The question now is why John Key didn’t take decisive action earlier. He promised to set high standards for his ministers, yet yesterday he was claiming Smith had done nothing wrong.

As late as this morning Keywas reported as saying if he sacked every Minister who made an error of judgement he wouldn’t have many left. Hardly a way to show his confidence in his own team…

Now it’s been revealled that this year’s Budget, the one in which Nick Smith heralded ACC’s dramatic turnaround, over-stated the savings ACC is supposed to be making. Documents obtained by Radio NZ under the OIA show that the Government ignored warnings from the Labour Department before the Budget that Treasury figures on proposed savings from ACC were too optimistic. The Labour Department predicted savings of $400 million over the next three years, but Treasury said $580 million would be saved.

Nick Smith has been all over the place on ACC figures. One minute it’s having a financial crisis the next he is ignoring Labour Department advice in order to make the Government’s financial position look better than it otherwise might. Nick Smith and National simply cannot be believed when it comes to ACC. There was never a crisis. ACC is an excellent scheme and National should stop trying to sabotage it so that they can make bigger profits for the Aussie insurance industry.

At yesterday’s Transport and Industrial Relations Select Committee meeting National members voted en-bloc to report back the petition of Louse Carroll and 5857 others to the House without hearing a single piece of evidence. That’s undemocratic and a slap in the face to all those who sought to have their concerns heard by their House of Representatives.

Having actively discriminated against those with hearing loss, the National government is now turning a deaf ear to their concerns. They aren’t even willing to allow them to come to Parliament and have their say. That’s frankly disgraceful. If almost 6,000 people were willing to take the time to sign a petition to Parliament, the least their elected representatives can do is allow them the courtesy of a hearing.

Smith and the National government used the financial crisis to make a number of changes to ACC that undermine some of the central principles behind the scheme. The changes that they made to compensation for victims of work-related hearing loss illustrate it well.

Under National, the guidelines ACC works to when considering hearing loss claims have been changed and ACC now discounts a person’s hearing loss as they get older, regardless of whether or not that loss is age-related. They’ve also set up an arbitrary 6% hearing loss threshold before compensation is considered, regardless of where on the hearing spectrum the loss happened. It’s quite possible to have less than 6% hearing loss and still not be able to hear the person standing next to you in a crowded room.

One of the core principles of the ACC system is that it’s comprehensive, no-fault coverage. Hearing loss is now the only injury/accident where the victim has to meet an injury severity threshold before they’re covered. I’m pleased the Human Rights Commission has agreed to hear the case. The only fair way to deal with hearing loss cases is to deal with each one individually, based on its own merits. That’s how ACC should work.

Vero’s executive general manager of new ventures Nigel Edmiston said his company – which is owned by the Australian SunCorp Group – had done some planning on entering the workplace insurance market but that the Government’s proposal “wasn’t particularly attractive”…

Edmiston said that private insurers would not be able to compete with ACC’s pricing and would prefer it was excised completely from the market.

“[ACC] have a huge market share, they have all the infrastructure and systems, they’ve got no set up costs, they don’t pay tax and they don’t pay dividends and they don’t need capital.”

He said at the outset private insurers would need to provide 80 cents in capital expenses for every dollar gained in premiums on such a product.

In other words, Edmiston is confirming what we’ve said all along. ACC is incredibly efficient and cheap, and it ensures that all of the money collected actually goes into helping those with injuries, rather than into the profit lines of the Aussie insurance industry.

The only way the private insurance industry could compete would be if ACC was excluded, in other words, the cheapest provider was arbitarily shut out of the market. How exactly would that be competition?

This all begs the question, however, of just how enduring Nick Smith’s commitment to his current proposal is. If National win the next election, don’t be surprised to see a more radical proposal for ACC reform suddenly emerge as National claims it has won a ‘mandate’ to do whatever it likes in dismantling our world-leading ACC scheme.

What concerns me about this most is that the National government haven’t even attempted to produce a robust case to show that it’s a good idea. This is a purely ideological decision, based on National’s blinkered belief that the market will always deliver the most efficient outcome. But consider these facts:

• An independent review by Pricewaterhouse (Australia) found that our ACC scheme has the lowest administration costs of any comparable scheme anywhere in the world.
• Information provided to the Transport and Industrial Relations Select Committee showed that the cost per-worker of work-related accident cover in New Zealand is, on average, about half what it costs in Australia (is this what National meant by catching the Aussies?).
• Under the current system, if someone is injured at work and has to stay home, the first week of income compensation has to be provided by the employer. Following the Christchurch earthquake, the government waived that requirement and ACC covered the lot. They couldn’t have done that if work-related injury cover had been provided by private insurers.
• If a private insurer offering ACC cover collapses, it’s the taxpayer who will have to pick up the tab for any outstanding claims liabilities. So the private insurance companies have an effective fail-safe guarantee. We’ve already seen one ‘accredited employer’ collapse resulting in ACC having to pick up the bill, that will only get worse under Nick Smith’s privatisation plan.
• When HIH, a private Australian accident insurance company collapsed in the early 2000s, the Aussie govt had to pick up a $500 million tab. HIH had been offering accident cover under National’s previous attempt to privatise ACC, which was reversed by the incoming Labour government following the 1999 general election.

There are only two ways that private insurance companies will be able to turn a profit from offering work-related accident cover in New Zealand. Either they will have to reduce entitlements, or they will have to increase the cost of that cover. In other words, we’ll all end up paying more to get less.

