2021 Levy Consultation > What do you think of our proposed levy changes for accredited employers

Recommendations to the Minister

What do you think of our proposed levy changes for accredited employers?

We're proposing changes to fees for the Accredited Employer Programme and discounts under its Partnership Discount Plan.

Agree

Disagree

Responses

Good health and safety performance leads to safer workplaces

The Accredited Employers Programme (AEP) is best suited to large employers who:

pay ACC levies of more than $250,000 per year
are able to manage claims and pay for the costs of treatment and rehabilitation for their employees’ work-related injuries (i.e. act on behalf of ACC).

Accredited employers can qualify for reductions of up to 90% in their Work levies. They can choose to join one of two plans:

the Partnership Discount Plan
the Full Self-Cover Plan.

Partnership Discount Plan

Employers on the Partnership Discount Plan (PDP) manage and accept financial responsibility for employees who suffer work-related injuries for a nominated claims management period.

A claims management period is the time selected by employers during which they manage and pay for an injured employee's treatment, rehabilitation and compensation. In return for providing this cover, the employer receives a discount on the standard Work levy they pay.

Claims that are still active beyond the claims management period return to ACC and we manage them from then on.

Full Self-Cover Plan

Employers in the Full Self-Cover Plan (FSC) take full financial and injury management responsibility for:

work-related injuries for the management period selected by the employer
the lifetime costs of all claims up to pre-selected financial limits.

At the end of the selected management period, ACC resumes the role of managing claims while the employer remains responsible for any unpaid claims costs up to the pre-selected limits. Employers pay for certain claims costs as a one-off payment at the end of the management period.

Work to enhance the AEP

As we implement changes to the programme that we co-designed with employers and unions, our current focus is improving how we collect data from Accredited Employers and how we then use this data to identify opportunities for further improvement.

The next phase requires revising the AEP framework before we can implement any of the proposed policy changes to give effect to these improvements. We will continue to work directly with accredited employers, third party administrators, and with workers and their representatives on these changes.

The 2021 levy consultation does not include any of the proposed policy changes from the co-design work undertaken over the past few years.

AEP co-design vision

Our proposed changes for the 2022-25 levy period

As a result of the proposed changes to the Work levy for businesses, we propose the following updates to fees and discounts to the AEP for the 2022/23–2024/25 levy period:

Proposals for the Work levy rates for businesses

Proposed change	Plans impacted	Impact on levy paid
Decrease the administration fee from 2.5% to 2.2% of the Work levy	PDP and FSC	Decrease
Decrease the unallocated primary health care cost fee from 1.4% to 1.3% of the Work levy	PDP and FSC	Decrease
Increase the bulk-funded public health care cost fee from 3.8% to 4.5% of the Work levy	FSC only	Increase
Decrease the average discount in the PDP one-year claim management option from 53.0% to 50.0% of the Work levy	PDP only	Increase
Decrease the average discount in the PDP two-year claim management option from 60.6% to 57.8% of the Work levy	PDP only	Increase

Combining the proposed changes and assuming no change in liable earnings, we estimate the following distribution of change to the levels proposed for 2022/23 compared to the current levy year (2021/22).

Changes in estimated levy rates between consultations for accredited employers in the Partnership Discount PlanChanges in estimated levy rates between consultations for accredited employers in the Full Self-Cover Plan

The levies payable for the PDP plans generally reduce in line with the recommended decrease in the average Work Account levy. For the FSC plan, there is an average increase of 15% in levy charged driven by an expected increase in claims hitting stop loss cover and high cost claims cover limits which has increased the cost of those components of the levy.

We want to hear your feedback on our proposed changes to the AEP.

In these proposals, the ‘Work levy’ refers to the Work levy before any discounts or penalties are applied. It’s the rate employers pay if they’re not in the AEP.

What’s driving the need for change?

When we review levy rates, we always assess the implications for the AEP. This includes a review of the cost to treat and care for those who have claims for injuries and the administration costs of supporting the programme.

