ , the equivalent version with employers liability insurance would be that TV3 and others had the SAME shows, just at different times.

      You keep forgetting or are just ignorant in that the payouts are the same as ACC- by law.

      • ghostwhowalksnz 1.2.1
        2 June 2011 at 1:40 pm

        Just to clarify, using TVNZ as an analogy, the advertisers got a choice while the viewers had exactly the same as before , ie the same shows just different times

  2. Thrash Cardiom 2
    2 June 2011 at 10:41 am

    “So, exposing TVNZ to private competition has been a bad thing, right?”

    Judging by the absolute crap that appears on TVNZ and total lack of any decent analysis or journalism (apart from on the soon to be defunct TVN7), Yes, it has been a bad thing.

  3. tc 3
    2 June 2011 at 10:49 am

    Hilarious TS, Comparing broadcasting of cheap game shows, inadequate news services and personality centric entertainment with a service that delivers and impacts on peoples physical/mental health and wellbeing is like comparing food with fluff…..try again.

    • tsmithfield 3.1
      2 June 2011 at 12:00 pm

      At least I can choose to watch shit if I want to. Or I can watch a good doco on Prime. But at least I have some choice, and am not dictated to by the whim of a program director on a monopoly channel.

      • toad 3.1.1
        2 June 2011 at 12:11 pm

        TS, under privatised workplace accident insurance the injured person doesn’t have any choice who their insurer is.

        That choice is made by the employer, whom in many cases will choose the insurer which charges the lowest levies, and is able to do so by minimising compensation to injured employees. The easiest way for insurers to do that is to deny entitlements that should be granted, in the knowledge that most people won’t have either the fortitude or the resources to contest the decision.

        Employer wins, insurer wins, but the injured person loses.

        • queenstfarmer 3.1.1.1
          2 June 2011 at 4:38 pm

          TS, under privatised workplace accident insurance the injured person doesn’t have any choice who their insurer is.

          So, like it is now…

          But I agree there could be a problem as you describe, IF the system is set up in such a way. Insurers are not in the business of declining valid claims, despite some unsupported assertions to the contrary (I have first hand knowledge of the industry). For a good example of improper declinations, see the current ACC systems (which has no compeition, and hence no reputation to protect).

          What they are in the business of doing is ensuring that only valid claims are paid. And if they are allowed to load up their coverage with exclusions and sub-limits, etc, then yes the system will be very flawed.

          • wtl 3.1.1.1.1
            2 June 2011 at 4:52 pm

            But why should those who choose to stay with ACC have to by the extra levy, given that ACC cannot default on payment, as outlined above. Surely this is just subsidising the private companies?

      • Blighty 3.1.2
        2 June 2011 at 12:16 pm

        TS’s argument on ACC boils down to a tortured metaphor with TV and ‘at least I can watch some shit if I want to’.

        Weak.

      • Draco T Bastard 3.1.3
        2 June 2011 at 2:18 pm

        If you break your arm what choice do you have for treatment? No matter where you’re going to go it will be exactly the same. Someone will give you a local anaesthetic, most likely adrenaline, straiten your arm so that the bones set straight, and splint it.

        You’re claiming you want choice where choice doesn’t exist.

        • tsmithfield 3.1.3.1
          2 June 2011 at 3:44 pm

          An employee can actually insure themselves if they want to. Now.

          • The Voice of Reason 3.1.3.1.1
            2 June 2011 at 3:52 pm

            Great. Your solution is to pay twice for accident cover?

            • wtl 3.1.3.1.1.1
              2 June 2011 at 4:50 pm

              And won’t this create a big issue about which insurance company is actually liable to pay?

            • tsmithfield 3.1.3.1.1.2
              2 June 2011 at 4:52 pm

              If you want to pin your income in the case of injury on what ACC will pay and the sickness benefit, then don’t insure your income. Your choice.

