ACC has $50B (of your money)

According to their 2021 Annual report, ACC (that’s the organisation established to look after people when they’re injured) has accumulated $50B through levying new Zealanders and playing the financial markets.

That’s a hard figure to get your head around, almost meaningless. Fifty thousand million? That’s no better. Approximately ten thousand dollars for every NZ citizen? Is that a lot?

Why?

That’s an excellent question. Why do they need $50B when in 1999 they had $0B (and operated just fine). It’s this change.

They changed the law so ACC could start building this enormous pile of money. Before 1999, it collected sufficient levies to pay for the treatment costs that year. It operated very much as hospitals do aiming to break even.

Enter neoliberal politicians (of all flavours) and it is now run like an insurance company, building reserves (profits) for a rainy day. The last time I read ex-chair Paula Rebstock trying to explain this (badly), ACC was aiming to build a mountain of money to the tune of $100B, twice it’s present size.

Interestingly, ACC still operates like it’s pre-1999 model. The levies it charges and the treatment costs are roughly the same. The 2021 Annual Report documents net levy revenue of $5.0B and claims paid of $5.2B. Close enough to break even. ACC’s accounts claim they lost $2.7B because they have a disingenuous line that syphons funds into their giant ‘Scrooge McDuck Money Bin’ - Expected increase in outstanding claims liability $2.1B. It’s the accounting equivalent of a magician’s misdirection to get us looking in the wrong place as they argue they need to increase levies (and steal our watch).

So, why do they need this money?

They don’t.

The entire rationale rests on the premise that if ACC stops collecting levies, it would need a lot of cash to support everyone with a current claim until they die. As ACC, in other words the government, has no intention of stopping collecting levies, they’re fine. The government has the ability to fund ACC whatever it needs to cover a shortfall, it sits on the government balance sheet.

Nothing in the 1999 environment required that ACC’s model needed to change. It was a change of philosophy from public service to private business.