Crucial reforms to Australia's largest workers' compensation scheme are in danger of being delayed as businesses threaten to move interstate.
The NSW Labor bill targeting psychological injuries would increase the threshold of impairment to limits opponents say could preclude nearly all claims.
Non-government MPs have flagged they will try to scrap the increased threshold during debate beginning on Tuesday.
Premier Chris Minns warned that reforms to make the compensation scheme for four million workers fiscally sustainable, need to be in place by July 1.
The scheme operator "has already identified premium increases unless there's reforms to the system," he told reporters on Tuesday.
Premiums could increase up to 36 per cent over three years for small businesses who do not even have psychosocial claims against them, Mr Minns said.
"One in five businesses are going to hit the wall unless there's a change."
Labor proposes raising the whole person impairment threshold to 30 per cent by mid-2026, warning the scheme could collapse without shifting the dial on who gets weekly payments for life.
But lawyers say that level could exclude nearly all workers' mental health claims and unions have argued it is not the kind of reform the scheme needs.
Peak bodies in the hospitality and care industries have meanwhile urged parliament to support the changes ahead of expected insurance hikes on July 1.
Mr Minns said insurers setting premiums at the start of the financial year have to make decisions based on the legislation in place at the time.
"If they know it's about to change because the law has already changed ... they can change their actuarial assumptions," Mr Minns said.
The Opposition indicated support for reform but will be moving amendments to the bill and may seek to have it referred to an inquiry.
"Contrary to suggestions that have been made, there is no statutory deadline to get this done by July 1," Opposition Leader Mark Speakman told reporters on Tuesday.
The rush was not about insurance premiums, Shadow Treasurer Damien Tudehope said.
"It has the feel that the treasurer is ramming this through the parliament in the week before his budget is due because it has an impact on his budget," he said.
Independent MPs were also working on amendments to the bill ahead of debate expected to take place on Tuesday afternoon.
About 20 per cent of more than 700 surveyed businesses told peak body Business NSW they could be forced to shut if premiums rose as projected, while others could relocate their workforce to other states.
"There needs to be a bi-partisan support for a solution to this problem and it must be done soon," Business NSW chief executive Daniel Hunter said.
"Without it, thousands of family-run businesses will simply not survive."