  4. ianmac 4
    2 June 2011 at 10:55 am

    Eddie “stood to make $200 a year in profit” ? $200million?
    It does seem likely that the softer introduction now is the thin end of the wedge for later expansion once they gain an electoral MANDATE!

    • Lanthanide 4.1
      2 June 2011 at 12:36 pm

      I’m really uncomfortable with the conflation that winning the election means they have a mandate to do whatever the hell they want. There are many many reasons people vote for a particular party (including voting for them because they aren’t someone else) and to claim that winning the election means you have a ‘mandate’ to implement all of your policies holus bolus is simply hubris.
       
      If they actually set up some sort of referendum system where once elected they asked for people’s opinions on specific policy, then sure, they’d have a mandate for that policy then.

      • Draco T Bastard 4.1.1
        2 June 2011 at 2:20 pm

        …to claim that winning the election means you have a ‘mandate’ to implement all of your policies holus bolus is simply hubris.

        Yes, it is but NAct do it every time.

        If they actually set up some sort of referendum system where once elected they asked for people’s opinions on specific policy, then sure, they’d have a mandate for that policy then.

        I would like to see this implemented but it would need serious controls such as:

        1.) Policy must be announced and sent to the ministries/universities for evaluation with reasonable time limits
        2.) The evaluations must be openly reported back to the electorate
        3.) Referendum cannot be within six months of the reports release to give everyone time to read them.

        • Lanthanide 4.1.1.1
          2 June 2011 at 3:30 pm

          My idea was simply referendum questions like this:
          1. Should the government sell state assets? Yes/No.
          2. Should the government implement national standards? Yes/No.
          3. Should the government create the supercity? Yes/No.
           
          The sorts of things they’ve claimed they had, or will have, mandates for, just based on getting elected. You can’t say with a straight face that people voted for National because of their National Standards policy when what they primarily campaigned on was tax cuts, sinking lid on public servants and ultra fast broadband.

          • Draco T Bastard 4.1.1.1.1
            2 June 2011 at 4:21 pm

            Simple referendum questions look good but it leaves people making uninformed decisions which will always make us worse off. My idea is to make the referendums actually a) binding and b) informed.

            One other clause I’d put in would be
            4.) Once the policy is announced the government or others cannot promote that policy.

            This would help encourage people to read the actual reports.

            • queenstfarmer 4.1.1.1.1.1
              2 June 2011 at 4:43 pm

              My idea is to make the referendums actually a) binding and b) informed.

              Love (a), but how would you achieve (b)?

              • Draco T Bastard …
                2 June 2011 at 5:56 pm

                Well, we can’t guarantee it (there are, after all, idiots who actually think that they already know everything) but we can make it so that their only information available to them is the reports which are publicly available and give them time to read them.

  5. felix 5
    2 June 2011 at 12:19 pm

    Everything is directly comparable to everything else.

    Every principle can be applied to every situation.

    So let’s talk about TVNZ instead.

    • Lanthanide 5.1
      2 June 2011 at 12:33 pm

      Tsk tsk, felix. Everything is only comparable to everything else, if and only if, it somehow makes Labour look bad or makes National look good.

  6. Rijab 6
    2 June 2011 at 1:01 pm

    Great Post!

    What is going on!!!! Where is the public outcry!?

    ACC is a social contract between EMPLOYEEs and Government: When it was introduced, employees’ lost their right to sue in common law for personal injury, and in return for losing this right the Government would provide a 24/7 no fault scheme.

    Why is Dr. Smith talking about giving employers choice? ACC is nothing to do with employers, they play the cards they’re dealt, and so far none of them are eager to leave simply because ACC is costing them an arm and a leg (which it CLEARLY isn’t)! Do employers realise the implications of this move…it won’t save them money, the Govt is committed at this stage to certain minimum standards, so it will inevitably cost them more!!! Who is this move in the interests of if not New Zealand workers NOR New Zealand companies?

