ACC Self-Insurance... is it worth it?
ACC self-insurance or not?
Typically, ACC doesn’t receive phone calls from employers thanking them for the latest ACC invoice. Understandable and we are no different.
That said, where we do differ to most employers is knowing that what we are charged by ACC is not necessarily what we should be paying.
ACC legislation allows for a range of interventions and nuances that typically reduces an invoice not by 10% or 20%, but on average with savings over 40% or even 50% - regardless of your payroll. This is outside of the self-insurance space.
How is this possible?
To be frank, rather all too easy really…
The ACC self-insurance space has typically been entertained by employers who pay more than $250,000 in ACC levies per annum. Why do they self-insure? A myriad of reasons but ultimately two are more prevalent.
Claims Control: getting control over the claims space allowing for a higher percentage of claims to be declined and greater day to day control over the duration of the claim and associated costs.
ACC Savings: by self-insuring and underwriting a level of financial risk, there are perceived savings of around 15% - 17% of the base ACC spend.
Third Party Administrators (TPA) manage claims on behalf of most self-insured employers under the Accredited Employer Programme. TPA’s play a similar role to ACC and their revenue models are driven by a certain volume of claims which contradicts one of the principals of the Accredited Employer Programme which is savings should be reinvested into injury prevention.
I digress. On 1 April 2020, ACC introduced a raft of changes as a result of substantial lobbying from us and other vested parties. The changes focused on Experience Rating (ER), the penalty / discount scheme that all businesses sit under. Under the new structure, ER provides for discounts of up to 50% for larger employers without needing to underwrite long-term claims.
Please note that under the self-insurance model, ER does not apply so employers do not have the opportunity to obtain up to a 50% discount – in fact, they cannot achieve any discount in this space.
TPA’s may argue that self-insurance is more useful given that ER can spike upwards if you have a bad run of accidents. Sure, we agree, however, firstly, the spike works the other way as well; and secondly, the impact of the spike is reduced under the new ER structure.
Perhaps more importantly is the argument that TPA’s typically create savings by decline more claims than ACC therefore creating a direct ROI for the employer.
Although this in principal is true, it is challenged on two fronts.
Declining claims typically disenfranchises the worker that could result in other costs that are not directly measured i.e. lost productivity; a worker being off from work whilst still incurring holiday pay; fellow workers having to take up the slack; possible litigious action by the worker against their employer; etc.
Claims impacting ER can also be challenged on various levels. Claims resulting from pre-existing injuries; reaggravation; overuse injuries; motor vehicle related; or perhaps fictitious claims, can all be successfully challenged under the legislation. This all drives savings under ER
So, what are the benefits of self-insurance?
We argue very little.