Comcare premiums your guide for 2012-13 [PDF, 504KB]

comcare.gov.au

Comcare premiums your guide for 2012-13 [PDF, 504KB]

COMCARE

PREMIUMS

Your guide

for 201213


1

This guide explains key concepts used to determine

annual workers’ compensation premiums for

Australian Government agencies.

It sets out:

> the drivers of estimates of claim costs and

premiums

> what agencies can do to reduce premiums.

TERMS USED

The premium is the amount an agency is required to pay Comcare. Premiums fund the costs of

claims, including Comcare’s claims administration costs.

The premium rate is a percentage of the agency’s payroll for that fi nancial year.

The prescribed amount is the main component of the premium. This amount is the product of the

premium rate for the agency and the agency’s payroll for that fi nancial year.

The bonus or penalty is an adjustment amount due to a revision of the premium rate for the

previous year.

An injury year is a calendar year in which injuries occur (regardless of when a claim is made

or accepted).

Lifetime claim cost means payments to date plus an estimate of possible future costs for a claim.


2

THE WORKERS’ COMPENSATION FRAMEWORK FOR

AUSTRALIAN GOVERNMENT AGENCIES

Federal workers’ compensation legislation established

Comcare to work with Australian Government agencies

and their employees to prevent injuries in the workplace,

process claims and pay the costs of workers’

compensation. The legislation:

> provides for an integrated safety, rehabilitation and

compensation system for agencies and employees

> empowers agencies to work with their employees to

maintain an injured employee at work or to achieve

an early, safe and durable return to work through

high-quality return to work programs

> provides benefi ts for injured employees, such as

income support (until retirement age if necessary),

medical and home help assistance, and other

benefi ts

> requires Comcare to fund costs through annual

premiums.

THE PREMIUM AND CLAIM PERFORMANCE

Every year, Comcare notifi es each agency of their

premium for the coming year. Comcare supplies a

Premium quick reference sheet with the premium notice.

This reference sheet summarises the agency’s premium

and claim performance over recent years. It shows the

premium amount payable and four years of information

on premium rates, claim cost and frequency. Information

for all agencies combined is also shown for comparison.

This is in addition to claim performance information that

agencies can monitor throughout the year online on

Comcare’s Customer Information System (CIS), at

www.comcare.gov.au.

The premium for each agency responds to trends in

their claim performance, as well as trends across the

whole system. This acts as a direct fi nancial incentive

to agencies to reduce workers’ compensation costs by

effective health, safety and rehabilitation measures.


3

HOW CLAIM PERFORMANCE IS ASSESSED AND REASSESSED

Claim performance is assessed using measures of claim frequency and claim cost. Claim frequency

is an estimate of the number of accepted claims from injuries which occur in the injury year,

expressed as a frequency per $million of payroll. Claim cost is the total estimated lifetime costs of

accepted claims for the injury year.

Comcare sets a premium for the coming year while the claims for past injuries are still being

accepted and those already accepted are at a very early stage of their potential development.

Premiums are intended to respond to trends in each agency’s claim performance, but early

assessments of claim performance are uncertain.

Comcare’s premium model takes this uncertainty into account in assessments of an agency’s claim

performance. The premium calculation balances stability in the premium from one year to the next

against responsiveness to each agency’s claim performance, which can change signifi cantly from

one injury year to the next. The premium responds to trends in claim performance but it is not meant

to match claim performance in a single year.

If all claims were short term, the payments made to date on each claim would be a suitable measure

of each agency’s claim cost performance. However, the legislation provides benefi ts that may

continue for many years after an injury. While most claimants have only days or weeks off work,

some will accumulate many months off work and a small percentage will continue to receive benefi ts

and accumulate time off work over many years.

Because claim costs will continue for many years for some claims, using only payments to date for

each claim would be a misleading, unfair way to assess each agency’s claim record. If this method

were used, claims that will eventually accumulate signifi cant costs over many years could appear

similar to short-term claims that will have no future costs.

To assess each agency’s claim performance fairly, an estimate of the lifetime cost of each claim is

needed. Lifetime cost means payments to date plus an estimate of future costs for each claim.

Comcare uses sophisticated software to estimate the lifetime cost of each claim. However, no method

can reliably forecast the lifetime costs for every claim, especially early in the life of the claim.

At the time a claim is accepted, the estimate of the lifetime cost must be based on the minimal

information available about the claim. This includes the claimant’s age, gender, normal weekly

earnings, type of injury, and the delay between their injury and acceptance of their claim. The

estimate of lifetime cost can only refl ect average outcomes of similar past claims.

As months and years pass, the initial indicators become less important and the emerging

development pattern for the individual claim becomes more important. Important factors include:

> the claimant’s cumulative time off work and the pattern of time off work (the number and length

of periods off work)

> whether the claimant is at work or off work, and how long that has been the case

> if the claimant is on a graduated return to work program, the number of hours they spend at work

each week

> the claimant’s pattern of medical and rehabilitation costs

> whether a third party recovery action has been initiated, and the progress of that action.