    ““The ACC employer contribution rate as a proportion of wages is substantially lower (0.78% at June 2007) than in comparable Australian workers compensation schemes (NSW 1.86%, Victoria 1.38%, Australian average 2%). The overall cost of ACC is quite low even after adjustment for coverage (eg common law access) and other known differences, and is also low relative to other international systems (Canada average 2%).”” (PWH Review 2008)

    Insurance companies are even uncertain they can compete, where is the outcry? Where are the hard questions from our journalists? Or do we have to send John Key to the other side of the world for an interview on HardTalk every time we need some decent questions to be asked?

    Sure ACC isn’t perfect but it is revered around the world, it is our ONLY social asset envied by most other developed countries….why do we have to join the rest, why not keep a step ahead of the crowd on the one thing we know we already are!

    PURE IDEOLOGY: In 3 years after competition is introduced National will attack ACC saying it is inefficient and all bets are off, public support goes behind full privatization, and then not only do our employees’ get screwed on their half of the social contract, but off goes hundreds of millions in profit every year…The inevitable result? Employees get less, employers pay more, our society strains under the pressure: Insurance companies profit.

    🙁

    • johnm 6.1
      2 June 2011 at 4:40 pm

      !00% right RIJAB this Nact so called government are ideological basketcases!

    • MrSmith 6.2
      2 June 2011 at 6:13 pm

      Couldn’t agree more, and the silence you here from the Media Rijab, we don’t have a media really and I sometimes wonder if the internet isn’t to blame for that. (no offense the standard)
      National are all about killing the generals publics golden gooses, Acc, selling accepts, striping the RMA etc they don’t work for us.

    • lefty 6.3
      2 June 2011 at 7:04 pm

      AAC was meant to be a compensation scheme for workers, not an insurance scheme for either workers or employers.
      It is always going to be vulnerable while politicians (as both National and Labour do) treat it like an insurance company that needs to be fully funded and tough on the workers who gave up the right to sue to give birth to it.
      The original idea was great but the way ACC treats injured workers, even before National started making it even meaner, is dreadful.
      Even strong supporters of the principlea behind it like myself, find it hard to get passionate about an organisation that treats the people it was formed to serve like shit.

  7. the pink postman 7
    2 June 2011 at 3:11 pm

    I hope you are correct in your comments Eddie .However I am not sure that Act and the Maori Party will vote against it. Act want’s it privatized and this will be enough for now , they will be hoping that they will add to it after the election. As for the Maori Party voting against well we thought that with a number of other anti-worker acts this bloody lot have done.
    The fact is the Maori Party is a Right- Wing branch of the Brown-Table

  8. Ed 8
    2 June 2011 at 4:36 pm

    I haven’t yet seen the terms under which Labour and the Green Party will reverse the privatisation, but I hope they think it through carefully, and ensure that any private companies be required to pay the full amount required to cover the full liabilities under the policies including required reserves, assessed on a basis that leaves no initial losses or capital requirements for ACC – there is no reason why ACC levies should be affected by set up costs for the companies, sales costs, or the costs of dismantling their systems and making staff redundant etc. If that means that the shareholders of those companies need to provide additional capital for that liability they should not be able to claim that this was unexpected.

    I thank the poster that gave a url for the paper on ACC that pointed out the reasons, summarised above, why this is a stupid idea of National’s. Anyone that thinks they can get a ‘win’ from such poor political decisions should be disabused – shareholders of private companies should know it is an almost certain loser for them.

    This announcement represents a government determined to ensure money is spent on administrative expenses that would cost our country millions of dollars without any improvement in ACC cover for anyone – this idea shows National acting totally contrary to their promise to find and eliminate waste.

  9. sean maitland 9
    2 June 2011 at 4:51 pm

    So why is giving the employer a choice between ACC and private firms such a bad thing? For SME businesses where everyone sits at a desk all day, this is surely a good thing? For large companies, this probably is a non-event as its better to stick with ACC, but IMO it is a good thing to allow this choice to small companies.

