How to manage your ACC levy invoice

Making the ACC experience rating work for you

Employers have now started receiving their ACC levy invoices for 2022/2023. For many, there will be a significant increase due to changes made by ACC that affect how the experience rating is calculated.

The ACC experience rating is calculated depending on an employer’s claims data for the past three years. Those with no or low claims can receive a discount on their ACC levy and those with higher claims could receive a penalty of up to 100%.

Increased ACC Penalties for large employers

Changes to the ACC levy experience rating could mean a company with a $100,000 ACC levy could end up paying anywhere between $50,000 and $200,000.

From 1 April 2022, large employers with levys over $10,000 may have even more to pay. While ACC discounts have remained unchanged, penalties have now increased from 75% to a maximum of 100% of the standard levy. This means a company with $100,000 ACC levy could end up paying $200,000.

This is a big difference from a company with no claims, on the same $100,000 standard levy who might only pay $50,000 with their 50% discount.

Real cost to employers

ACC manages over 2 million new claims per annum, and the scheme does a positive job in managing the majority of claims that don’t require time off work.

However, ACC’s claims performance is worsening for lost-time work injuries. This is impacting employers through increased penalties and increased absenteeism. 

ACC’s Second Quarterly Report to 31 December 2021 shows that the average duration per weekly compensation claim has increased to 106 days per claim against a target of 102.3 days.

The same ACC report shows both Medical Provider and Business Net Trust scores with ACC are at -25 and -27 respectively, against targets of -13 and -5. The report also highlighted that the number of claims going over 365 days duration had increased by 7.5%. This is in addition to an 8.5% increase for the year ending 30 June 2021. 

To further highlight how much ACC performance has deteriorated for lost-time work injuries, in August 2021, ACC’s Actuarial team produced the Work Account 2022/2025 Pricing Report. This report showed the average cost of a weekly compensation claim in 2016 was $20,697, but in 2020 this had increased to $25,723.

Employers are also having issues accessing the ACC system to discuss their work injuries and the rehabilitation of their staff. Both situations are negatively impacting overall claims performance, leading to increased costs through experience rating and lost productivity.  

So how can an employer improve their experience rating?

There is quite a bit that can be done for an employer to manage their claims better, and thus giving the best chance at receiving a discount on their levy and avoiding a penalty.

1. Prevention: Employers should consider putting in place support for employees to prevent claims from occurring, such as early intervention programmes.

2. Review: Reviewing cover decisions made by ACC to ensure they are correctly attributed as a work injury.

3. Self-management: For those paying over $120,000 in annual levy, it is worth reviewing ACC product options and consider managing their own claims through the Accredited Employer Programme.

Accredited Employer Programme

Employers that are part of the Accredited Employer Programme self-manage their work injuries and claims, are not subject to the experience rating, and receive significant discounts on their standard levy. Furthermore, they are in a better position to look after their injured staff.

Currently, Accredited Employers employ over 23% of the New Zealand workforce, and is a very achievable option for many organisations. 

There are basic audit requirements employers have to meet, meaning that the product is most appropriate for larger employers paying over $120,000 in annual levy.  

Here is a list of all businesses who are part of the Accredited Employers Programme (AEP):

https://www.acc.co.nz/for-business/understanding-your-cover-options/aes/

What are the benefits?

There are benefits for both employers and employees. Most notably is ease of access to information, and quicker rehabilitation and return to work rates. 
To highlight the significant differences in rehabilitation improvements, as part of levy consultation ACC produces information specific to industry groups, called Levy Risk Groups (LRG).

As an example, the LRG information produced by ACC, specific to Road Freight Transport for 2020/21 shows the average life time cost of an entitlement claim managed by ACC is $35,501.

The average cost for the same claim type, in the same industry, but managed by Accredited Employers is $18,056. This is almost a 50% reduction in costs with the biggest average cost of work injury claims being days off work.