These changes have often been small in the past but with the time between levy reviews extending to three years, it’s possible that larger movements in fees and discounts could occur.

What’s the impact of the proposed changes?

Proposed decrease to administration fee

We propose to decrease the administration fee to 2.2% for 1 April 2022.

	2019/21 Levy ($000's)	2022/25 Consultation ($000's)
Administration expenses	4,793	4,850
Standard levy	189,000	219,500
Administration fee	2.5%	2.2%

Proposed increase to unallocated primary healthcare cost fee

From 1 April 2022, we propose decreasing this fee from 1.4% to 1.3% of the Work levy for accredited employers. A decrease in work claims that cannot be attributed to individual employers has led us to make this proposal.

Why is there an unallocated primary healthcare cost?

Some of the workplace injury costs we pay are short-term medical costs that can’t be attributed to individual employers. This is because some workers don’t or can’t provide employer-specific information when they seek treatment or other support for work-related injuries.

Although these claims are rare, we still need to collect money to cover these costs. We do this through the unallocated primary health care cost fee, which is included in accredited employers’ total Work levies.

Proposed decrease to bulk-funded public healthcare cost (BHC) fee

From 1 April 2022, we propose to increase the BHC fee from 3.8% to 4.5% of the Work levy for accredited employers. BHCs are expected to increase from an average $40 million a year in 2019/20–2021/22 to $48 million a year in 2022-25. This is consistent with an overall increase in the expected cost of bulk-funded health care. The pool of liable earnings to pay for these BHCs is also increasing but not as much as the BHCs, which increases the amount required to cover these costs.

Below you’ll see our calculations for the proposed BHC fee:

Fee: BHC = (C / LET)*(100 / APR)

Where:

C = Estimated average annual bulk health care costs for the 2022–25 levy year/s ($48 million)

LET = Estimated average annual liable earnings of all employers ($166,500 million)

APR = Average Work levy rate for employers ($0.65 per $100 liable earnings)

So:

BHC = ($48 million / $166,000 million) * (100 / 0.65) = 4.5% of the proposed standard work levy

[note: differences may exist due to rounding of figures]

What is BHC?

The BHC fee is a payment we make to district health boards (DHBs) to cover acute treatment for accident-related injuries. We pay this as a bulk amount based on the expected cost of the services the DHBs will provide as part of ACC cover. A portion of levy funding in ACC’s Accounts is used to cover the BHC fee. Accredited employers are charged this amount as a percentage of their Work levies.

Proposed changes to stop loss limits

The maximum stop loss limit is currently 250%, and the minimum 160%, of an employer’s expected claims costs. We calculate these expected costs using the employer’s standard Work levy before any discounts are applied. We review the limits (which we set as a percentage of the Work levy) every year so they reflect changes in the Work levy.

The table below shows the calculated maximum and minimum stop loss limits as percentages of the Work levy. The proposed decrease to the Work levy means the percentages increase.

	Partnership Discount Plan 1 year (PDP1)		Partnership Discount Plan 2 years (PDP2)		Full Self-Cover Plan
	2019/20- 2021/22	2022/23- 2024/25	2019/20- 2021/22	2022/23- 2024/25	2019/20- 2021/22	2022/23- 2024/25
160% of expected claims costs	73.60%	82.70%	86.40%	97.10%	140.00%	163.20%
250% of expected claims costs	115.00%	129.20%	135.00%	151.70%	218.80%	255.00%

PDP employers who opt for stop loss cover pay for claim-related costs during:

the cover period
a selected management period of either one additional year (PDP1) or two additional years (PDP2), up to their stop loss limit.

FSC employers are responsible for claim-related costs for the lifetimes of the claims. As a result, they’re expected to pay more claim-related costs (as a percentage of the standard Work levy) than PDP2 employers. PDP2 employers are expected to pay more claim-related costs as a percentage of the standard Work levy than PDP1 employers.

This means the stop loss limits (as percentages of the Work levy) for PDP1 employers should be lower than those for PDP2 employers. These limits will also be lower than those for FSC employers.