    I know you will say that the private insurers will game the system to maximise profits – but if they don’t provide an adequate service, they will simply lose clients. Remember, its in the employers best interest to have their staff injury free also – so no employer will choose to stay with a piss poor private insurer.

    Personally, as self-employed IT contractor, the current system is a joke requiring me to pay $2600 a year in ACC levies when in 14 years I haven’t even had a paper cut.

    • Draco T Bastard 9.1
      2 June 2011 at 6:00 pm

      So why is giving the employer a choice between ACC and private firms such a bad thing?

      Because it pushes up costs for no benefit.

      …they will simply lose clients.

      No they won’t as you won’t hear about them gaming the system. Same thing happens now.

      Personally, as self-employed IT contractor, the current system is a joke requiring me to pay $2600 a year in ACC levies when in 14 years I haven’t even had a paper cut.

      And this makes it a joke how? Oh, that’s right, it doesn’t – it just proves that you have NFI how insurance works.

      • sean maitland 9.1.1
        2 June 2011 at 6:24 pm

        You’re wrong on the losing clients part by the way – if they turn down reasonable claims, what idiot would keep their company with that provider? Who cares about not hearing about it? That is completely irrelevant showing you have NFI……

        So can you please explain what accident is going to happen sitting at a desk that I will need cover for? RSI and OOS are not accidents and are not relevant as I don’t get them.

        • Draco T Bastard 9.1.1.1
          2 June 2011 at 10:14 pm

          …what idiot would keep their company with that provider?

          How are they going to hear?

          1.) ACC covers you for more than going to work.
          2.) If you weren’t in ACC it would cost you far more.

          Basically, you’re fucken idiot who refuses to believe the truth – that privatisation is not in the national interest and nor is it in an individuals interest.

          • sean maitland 9.1.1.1.1
            2 June 2011 at 11:52 pm

            Ok – let me explain it simply: Employer A has employees who get injured at their workplace. Private insurer then turns down the resulting claims or mucks them around, causing the employer lost income, lost productivity etc, etc. Employer A then changes to a different provider, most likely after researching other providers and feedback on them. The original insurer then loses that client and all their premiums. If they screw over all their clients as some people on this site claim they will, soon they have no clients left and no revenue. I.E. it is not a longterm business model, and the employers have the power of choosing the private insurer they want (if they choose not to stick with ACC). Shooting yourself in the foot by screwing over your customers is not going to work, yet you claim that is what is going to happen.

            I still don’t need to be paying ACC fees as high as they are for my workplace cover. Swearing at me does not prove the point. My income protection and private medical insurance cover me for a lot of stuff, and obviously road accidents are covered by vehicle registration fees.

            • weizguy 9.1.1.1.1.1
              4 June 2011 at 12:13 am

              “Ok – let me explain it simply: Employer A has employees who get injured at their workplace. Private insurer then turns down the resulting claims or mucks them around, causing the employer lost income, lost productivity etc, etc. Employer A then changes to a different provider, most likely after researching other providers and feedback on them. The original insurer then loses that client and all their premiums. If they screw over all their clients as some people on this site claim they will, soon they have no clients left and no revenue.”

              Why do you think the employers care? They don’t want claims to be accepted, because it pushes up their premiums. The reality (as happened the last time let rip with this particular ideological vomit) is that employers start challenging claims on the basis that they didn’t happen at work, pushing the costs onto ACC, and unless we’re talking about gradual process or industrial disease, ACC will pay.

              Basically, you don’t know what you’re talking about, and I suspect you never will, unless you have some sort of serious accident. It’s interesting to see how people go from complaining about how high their levies are, to how they aren’t getting enough in compensation. Particularly farmers.

  10. DS 10
    2 June 2011 at 8:12 pm

    Wait… so we’re introducing the biggest change to the insurance market since 1999 when the insurance market is struggling to deal with the biggest insurable event in New Zealand’s history?

    Tell me the start of this joke involves three men walking into an Irish bar.

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