WorkSafe Victoria failing the most vulnerable: insurers profiting
At 174 pages, the Victorian Ombudsman’s September 2016 Investigation into the management of complex workers compensation claims and WorkSafe oversight is no quick read. Nor is it a light read.
The report details the ways in which WorkSafe Victoria has failed the most vulnerable people in any workers’ compensation system: those with long-term, complex claims. In Victoria, such claims comprise about 20% of claims overall. Profiting from WorkSafe’s failure are the insurers contracted to provide claims management services.
Below is a summary of the Ombudsman’s report. In this article we have limited ourselves to the facts, without any of the personal experiences that make the original report so challenging and compelling to read. However, we will return to the report over the coming weeks, once we have had time to digest its contents more fully.
To help you navigate our summary (which is longer than a typical RTWMatters article) we have included in-text links below, which will take you to the appropriate section of the article. Readers less familiar with the Victorian system might benefit from reading the last section first, as it provides an overview of workers' compensation and injury management in that jurisdiction.
- What prompted the Ombudsman’s investigation?
- What was investigated?
- How was the investigation conducted?
- What were the key findings?
- What did the Ombudsman recommend?
- How did Worksafe respond to the report?
- How did the Victorian government respond to the report?
- How does the Victorian system work?
In 2014-2015, the Victorian Ombudsman’s office received 503 complaints about the workers’ compensation scheme, which it considered to be an unusually large number. Two types of complaints stood out: complaints about claims decisions and processes, and complaints about delays and poor decision-making around payments.
Informal investigations conducted by the Ombudsman’s staff unearthed evidence of unfair payment terminations. Consultation with stakeholders raised the possibility that the problem was widespread, and that it was caused by the types of financial incentives WorkSafe pays to insurers. Meanwhile, conciliation requests had increased 37.2% over the previous six years, indicating that disputes were on the rise.
In this context, the Ombudsman initiated an “own motion” investigation into WorkSafe and the claims management practices of its insurers.
The majority of the claims examined by the Ombudsman were complex claims, which involve long periods of incapacity and / or long term medical treatment, as well as any associated mental health issues. On a year by year basis, complex claims comprise about 20% of claims overall, but account for about 90% of the liabilities of the Victorian workers’ compensation scheme.
In relation to these claims the Ombudsman examined whether:
- Workers’ compensation claims had been unreasonably denied;
- Workers’ compensation entitlements had been unreasonably terminated;
- The financial rewards available to insurers via WorkSafe had contributed to claims being unfairly rejected or payments terminated; and
- WorkSafe provided effective oversight of claims management, particularly the insurers’ use of Independent Medical Examiners (IMEs).
The Ombudsman looked in depth at 65 cases that had been rejected or terminated in 2014-2016, representing compensation claims managed by each of the five insurers. The claims varied according to type of workplace, and also according to type of injury (i.e. physical or psychological). The cases examined were not selected randomly, but drawn from the pool of people who had contacted the Ombudsman’s office with a complaint.
The investigation drew on:
- Material from WorkSafe including the Claims Manual provided to insurers, as well as its contract with insurers;
- Materials from the insurance agents including internal policies and procedures;
- A random sample of emails sent by claims management experts at each insurer;
- Conversations with injured workers and their families;
- Meetings with stakeholders;
- Interviews with WorkSafe staff; and
- Interviews with insurer executives and ex-staff.
In the words of the report:
“The system needs a better safety net for the vulnerable. Action must be taken to address the complex end of the system where terminations are rewarded. WorkSafe needs to examine its incentives – and the use of IMEs – to ensure that the system rewards sustainable decisions and to target its oversight accordingly. The process for resolving disputes also demands careful reconsideration – it is in the interests of workers, employers and the public at large that the resolution of claims should be both timely and fair.”
The Ombudsman concluded that the Victorian system does not deal well with complex cases because:
- The system of financial rewards and penalties has encouraged insurers to focus on terminating payments rather than securing good outcomes for injured workers (including those who may never be able to return to work);
- Insurers are able to use IMEs to unfairly disadvantage workers; and
- WorkSafe’s oversight of the system is currently inadequate.
Insurers have rejected claims and terminated worker entitlements unreasonably by:
- Being selective in their use of evidence;
- Providing inaccurate or incomplete evidence to IMEs;
- Repeatedly asking IMEs for supplementary reports in an attempt to influence or change their assessment of workers;
- Preferentially using IMEs who were likely to provide an opinion adverse to the worker;
- Doctor shopping i.e. sending workers to multiple IMEs until one provided an opinion adverse to the worker; and
- Asking IMEs leading questions with the aim of eliciting information adverse to the worker.
- Despite Ministerial Guidelines to the contrary, insurers have maintained unreasonable positions at conciliation. This has led to situations in which some workers with a legitimate claim must either abandon their claim or pursue it in the courts, with all the stress and hardship that entails.
- In terminating payments or rejecting requests for treatment costs to be covered, insurers have ignored opinions of the Medical Panel, which are supposed to be final and binding.
