Big lift in ACC levies needed

Relevant offers

Politics

Shake-up heading in EQC's direction Brownlee turns up heat on council over rebuild Agency mulled to run emergency 111 system MPs' travel bills leap during election Remedial work for navy's problem ship Wait for new oil law before awarding permits, Govt urged TVNZ included in police Electoral Act investigation Sea law 'an environmental risk' Govt defends 50c an hour minimum wage lift Maori queue-jumping for SOEs raised

"Unpalatable" rises in ACC premiums are likely after the corporation reported a $4.8 billion loss in the past financial year.

New board chairman John Judge said the corporation's financial position was "unsustainable" and, if the gap between the scheme's assets and liabilities continued to grow, "the scheme's very existence could be under threat".

The corporation's annual report, released yesterday, said the losses were spread across all six ACC accounts – workplace injury, motor vehicle, treatment injury, work, non-earners and residual claims.

Judge said the new board had found the corporation had been collecting insufficient levies to cover claims for many years.

"That means ACC must now collect enough to not only cover current costs, but significant additional amounts to fund the deficit."

The corporation needed to cut the length of time people spent on ACC through better service delivery and to find cheaper health and rehabilitation providers, he said.

The corporation was looking at providing more flexibility in levy payments, with a bigger range of products, and was reviewing its internal expenditure to see where costs could be cut, he said.

"In addition to all of these measures, substantial levy increases are also required, particularly for motor vehicle owners and earners in the workforce," Judge said.

"The prospect of levy increases will be unpalatable to many New Zealanders, especially since this is a time when people are hurting as a result of the current economic climate.

"However, if we don't improve ACC's financial position now, the gap will continue to grow and we will simply be passing the problem on for future generations to deal with."

ACC Minister Nick Smith said it was clear further reform was required to ensure ACC had a future. The $4.8b loss followed a $2.4b loss the year before.

The Government's major concern was the growing gap between the corporation's assets and liabilities. Outstanding-claims liabilities had blown out to $23.8b in just four years.

"ACC cannot sustain the huge ongoing increases in claim costs arising from greater claim numbers, deteriorating rehabilitation rates and unfunded scheme extensions," Smith said.

"The underlying problem is that ACC has drifted from being a state insurer to a welfare provider."

In March, Smith sacked ACC chairman Ross Wilson and half the board members and initiated a top-down review of the scheme, prompting claims the Government was preparing the corporation for privatisation or sale.

Yesterday, Smith denied that was the case, but said some "difficult choices" on levies and scheme entitlements had to be made. He would not outline what those were, but said he was taking some suggestions to the Cabinet.

It was likely the changes would involve a mix of scaling back entitlements and increasing premiums, Smith said.

It was also likely ACC would move to a scheme where those at higher risk of injury or claim had to pay more for their premiums.

"We will need to carefully balance the interests of claimants with those of levy payers, who cannot sustain the sort of hikes that will be needed if costs are left unchecked," Smith said.

ACC has already clamped down on elective-surgery claims, declining twice as many as in the previous year.

It is also calling in private case managers to deal with up to 1500 claimants as it moves to cut $2b from its long-term claims bill.

- © Fairfax NZ News