Mental health claims budget pressure

With a recent State Government review finding that the Victorian WorkCover system is fundamentally broken, no longer fit for purpose, and not meeting the modern needs of those it was originally designed to assist 30 years ago, WorkCover is in for a shake-up!

Pay-outs in 2022 exceeded premium revenue by $1.1 billion in 2022. The key reasons identified for this are:

• an increase in the number of people that remain on WorkCover benefits for longer than 130 weeks (now around 25% of claims)
• the growing number of mental health claims (currently 16% of all claims, increasing by 3.5% each year)
• the unsuitability of the current capacity test for injured workers to return to work (which was designed to assess physical injuries, not mental injuries)
• the large number of claims based on interpersonal work conflicts (under the umbrella of bullying and harassment) where the only impediment to a person returning to work is poor relationships with colleagues.

To address these issues, the government is considering a number of options, including updating the return-to-work capacity test, capping claims, reducing the percentage of pre-injury wages being payable, narrowing the criteria for accepting mental health claims, by limiting mental health injuries to post-traumatic stress disorder, and excluding bullying and harassment injuries.

Workers may also have to prove that a mental health injury is nearly 100% work-related and not due to other factors in a person’s personal life – currently, for a claim to be successful, workers only need to show a causal relationship between the injury and their employment.

Businesses are also likely to face premium increases. The cost of WorkCover premiums are based on the type of business, the business’s history of workplace accidents, and the total payroll of the business. Victoria is currently at the lower end of the scale of premiums, paying around 1.27% of payroll, NSW pays 1.48%, SA and WA pay 1.8%. A rise to 2% has not been ruled out.

While politically, there is pressure on the Victorian Government to avoid adding costs to businesses that will put jobs at risk, continued multi-billion-dollar cost blow-outs make it evident that to remain sustainable, the whole WorkCover scheme needs a massive make-over, both in terms of cost and services.

If you have concerns about managing WorkCover claims in your business, then reach out and we can discuss how HR Gurus could support you.

Written by Louise Betts