Private sector and ACC a bad mix

By Helen Kelly

The news that ACC is contracting four private companies to manage the cases of up to 1500 long-term claimants should send shivers down the spine of every New Zealand worker.

Despite its hollow denials (contradicted by its pre-election noises), this National Government is clearly desperate to introduce private sector involvement to ACC, and this is plainly the first move towards much more extensive privatisation of the work account.

This is bad news for injured workers because the experience of private sector case management in both New Zealand and Australia is that claimants receive an inferior and probably more expensive service. It is tainted with perverse incentives for profit.

In a recent article, the northern branch of the Employers and Manufacturers Association (EMA) proposed that New Zealand adopt the workers' compensation system of Victoria, Australia.


There the management of claims is handled by private sector "Third-Party Administrators" (TPA) whilst the levy setting and collection is performed by the government.

Proponents of the Victorian system hoped private providers would compete for market share through efficient service delivery and claims management. Instead they found that providers competed in unhealthy ways. Agents were compelled to impress employers with "tough" claims management and suppression of costs.

The EMA's most alarming proposal is that "TPAs' claims cost overruns can be met by the TPA, creating an incentive to stick to a capped budget". If this is adopted, situations will certainly arise where financial concerns will override the health considerations of injured New Zealanders.


People will miss out on basic entitlements to medical care because the administrators have to meet a budget to turn a profit.


Gallagher Basset, a multinational company that manages claims in Victoria, is one company looking for case management business here. A quick search on the internet shows their name appears on countless consumer watchdog and complaint sites.


This hardly inspires confidence that such a system and its operators will operate to the benefit of the injured worker.


One of ACC's founding principles is community responsibility - which means we recognise the interdependence of our industries.


For example, the economy relies on road workers to build roads that we all need to transport goods and we collectively share the responsibility for their health risks by paying levies to a single public provider.