Health prevention in Victoria

A novel preventative health – work insurance model is operating in Victoria and appears to be delivering impressive results. Under the ‘WorkSafe’ scheme employers pay variable health premiums based on their health and safety record and ability to safely return and rehabilitate injured employees back to work. So over time this should reward employers who invest more in the health of their workforce. And important too – with ever more of us spending our working days slumped over a computer and likely living with one long-term condition or another, the workplace is becoming one of the front-lines of modern health systems.

Anyhow WorkSafe has delivered savings (in terms of lower employer premiers) of $1bn since 2004, with Victoria now having the second lowest employee premium levels in Australia. In addition to recycling profits back to employers, the scheme’s further surpluses have enabled creation of a $600m preventative fund.

This is providing occupational therapy services and other health interventions to partner and locate with employers, particularly SMEs. Incidentally this was a big theme of the UK’s recent Next Stage Review of the NHS led by Lord Darzi, although with no such innovative funding model.


Could it work in the UK?

The UK equivalent is something called Employers Compulsory Liability Insurance, or ‘ELCI’. In about four-fifths of cases ELCI premiums are non-variable, so there are very weak incentives for employers to actually stump up much to look after their employees’ health. In the past it’s been argued that reform would prohibited by the large asymmetries in the market – in other words that obtaining reliable information on employers’ health records is near impossible or very costly. Another argument made against reforming ELCI has been that it could be unfair to small employers who are less able to make investments to reduce likelihood of claims and who would be particular exposed to a spate of claims.

But I think the Victorian model goes someway to rebutting these. In the first place the asymmetries argument seems to have been got past in Victoria (and it’s less than a tenth the size of the UK) through clear statutory obligations to report health and safety records and risk-based use of inspectorates. And on the small employers point it’s quite easy to design in some rules which get past this – like limiting annual escalation in premiums for particular types of employers or in particular circumstances. Moreover, the Victorian model does all this in quite an efficient way. So rather than run the insurance as a state bureaucracy it has a list of preferred and accredited providers – so the state holds the ring and determines the rules but lets the market work within these parameters.


Anyhow a good excuse to show the classic health inspector clip from ‘That Peter Kay Thing’ – scroll in to 4 minutes….