Published on : January 15, 2014
Return to Work and Psychological Risks: The Australian Experience
The cost, duration and frequency of psychological claims have been rising in Australia over the past 10-15 years, with a notable surge in the past 5 years.
According to a recent report by Safe Work Australia, Mental Stress now costs Australian business more than $10 billion per year.
In 2000-01 Australia changed the way it approached mental illness, and became more open about it as a society. This inherently this lifted the profile of psychological illness in the workplace.This in turn has become a compensation disaster.
Recent reports indicate that 1:4 teenage children in Australia have a mental illness . In the coming years, these people will become active in the workforce, which can only lead to an assumed increase in the rate of aggravation to psychological conditions in the workplace.
The Federal workers compensation regulator, Comcare, have an average cost of $249,000 for psychological claims in its jurisdiction, they also represent the highest number of claim numbers.This figure has been on the rise for many years, and is taking a considerable effort to bring under control.
In 1994/95 claims for "mental disorders" accounted for 4% of total claim numbers.
On average from 2006 - 2010 mental stress claims accounted for 10% of all claims, 35% of total claims costs, an averaged $201,000 per claim.
In 2010-11 mental stress claims accounted for 13% of all claims, 31% of total claims cost and averaged $205,000 .
In 2011-12, this figure rose to an average cost of $249,000, with increasing numbers of new claims.
The average cost of psychological claims is considerably higher than other mechanisms, as the absence from work is longer and other medical and legal costs are, on average, higher.
Whilst the workers compensation industry in Australia has seen a dramatic rise in psychological claims, so have the superannuation disability, income protection and other disability insurance lines. One Insurer has reported a 3-year increase in cost of 24% year-on-year; another has had its claims cost increase so much, that the company's ASX share price was affected.
Australia has a significant number of people off work on psychological insurance claims, and this appears to be climbing. Once a person has conceded a psychological condition and is in receipt of compensation for it, the likelihood of return to work significantly diminishes. These claimants do not fit the typical rehabilitation framework, as these are primarily designed to cater for physical injuries and conditions.
Many self-funded companies and Regulators have redesigned their injury management processes to be more responsive to psychological conditions, with varying results.
Almost all long-term physical claimsnow have psychologicalsequelae. Analysis of long term claims show that even just being on compensation can cause anxiety and/or depression. From a legal perspective, this becomes expensive, but from a Rehabilitation and Return to Work perspective, it becomes complex and difficult.
From a purely academic perspective, if we look at the combined models from a basic perspective, we have a Bio-psycho-social model for the primary injury or illness, and a psychosocial model to address the psychological sequelae.
These two models need to have a different purpose as they address different barriers. I.e. in Bio-psycho-social, we modify the job/workplace/retrain... in psychosocial we address the "non-injury barriers to return to work".
Some claims report a primary psychiatric disabilitywith a sequelae psychological condition on top. I.e. theClaimant may have pre-existing depression, which has been aggravated (the claim); thenthey develop Anxiety and Adjustment Disorder, together with other psychosocial issues. These cases are particularly difficult. If you do not sort these out, you will not achieve the RTW goal. They require a more defined breakdown of their barriers to return to work, and more creative solutions to achieve it.
The acceptance of a psychological claim in Australia relies primarily on a diagnosis from the DSMIV; and will soon move to the DSMV. The claimant must then meet a "significant contribution" test to employment, which is not proving to be a difficult hurdle.
Every Australian jurisdiction has an exclusionary provision for psychological claims. If “reasonable management or administrative action” has caused the ‘claimed condition’ then an "exclusionary provision" applies, and the claim can be denied.
This exclusionary provision was designed to allow companies the ability to administer reasonable human resources activities, without the fear of compensation.
It was the intent of the legislator to enable business to conduct reasonable Human Resources activities, and provided they were managed in a reasonable way, the employer should be protected from the onset or aggravation of a psychological condition.
It is reasonable to assume that an employee who faces dismissal, or has been dismissed from their employment, will develop symptoms of distress; the intent of the exclusionary provision is thatthis should not be attributed to fault of the employer, provided the process was managed reasonably.
This provides for a "double reasonable test", being "how reasonable the action was" and then "how reasonably it was managed". If the employer or insurer are unable to satisfy both tests, they will not be able to rely on the exclusionary provisionsto deny the claim.
This puts a high reliance on Industrial Relations policies, Human Resources practices and the actions of the front line supervisor to defend a claim.
With the best intentions of the legislator, this exclusionary provision has become exceedingly difficult to rely on, due to its interpretation by the judiciary, and the exceedingly high standard they expect Australian employers to deliver.
To protect further employers from compensation, some jurisdictions have made it mandatory for employees to declare pre-existing injuries or conditions, pre-employment. The purpose of declaring is to enable the employer to adjust the workplace for the person’s needs.
A person can be barred from claiming compensation in some Australian jurisdictions if they fail to declare a pre-existing condition that is then aggravated by their employment. The reason for this is that the employer had not been able to provide them with a safe place of employment, as they were not aware of the special circumstances or consideration required.
It is essential that the employer does not use a declared injury or illness as a reason for excluding a person from a position, as this would be seen as discriminatory.
It is important to note that if the employer does not ask, the employee does not need to declare.
Australia has not seen the rise of a mechanism of injury, like this since the "repetitive strain injury" epidemic of the early 1990s. Today we have better defined "repetitive strain injuries" and in many situations eliminated them at their cause, and whilst we still face issues with "occupational overuse syndrome" this has dramatically decreased in recent years .
In the exact opposite direction, we have seen psychological claims prevail.
Self-Funding companies in the United States need to be aware of this emerging risk in Australia and be aware of how to manage this claim type. Failing to manage this emerging risk can lead to a significant increase in liabilities, and a very difficult path when trying to contain it.
About the Author
Dean Stone has consistently proven that employers and insurers can reduce the cost of injuries and illnesses.
With more than 20 years’ experience managing claims and rehabilitation teams in almost all jurisdictions in Australia, Dean is now a Trainer and Consultant who specialises in the design of systems that reduce cost, increase efficiency and improve business performance.
Deans experience includes has been an Advisory Board Member, Self Funding Employers Association since 2010 and in recent years has been the Deputy Chair, National Council of Self Insurer and President, Safety, Rehabilitation and Compensation Licensees Association (Comcare)
In September 2012, Dean was awarded the ‘Claims Manager of the Year' at the Comcare Work Health and Safety Awards (Federal Regulator).
Dean’s focus is to introduce new and innovative thinking, giving a new perspective on what you can do to have a positive influence on your Self Funding portfolio.