A warning that premiums need to drastically increase to shore up NSW's flailing state-owned workers' compensation scheme has been rejected by the government.
State insurer icare, which manages the scheme covering more than 3.2 million public and private employees, has been plagued by allegations of mismanagement, haemorrhaging money and the leaking of personal data of nearly 200,000 injured workers.
A confidential briefing note released on Monday by Labor showed the NSW Treasury warned in August the scheme's finances were equivalent to that of the early 2010s, when it was considered to be in "financial crisis".
To overcome a projected shortfall, the note said premiums in 2025 had to be 33 per cent higher than 2021 prices.
But Treasurer Matt Kean batted away suggestions drastic increases to premiums was necessary.
Rather, the government would aim to get injured workers back to work faster and have icare make better investment decisions.
Labor, he said, was making it very clear they wanted to "jack up" premiums on small businesses across NSW.
"That stands in stark contrast to the government's position: to keep premiums low and support injured workers and help them recover," the treasurer told reporters on Monday.
Shadow Treasurer Daniel Mookhey said senior ministers knew the state of icare's finances was catastrophic.
"This agency remains a basket case. But instead of fixing the problem, the government has engaged in a cover-up," he said in a statement on Monday.
A re-elected coalition government would surely - "as night follows day" - try to eject more injured workers from the scheme to shore it up, Mr Mookhey said.
The briefing note advised Mr Kean and Finance Minister Damien Tudehope to approve icare's statement of business intent.
Treasury, which supported icare's plans, said the insurer had "made significant advances" to address immediate issues and "is making sensible plans for continued progress".
But significant concerns remained for the financial outlook of the workers' compensation scheme.
"This is not a criticism of icare, rather a reflection of the challenges facing the scheme," the note said.
Annual premiums are currently 1.48 per cent of wages but will need to lift to about 1.85 per cent in two years, representing a $3800 increase on every million dollars of wages, AAP estimates.
Leaving annual increases at 2.9 per cent, as they've been since 2021, would cause a key indicator of the scheme's health - the insurance ratio - to fall below 100 per cent, the note said.
icare's target insurance ratio is 130 per cent.
"The forecast financial improvement is now dependent on premium increases that may not be achievable," the note said.
Mr Tudehope said keeping premiums increases low in 2021 and 2022 came after considering the potential impact on NSW businesses recovering from the COVID-19 pandemic.
He remained confident the icare board were making the necessary reforms to improve performance through better return to work rates, internal cost savings and investment management.
"This is a multi-year program of improvement to ensure long-term sustainable change is embedded for the benefit of injured workers," he told AAP in a statement.
"Labor's attacks on icare are all about politics and nothing to do with supporting injured workers or businesses."