Ask just about anyone involved in running a business about workers' compensation and you're likely to receive a highly negative response saying it's a huge business headache.
The problems with workers' compensation are many. But central to understanding this is the fact that the eight different schemes run by the states and territories are mini-empires of monopoly. And like all monopolies they do a job but fail to deliver the highest quality outcomes to consumers.
However, some change is now beginning to unfold that will expose the state schemes to competition. And it could be the start of much bigger change.
In what can only be described as the emergence of "competitive federalism", the Federal Government is now making its workers' compensation scheme, Comcare, available to some sections of private business.
For private companies to enter Comcare, they must be large enough to self-insure and be in competition with a Commonwealth authority or former authority. The state governments are not happy with this. The first to enter Comcare was Optus in 2004. In response, the Victorian Government mounted a legal challenge but this failed. Now the door seems open to large numbers of companies to follow the Optus lead.
Transport company Linfox recently entered the scheme. And many companies are making applications or seriously considering the option.
Commonwealth Bank, for example, would automatically succeed because it is a former government authority. ANZ, NAB and all others banks and financial institutions could enter because they compete with Commonwealth Bank.
Any transport company that competes with Australia Post should be eligible. Mining companies may be eligible where they compete with a former government power company that operated mines, for example. The number of businesses that may be eligible is large and the benefits of shifting to Comcare are significant.
Any business that operates nationally is now forced to register and comply with each individual state workers' compensation scheme. The complexity of compliance is massive. The schedule of claimable injuries and compensation amounts is different from state to state. The administration rules that apply are totally different in each state. The premium rates and administration vary hugely and claims administration has no consistency. This was all detailed in a Productivity Commission report in 2004.
The state governments may claim that these differences are important if federalism is to operate properly. States with superior workers' compensation schemes can attract businesses, they might say. But the horse-and-buggy days of states running self-contained economies have long passed. Even small businesses frequently need to operate in national if not global economies if they are to be viable.
For companies operating nationally, the appeal of having one national workers' compensation scheme across their entire business makes enormous sense. For a long time the states have had a committee of heads of compensation authorities to try to bring some consistency but the process has been a complete failure.
It's not surprising, then, that the Federal Government has decided to take the lead and open the states to competition. Initially the benefits will only be felt by large businesses that can handle self-insurance. But the implications are much wider.
The states will come under pressure from businesses and workers who are their clients and who, for the first time, now have another option. Some listening to clients might actually occur. The state schemes may feel the need to improve administration and servicing and stop many of the rorts in which they are involved.
For example, in the labour hire area, all state workers' compensation schemes apply what they call "recovery". When a labour hire worker is injured, the states regularly sue the client of the labour hire business and "recover" the cost of the injury claim against the client's public liability insurance. The states use a legal loophole they have created to avoid their insurance obligations. In this respect the schemes are a sham. Labour hire companies are likely to rush Comcare if they can.
Many other workers' compensation scams exist. The federal scheme is likely to create competition for the states to mend their ways, to create truly effective and efficient schemes.
At this stage Comcare is only available to larger businesses. But as Comcare grows the states will be worried that all businesses and workers will demand entry.
Many states may say the Federal Government is destroying federalism. But Australia's federalism has always been about creating competition between the states. If this has failed in some areas, the entry of the Commonwealth to create a new level of competition must be welcome.
In the end, the ones who stand to benefit are Australia's workers and businesses.
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