New York Workers Compensation Alliance

The New York Times today reported the shocking news (see article below) that New York employers are cheating the workers' compensation system out of  up to $1 billion dollars per year, according to a report released by the Fiscal Policy Institute.  The news sent reverberations through the halls of Albany and sent policy makers and the New York State Legislators talking.  The report was picked up by influential industry sites such as WorkersComp Central and the Workers Comp Insider, who provided their own comments and analysis.  In addition, the new Business and Labor Coalition of New York (BALCONY) and the Public Employees Federation (PEF) called upon new Attorney General Andrew Cuomo to investigate and prosecute cheating employers. 

Given the size of such fraud and the harm to the majority of  honest employers throughout New York, it's interesting that the Business Council of New York State has not placed employer workers' compensation fraud on it's own priority agenda.  They keep on trotting out the same old highly suspect statistics, but say nothing about rampant employer workers' compensation fraud....hmm? Certainly, eliminating such fraud would more than pay for the measly 7000 permanent partial disabilities found among the 150,000 indexed workers comp claims per year. 

 Permanent partial disabilities make up only 5% of the claims each year and fall disproportionately on the working poor. The working poor in New York State are your sisters, brothers and cousins and are more likely to be single women, African Americans and Hispanics.  We don't believe that Gov. Spitzer or the State Legislature has any intention of making the working poor bare the brunt of any workers' compensation reform while rich corporate interests continue to cheat the system.

The below Times article by Steven Greenhouse is eye opening:

January 25, 2007 
Study Says Many Firms Cheat New York Workers’ Comp System
By STEVEN GREENHOUSE

A new study estimates that employers cheat New York State’s workers’ compensation system by not paying $500 million to $1 billion a year in required insurance premiums, forcing other employers to pay higher premiums.

The study by the Fiscal Policy Institute, a liberal research group, found that these illegal underpayments represent 15 percent to 20 percent of all the workers’ comp premiums that are supposed to be paid each year statewide.

Some companies pay no premiums while others underpay by underreporting the size of their work force to qualify for lower premiums, the study said.

Government, business and labor leaders say the noncompliance hurts the state’s business climate by forcing law-abiding companies to pay higher workers’ comp premiums when many corporations are already complaining that their premiums are too high.

“We were surprised to find this magnitude of noncompliance,” said James Parrott, the chief economist for the Fiscal Policy Institute. “This noncompliance has helped cause at least two things: very low benefits for injured workers in New York, which are among the lowest in the country, and second, despite these low benefits, workers’ comp premiums that are considered very high.”

Mr. Parrott said inadequate data made it hard to pinpoint the exact amount of cheating.

The report asserts that if more companies paid their full premiums, the extra money would enable the state to cut workers’ comp premiums over all and increase benefits for injured workers. The report maintains that a lack of enforcement has emboldened employers to cheat.

“Not being honest on payroll has become almost an accepted practice in New York State,” said Art Wilcox, a workers’ comp expert with the New York State A.F.L.-C.I.O. “It hurts the competitiveness of a business that does the right thing. It hurts the competitiveness of an insurance broker who refuses to play games with payroll. And it certainly hurts any insurance carrier who won’t bend the rules because they’re competing against people who will.”

Michael Moran, a spokesman for the American Insurance Association, said he found it difficult to believe the level of noncompliance found by the study. “It is very important for insurance companies to be paid correctly for all the people they cover,” he said. “They work at it very hard. They try to audit to make sure that things are right.”

The Fiscal Policy Institute based its calculations on financial numbers filed with state agencies. It bolsters the finding of a report last year by the state’s association of insurance agents, which estimated, based on inside knowledge of industry practices, that up to 20 percent of New York’s employers did not pay all their required premiums.

“New York’s honest businesses who are playing by the rules have had to subsidize those who don’t even cover their employees or those who seriously underpay for the coverage they do have,” said David Dickson, president of the association, Professional Insurance Agents of New York State. “It approaches plain fraud.”

Gov. Eliot Spitzer has pledged to make major changes in the workers’ comp system, hoping to hold down premiums and increase benefits. The maximum benefit an injured worker can now obtain is $400 a week.

“Although we do not know the magnitude of the underreporting of workers’ comp obligations, we recognize that it is a serious problem,” said Christine Anderson, a spokeswoman for the governor.

Insurance experts say that a company with, say, 100 employees might tell its insurer that it has only 70 workers and then pay premiums for only 70.

But if any of the company’s 100 employees are injured on the job, they would be likely to qualify for worker’s comp benefits — either medical coverage and weekly benefits in lieu of wages — when they are out of work. This means that the amount collected in premiums might fall short of the amount spent on benefits. As a result of such a shortfall statewide, insurers often pressure New York officials to increase premiums for all employers in an effort to balance total premiums paid in with total benefits paid out.

“The lack of aggressive enforcement forces everybody in the process to bend the rules,” said Mr. Wilcox of the A.F.L.-C.I.O. “If insurance company A enforces the law but all the rest don’t, then the client will end up with insurance company B or C or D.”

In finding underpayments, the Fiscal Policy Institute first looked at the total amount of employee payroll — $389 billion — that the state’s employers reported for 2003 to the Labor Department and Tax Department when they paid their unemployment insurance taxes. Then the institute examined the total payroll reported to the state agencies and the industry association that handle payroll data for employers paying workers’ comp insurance. The total payroll reported for workers’ comp came to just $311 billion (after the policy institute made some adjustments to account for excluded job categories.)