4

Assessments of each injury year’s claim cost

performance change and become more reliable over

time as more information about the development of

each claim becomes available and the estimate of

lifetime cost for each claim is updated. Estimates of

lifetime costs increase or decrease for each claim,

depending on the changing pattern of actual costs and

time off work for the claim.

The premium model applies a ‘cap’ to claims for an

injury year to spread across all premium payers the

impact of the largest individual claims.

When an injury year is assessed or reassessed, a

claim cost cap for that injury year is set at a level

where the sum of the claim costs above the cap is

5 per cent of the sum of the costs of all claims. Then

the premium calculation uses the ‘below the cap’ cost

of each claim plus 5 per cent.

For example, the cap amount in 201213

premium calculations is $571,000 for injuries

suffered in 2011.

Also, some claims are accepted long after the injury

date. Often these claims are high-cost claims. The

claim frequency measure includes an estimate of

claims not yet accepted. Reassessments of past injury

years refl ect the acceptance of those claims as well as

the development of existing claims.

Claims for injuries suffered in each injury year are

assessed four times for premium calculations. For

example, injuries suffered in 2008 were initially

assessed for premium calculations in 2009, then

reassessed in 2010 and 2011, and reassessed for

the fi nal time for the premium calculations in 2012.


5

THE PREMIUM IS ASSESSED AND REASSESSED

The 201213 premium amount for each agency is the sum of two parts:

> The main component is called the prescribed amount. This amount is the product of the

premium rate for the agency for 201213 and the agency’s payroll for 201213.

> The other component of a premium is called the bonus or penalty. This amount is based on a

revision of the agency’s premium rate for 2011–12.

The core component of the premium is the premium rate. Comcare sets a unique rate for each

agency for each fi nancial year which responds to trends in claim performance as explained above.

The premium rate also responds to overall trends in the number and cost of claims and the total

amount that Comcare must collect for that fi nancial year from all agencies combined.

Bonuses and penalties make premiums fairer for each agency. Estimates of the lifetime cost of each

claim become more reliable over time as more information about the development of the claim

becomes available. A bonus or penalty is an adjustment using later, more reliable estimates of

claim costs.

The bonus or penalty in the 201213 premium refl ects a revision of the agency’s 2011–12

premium rate based on the development of the agency’s claims for injuries suffered in 2008, 2009

and 2010. If the agency’s rate for 2011–12 is revised downwards, the amount is called a bonus

and reduces the 201213 premium. If the agency’s rate for 2011–12 is revised upwards, the

amount is called a penalty and increases the 201213 premium.

Generally, the bonus or penalty amount refl ects the effectiveness of the agency’s programs to

manage return to work and rehabilitate injured workers. The success of return to work programs is

the key driver in reducing the ongoing costs of claims for past injuries. However, reassessments

of past injury years also refl ect the late acceptance of claims. Some or all of the change for a past

injury year may be due to claims for injuries that were suffered in that injury year but only accepted

after last year’s premium was calculated.


6

HOW AGENCIES CAN REDUCE PREMIUMS

To reduce future premium rates, agencies must:

> reduce the number of claims by preventing injuries

> reduce the claim costs. Payments for time off work make up the largest component of the cost

of claims. Therefore, the best way for agencies to reduce claim costs is to manage the early,

sustainable return to work of each claimant. While most claimants have less than one week off

work, the few claimants who will be on benefi ts for more than one year create most of the claim

costs.

PAYMENTS AND APPEALS

Each agency must pay its premium to Comcare by 31 July or 30 days after Comcare sends the

premium notice, whichever is later. Comcare will charge interest on any amount not paid by the due

date.

Within 14 days of the premium notice, the principal offi cer of a premium-paying agency may, by

written notice of objection, ask Comcare to review the premium. The notice of objection must set out

the grounds of the objection and should be addressed to:

Chief Executive Offi cer

Comcare

GPO Box 9905

Canberra ACT 2601

Comcare will review the premium and notify the agency of whether the amount is confi rmed

or varied. Within 14 days of that advice the principal offi cer may, by another written notice of

objection, request the Safety, Rehabilitation and Compensation Commission to review the premium.

An agency’s request for a review of its premium does not alter the due date for payment of the

premium. If a review reduces a premium, Comcare will refund the difference with interest.

FURTHER INFORMATION AND ASSISTANCE

Agencies have internet access to information on individual claims performance and agency-level

trends through Comcare’s on-line Customer Information System.

Further information on claim issues can be obtained through Comcare’s Recovery and Support

Services group on 1300 366 979.

Comcare’s Prudential Management Team can explain the premium amount for a particular agency.

Agencies can contact the Prudential Management Team on 02 8218 3792.


PUB26 (June 2012)

1300 366 979 | COMCARE.GOV.AU

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