Since National became the government, Nick Smith has gone to some lengths to manufacture a crisis in ACC in order to justify his privatisation plans. As I outline a last week, ACC is in pretty good shape and Smith’s scaremongering is pretty transparent. His moves to massively hike up levies in 2009 were designed to erode public support. If ever we needed proof of how cynical a move that was, we got it a few weeks ago when he started talking about levy cuts just six months out from a general election.

ACC isn’t perfect, but the comprehensive, no-fault, 24/7, universal cover it currently offers is the right approach for us to take. We should be focused on how we can improve what we have now, not how we can create more profit-making opportunities for National’s mates in the private insurance industry.

But we’ll also be looking at how we can improve the scheme that we have now, because although we think the system overall is a sound one, we agree that it could be even better. Over the past few months I’ve been meeting with a wide range of ACC stakeholders, from claimants and their advocates through to medical providers and medical assessors.

One of the issues that I’ve become increasingly concerned about is the lack of independence in the specialist medical assessor process. It’s pretty clear to me that ACC have some “tame” medical assessors who are giving them the result that ACC wants, rather than the one that is in the claimant’s best interests.

In some cases, these assessors are working almost exclusively for ACC, making them reluctant to bite the hand that feeds. I’ve also met with specialists who have been all but ‘black listed’ by ACC because they haven’t been willing to give them the assessment results that they want.

So the question I’ve been contemplating is whether we need a bit more independence in the ACC medical assessment process. Should specialist assessors be required to be ‘current practitioners’ in the field they are assessing? Should there be a limit on the proportion of a specialist’s work that can be ACC assessments? Should claimants be given more ‘choice’ over who they go to for specialist assessments?

I’m interested in your views and your stories. Like I said above, I think ACC is a very good system and I’d hate to see it carved up as National want to, but that doesn’t mean I’m not willing to debate how it can be constructively improved.

ACC was never in crisis. In fact, ACC was in much better shape when Labour left office in 2008 than it was when National got booted out in 1999. Back then, only 36% of the work account was fully-funded, in other words ACC had an outstanding claims liability for work-related injuries of 64%. By the time Labour left office, that had fallen to 45%.

In 2008, the year the “crisis” was supposed to have happened, ACC collected $3.65 billion in levy revenue and paid out $2.73 billion on claims. The remainder went towards reducing some of that outstanding claims liability.

Looking at the big picture, when National left office in 1999, ACC had $2.5 billion of investments. By the time they came back in 2008, ACC had investments in excess of $12 billion. It’s yet another example of how the Labour Party focused on saving and building up assets for the future, while National’s only plan is to cut stuff.

Nick Smith manufactured a crisis in ACC to soften the public up for changes he knew wouldn’t be popular. He then hiked ACC levies and cut entitlements. Under National, Kiwis pay more for ACC and get less in return. That situation is only going to get worse if they decide to press ahead with their plans to introduce competition (read privatisation) into the ACC work account.

I think ACC is a fantastic system. Undoubtedly there are improvements that can be made, and I’ll talk more about some of those in coming months, but let’s not throw the baby out with the bathwater. We should be proud of our ACC system and National should keep their hands off it.

ACC’s head of injury prevention and insurance products, Peter Wood, said that although the long-term costs to the corporation would be high, they were manageable.

“Obviously additional claims from the Christchurch earthquake will increase costs and ACC funding requirements,” he said.

“However, the overall size of ACC allows for these increased costs to be absorbed with the current levies or funding structure without significant increases being required.”

The costs had to be seen in the context of ACC’s $16 billion in reserves and claims costs each year of more than $3b.

“It is therefore unlikely that the long-term cost of these claims will have an impact on ACC levy rates in the future.”

This highlights once again how crazy the National Party are to try and privatise parts of ACC. As a single, nationalised scheme, ACC is able to absorb the impact of a big event like the Christchurch earthquake without too many problems.

I blogged a couple of weeks ago about the impending collapse of AMI Insurance and how National’s ACC privatisation plans could lead to a similar outcome. I’m not at all surprised that Nick Smith is delaying announcing their preferred options. Carving off a big chunk of ACC and handing it to the private insurance industry right at the time you’re having to bail out one of the big players isn’t a good look in anyone’s book.

Then there is the issue of Nick Smith’s (sensible) move to ensure that victims of the earthquake received cover for the first week of injury if they weren’t able to work. Normally that cost would either have to be met by the employer for a work-related injury, or the individual themselves. Had the government already privatised the ACC work account, they wouldn’t have been able to do this as they would have effectively been instructing a private insurance company to provide cover over and above what the victim was entitled to.

ACC is a good scheme. Sure there are some areas that we’d all like to see improved, but National’s plan to farm it out to the private insurance industry is just nuts. They should go back to the drawing board and leave ACC alone.

But it highlights the risks involved in another National government policy – the privatisation of ACC. Under National’s privatised model of accident cover (they try to dress it up by calling it ‘competition’ but it’s privatisation by any other name) a private accident insurance company, faced with an unforeseen influx of claims due to a disaster such as an earthquake, could find themselves in the same boat as AMI does now.

I asked Nick Smith in Parliament a few weeks ago whether or not the government would guarantee Kiwis that if their private ACC insurance provider collapsed they would still be covered. Naturally he evaded the issue. He had no choice really. If he’d said no, he’d basically be saying that privatisation would mean thousands of New Zealanders could find themselves without cover. If he’s said yes, he’d basically be writing a blank cheque to the insurance industry.

I think there are a lot of Kiwis who are getting pretty fed up with the government having to constantly bail out private companies who rack up massive profits when the going is good and then turn to the taxpayer for assistance when things get a bit tough. Why would we want to replicate the problem in ACC?