- Insurers sometimes allow employers to exert improper influence over the claims’ management process, for example by ceding to employer requests to investigate or reject claims that are obviously legitimate.
- The insurers’ internal review processes, which should provide workers with an avenue to dispute a decision, can be little more than box ticking exercises.
- Insurers have manipulated claims data to maximise financial rewards and avoid penalties, for example by creating file notes containing false information.
- The structure of the financial rewards and penalties offered by WorkSafe has led insurers to focus on terminations at the expense of good outcomes for injured workers.
Regarding WorkSafe’s oversight…
- Inadequate incentives are currently offered to insurers for good quality, timely decision-making and assisting long-term claimants to return to work rather than simply cutting off their entitlements.
- The Senior Conciliation Officer at the Accident Compensation Conciliation Service (ACCS), worker representatives and the Australian Medical Association (AMA) all raised concerns with WorkSafe about the behaviour of insurers. These concerns were not addressed.
- WorkSafe does not respond to worker complaints in a way that allows it to identify improper patterns of behaviour amongst insurers, problems with IMEs or other systemic issues. Nor does it act to rectify legitimate complaints.
The report recommended that the Victorian government should:
- Fix the dispute resolution model, especially when no agreement is reached at conciliation; and
- Fix the WIRC Act, so that ACCS can intervene when insurers pursue unreasonable disputes.
The report recommended that Worksafe Victoria should:
- Use the data it collects to monitor complaint patterns and insurer behaviour;
- Use its powers to access insurer case files, track claims disputes, direct the behaviour of insurers and ensure that workers are fairly allocated to (or have their own choice of) IME;
- Use clarity in relation to the wording of medical opinions that can be used to justify terminations;
- Use incentives, penalties and audits to promote genuine, sustainable and timely outcomes, rather than simply rewarding terminations;
- Use training to ensure that insurer staff understand their role in the system;
- Use transparency, publishing annual information about financial penalties and rewards;
- Use quality assurance processes to investigate IMEs subject to a high number of complaints; and
- Use reviews to protect workers’ interests when IME reports are of insufficient quality.
WorkSafe rejected the Ombudsman’s recommendations to the Victorian government, but accepted all of the recommendations made to WorkSafe.
The tone of WorkSafe’s response was defensive. WorkSafe said that in concluding that insurers had broken the law, and that WorkSafe’s actions were “wrong,” the Ombudsman had “substantially overreach[ed] the limited evidence considered” in the course of the investigation.
In support of this position, WorkSafe pointed to the fact that the Ombudsman had considered evidence from a very small number of claims, all of which came to the Ombudsman’s attention in the form of complaints. WorkSafe argued that these complaints were not representative of worker experiences overall, as evidenced by the high levels of claimant satisfaction revealed in annual survey results.
However, the subject of the Ombudsman’s investigation was the management of complex claims, not claims overall. WorkSafe does not currently measure levels of satisfaction amongst workers involved in complex claims, and did not propose to do so in any systematic way.
The Ombudsman’s report was tabled in parliament on the 13th of September, 2016. Shadow Minister Georgina Crozier of the Liberal Party briefly mentioned the report in the Legislative Council the following day but there has been no substantive discussion of its content to date.
In Victoria as of September 2016, workers’ compensation is underwritten by WorkSafe, which also regulates occupational health and safety and return to work. WorkSafe answers to the Minister for Finance, and is charged with protecting the financial viability of the scheme while ensuring that injured workers are compensated quickly and in a socially and economically appropriate manner.
Claims’ management is outsourced to a number of private insurance agents, who also collect insurance premiums. Employers are able to choose their insurer, and market share varies between the agents. At the time of the Ombudsman’s investigation the insurers were Allianz, CGU, Gallagher Bassett, QBE and Xchanging.
Insurers are in the system to make a profit but are also required to act in the public interest. Specifically, they are bound by WorkSafe’s statutory functions, and must act in accordance with policies and guidelines that promote sound, evidence-based decision making.
WorkSafe oversees the insurers’ claims management, and remunerates them for it. The contract between WorkSafe and the insurers includes a number of financial rewards and punishments tied to performance benchmarks. One benchmark that attracts a financial reward is the termination of claims within certain timeframes, namely 13 weeks, 52 weeks and 134 weeks.
Like insurers, Independent Medical Examiners (IMEs) are in the system for profit, paid by insurers to examine claimants and provide an opinion on work capacity, treatment, and the relevant injury or illness. In some instances, this opinion will be used as evidence to reject a claim. IMEs must register with WorkSafe, meet mandatory selection criteria, and participate in peer reviews.
It is the insurers that decide whether or not a workers’ claim will be accepted, and whether existing payments will be terminated. Workers who receive unfavourable decisions may dispute the matter through the Accident Compensation Conciliation Service (ACCS), and failing this, through the Magistrates Court or County Court. The final port of call is the Medical Panel, the decisions of which are final and binding.