What is stop loss cover?

Stop loss cover protects accredited employers against unexpectedly high total injury costs during a cover period (e.g. if there are a high number of work-related accidents within a very short timeframe).

Stop loss cover is compulsory for employers in the FSC and optional for those in the PDP.

Accredited employers select a stop loss limit from a range of expected claims. They pay all claim costs up to the nominated amounts, with ACC covering any additional costs.

The levy for stop loss cover is based on the expected variability in claims history.

This depends on:

the size of the business – smaller employers generally have more variable claims experiences
the average cost of a business’s claims – employers with relatively low average claim costs tend to have less variable claims histories e.g. an employer expected to have 100 claims of $5,000 will have a more stable claims history than an employer expected to have 10 claims of $50,000
the likelihood of a high-cost, serious injury claim.

Proposed discount changes to the PDP

The total levies employers in the PDP pay depends on their relevant industry classification unit and whether they choose the one or two-year plan. Currently the average levy discounts are:

53.0% of the Work levy for the one-year plan
60.6% of the Work levy for the two-year plan.

We propose, from 1 April 2022, to decrease the average levy discounts for the PDP to:

50.0% of the Work levy for the one-year plan
57.8% of the Work levy for the two-year plan.

This decrease is caused by changes in claims payment patterns. We expect a smaller proportion of claims payments to fall within the claims management period compared to 2018. Therefore, employers should receive a lower discount on the Work levy.

As the severity of accidents varies by industry, PDP discounts depend on each employer’s levy risk group e.g. an industry with a high percentage of low-cost claims will receive a larger discount because it will have contributed a higher proportion of payments during its claims management period.

In the table below, you’ll see how we calculated our proposed discount changes.

Proposed 2022/2023 – 2024/2025 Partnership Discount Plan discounts
		Claims management period subsequent to cover period
	Standard employers	1st year	2nd year
Direct claim costs	0.0068	0.0034	0.0028
Bulk-billed claim costs	0.0004	0.0004	0.0004
Claims handling expense	0.0006	0.0003	0.0002
Administration expense	0.0001	0.0000	0.0000
Levy collection costs	0.0001	0.0000	0.0000
Provision for doubtful debts	0.0002	0.0002	0.0002
Risk margin on claim costs	0.0000	0.0000	0.0000
Funding adjustment	-0.0023	-0.0011	-0.0009
Performance pricing discount funding	0.0005	0.0000	0.0000
Net average employer work levy rate	0.0064	0.0032	0.0027
Total variable costs	0.0051	0.0026	0.0021
Total fixed costs	0.0008	0.0006	0.0006
Total average employer work levy rate	0.0064	0.0032	0.0027
Partnership Discount Plan discount		50.0%	57.8%
2021/22 discounts		53.0%	60.6%

There are no changes proposed to high-cost cover for the FSC.

1 Sep 2021

Open for feedback

Tell us what you think about our proposals.

5 Oct 2021

Consultation closes

We’ll review and consider all feedback submitted to us.

Nov 2021

Recommendations to the Minister

Taking account of what you tell us, we’ll make recommendations on levy rates to the Minister for ACC.

Dec 2021

Final decisions by Government

The Government will make the decision on final levy rates, which will take effect next year and be in place for three years.

Agree

70%

Disagree

30%

70%

Agree

70%

Disagree

30%

Its pointless when ACC puts in place rubbish rules that no other entity in New Zealand asks for. Specifically after 20 years ACC asks for audited accounts for every employer. No consultation, no reason why as after asking no employer in NZ that doesn't need to produce audited accounts has never negatively impacted on ACC through AEP. Inland Revenue, Insurance for a lot more than .67% of payroll don't require it, International Financial REporting Standards don't require it but incorrectly ACC does. Our accounts still need to be certified and signed off independently it shows how out of touch ACC is with business requirements.

This is nuts at the rate we pay and slack acc service you still want more. How about you provide a proper service first not months on waiting lists thats why the cost is so high.