ACC has today released proposals for increases to ACC levies as part of its annual levy setting process.
The proposals relate to three ACC levies: Work levy rates that provide cover for work-related personal injuries; earners’ levy rates that provide cover for non work-related personal injuries (eg at home or at sport); and motor vehicle rates that provide cover for personal injuries involving moving motor vehicles on public roads.
ACC chairman John Judge said the need to increase levies was driven by many factors.
‘An increase in the number of claims received annually, rising health costs and Scheme extensions have been major contributors to the need to increase levies to cover the current costs of the Scheme,’ he said. Private health insurer Southern Cross also cited rising claim numbers and healthcare costs increasing well above the rate of inflation as key drivers for their deficit reported yesterday.
‘We are also taking a more realistic approach to estimating future costs and liability. Other factors such as the global recession have had a compounding effect,’ Mr Judge said.
Mr Judge noted ACC is required to develop its levy proposals under existing legislative provisions. However, the Minister for ACC is introducing amendments to the ACC legislation that will have an impact on the final levy rates set for 2010/11 – in particular extending the date by which the Scheme must be fully funded. In addition, ACC is also undertaking a number of initiatives which may reduce the need for levy increases in the order it is proposing.
‘The ACC Board appreciates there’s a limit to how much New Zealanders should be expected to pay in ACC levies, and that many will view the prospect of levy increases at this time with dismay.’ We wish to stress that levy increases are not seen as the only answer to the challenges confronting the ACC Scheme – the focus must be on other ways to make the Scheme more sustainable and affordable in the long run.’
The following table provides an indication of proposed levy rates based on some of these initiatives and changes to legislation taking effect.
Who pays |
Levy Component |
Current 2009/10 |
Proposed 2010/11 [current legislation] |
Indicative 2010/11 [including initiatives & legislation change] |
Proposed change |
|---|---|---|---|---|---|
Work Account Cover for work injuries paid by self-employed* and employers (invoiced directly by ACC) |
Combined average levy rate per $100 liable earnings |
$1.31 |
$1.89 |
$1.47 |
Up 16c |
Note: | |||||
Earners’ Account Cover for non-work injuries paid by employees and self-employed (through PAYE) |
Levy rate for non-work claims in 2010/11 per $100 liable earnings |
$1.5110^ |
$2.4889^ |
$2.1778# |
Up 67c |
Motor Vehicle Account Cover for motor vehicle injuries paid by motorists (through licensing fees & petrol levy) |
Average levy per vehicle |
$287.00 |
$417.28 |
$317.28 |
Up $30.28 |
* Self-employed and non-PAYE shareholders also pay the non-work claims levy
^ Proposed non-work claims levy excluding GST is $2.49 ($1.51 in 2009/10). To calculate the GST inclusive amount, please use the GST calculator (ACC’s external website).# Indicative non-work levy including GST is $2.18 (if improvement initiatives and legislative amendments are taken into account). To calculate the GST inclusive amount, please use the GST calculator (ACC’s external website).Earners’ levy
While growing claims for home and sports injuries have put pressure on the Earners’ Account, the big increase this year is largely because the levy rate has been too low since 2007/08. ‘I understand the decision last year to set the Earners’ levy rate lower than required to adequately fund the account was driven by the recession and the impact on people’s income,’ Mr Judge said, ‘but this is unsustainable.’
Motorcycle levies
Within the motor vehicle levy changes (summarised in the above table) ACC is proposing major changes to motorcycle levies to take into account the fact that for several years, car drivers have been subsidising motorcycle and moped riders.
The new levies reflect the fact that motorcycle riders are 16 times more likely to be involved in a road crash than any other road users and are far more likely to be seriously injured. In 2008/09 ACC paid more than $62 million for motorcycle riders but collected only $12.3 million in levies from them.
Even with the significant proposed increases in the rates payable by motorcycle and moped drivers to redress this imbalance, car drivers will still continue to subsidise motorcycle and moped drivers by $77 a year for the 2010/2011 year.
‘The proposed legislative change to extend the full funding date to 2019 would reduce the effect of residual claims on motor vehicle levies by $100,’ said Mr Judge. ‘However, whether or not this translates into an equivalent reduction in those levies will depend on how best to fund the account fully over the next 10 years. This is something the Board must determine.’
The proposals also change the categories for mopeds and motorcycles, by grouping mopeds and motorcycles together and introducing three sub-classes for 0-125 cc, 126-600 cc and 601+ cc cycles.
Preventing further deterioration
‘Along with other changes, levy increases are needed to help avoid further deterioration in our financial position,’ Mr Judge said.
‘The proposed increases only deal with the current shortfall in funding and largely go towards paying the ongoing costs of existing claims – not future cost increases or increases in demand for services.
‘Government is proposing legislative changes which, if passed, will reduce the size of levy increases. When the Amendment is passed, the Board will reconsider its funding requirements and levy recommendations to the Minister. Despite this, the proposed rates we are releasing today show how bad the situation has really become,’ Mr Judge said.
Consultation
Mr Judge said the ACC Board’s final view on levy increases will be informed by consultation and it will then make appropriate recommendations for Government to consider and to make a final decision.
Further information, including consultation documents and actuarial reports relating to setting levy rates and the estimated outstanding claims liability, is available from www.acc.co.nz/consultation. Alternatively, call 0800ACCRATES (0800222728) or send an email with your request to consultation@acc.co.nz.
Making a submission
ACC is encouraging New Zealanders and affected organisations to have their say.
Submissions must include: |
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Your name |
You can send your submission: |
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By post: |
ACC | |
By fax: |
(04)9184395 | |
By email: |
Deadline for submissions: 5pm, 10November2009