“Manufacturers are paying significant amount of workers’ comp, and they obviously pay more than they need to because it looks like a large percentage of companies aren’t paying into the system,” said Randall Wolken, president of the Manufacturers Association of Central New York. “If we’re inadvertently increasing some companies’ costs, we inadvertently drive some companies out of the state.”

Last July, the state’s insurance superintendent, Howard Mills, denied a request by insurers to increase workers’ comp premiums, saying, “The insurers’ efforts to fight fraud — both claimant and employer fraud — can be said to be anemic at best.”

At the time, Mr. Mills, who stepped down last month, said that without a greater commitment by insurers to fight fraud, it would be hard to justify any overall increase in premiums.

One common practice, insurance experts say, is for companies, often taxi or trucking companies, to say that their drivers are independent contractors (who are not required to be part of the workers’ comp system) when by many definitions they are actual employees.

As part of the campaign against fraud, Manhattan District Attorney Robert M. Morgenthau and the State Insurance Fund, a state agency that provides workers’ comp coverage to 194,000 employers, arrested Anthony Spychalsky last month and charged his company, NY Ceiling & Drywall, with underpaying premiums by at least $207,000. Mr. Spychalsky pleaded guilty on Jan. 8 to insurance fraud.

Many industry experts say the State Insurance Fund, which focuses on providing coverage to small business, is more aggressive in pursuing premium fraud than private insurance carriers.

Robert Lawson, the insurance fund’s spokesman, said that in 2006, the fund’s 200 auditors did 88,398 field audits. All the audits yielded an additional $89 million in revenues, coming to $493,000 per auditor, Mr. Lawson said.

Mr. Dickson, the head of the insurance agents’ group, said, “The level of audits that are conducted by the commercial carriers and the frequency of the audits, I don’t see that at the same standard as the State Insurance Fund’s efforts.”

Kenneth Adams, president of the Business Council of New York State, said, “Whatever can be put in place to limit and reduce fraud by employers or injured workers, that will produce benefits throughout the system.”

Copyright 2007 The New York Times Company

Undeniably, there is rampant work comp fraud in NYS -- probably in excess of $1B annually. Last July the state ins. superintendent denied the ins. industry's annual rate request, and concluded "... that the cost of fraud is merely being transferred to the insureds."

Work comp premium cost is too high, and legitimate benefit payments are too low. In the simplest diagram, if the premiums paid in at the top are too high and the benefits that dribble out the bottom are too small, there are major problems in the process.

Premium fraud is most prevalent among those employers who somehow "qualify" for non-enforcement of the broader state and federal tax and labor laws. Work comp premium calculations are balanced to state and federal employment tax reports. Uniform enforcement of presently ignored tax and labor laws are needed to fix this particular problem.

True claimant fraud is an individual effort. It is not plausible that enough individuals could conspire to create a pattern of fraud that would constitute a large segment of the annual claim fraud.

That leaves a combination of provider, carrier, and other party liability fraud as the most fertile area to explore to identify the pattern of claim fraud that has emerged. When the state's largest work comp writer adamantly refuses to defend fraudulent claims, the door is left wide open. (Read "Commissioners of the State Insurance Fund, Respondent, v Photocircuits Corporation, Appellant," at www.courts.state.ny.us/reporter/3dseries/2005/2005_04697.htm)

We don't need media attention to further slant the work comp issue to any commercial or political advantage. We need administration of work comp to return to the original legislative intent of the law.

The intended beneficiaries and the premium paying employers are the victims here. Experience rating puts the entire program on a retrospective basis.

We better fix this problem before a few people, claiming to be labor advocates, do the same thing for NYS that Charlie Bryan did for Eastern Airlines.

Governor Spitzer,
With the BILLIONS of DOLLARS that the SELF INSURERS and the FRAUDULENT IMES' are making is "criminal."
I reported FRAUD regarding three IMES' and the New York State Workers Compensation did NOTHING. I also called the NEW YORK INSURANCE Department to "INVESTIGATE" the Bad Faith, Negligent, Fraudulent criminal behavior of the self insurer and they told me that workers' comp. takes care of themselves and that they DON"T INVESTIGATE self insurers ! That pretty much tells the hard working injured person like myself that their is "NO LAWS" to protect us.
So I took it to the next level and brought a civil action against my employer, their self insurer and two of the IMES'. The cases of the IMES' were dismissed because the supreme court judge stated," that there is NO patient doctor relationship", within those 10 minutes of physical humiliation.
The other cases are still pending . I have to add that I was forced to do this because after refusing me medical care, surgery for a flattened , compressed spinal cord for 15 months further causing more medical problems (nerve and muscle damage that is irreversible) they CLOSED my case. As a critical care RN I knew soon after my work injury 2/2000 what care I needed. But I was even refused a simple x-ray. At the emergency room I demanded to pay for the MRI myself and the local hospital refused saying you are a comp patient and we need to get an approval. May 1st 2000 I was at a neurologist and received 40 cortizone injections from my neck to my mid back because of so many uncontrollable spasms. I finally had an EMG and the neurosurgeon faxed to the self insurer an "URGENT" request for surgery . This was IGNORED. Finally at a hearing in 2001 the law judge allowed the neck surgery for the two discs flattening my spinal cord caused by lifting on male patients all day.
My case was closed after my doctors continually requested medical care , I now live on social security and medicare. My neck surgery was too little too late. However my spinal cord was finally decompressed. I suffer all day every day with muscle and nerve damage do to negligence, delays and refusals of much needed therapy. Chronic pain is paralyzing.
REMEMBER NO LAWS, NO STATISTICS, NO REPORTING for IMES and SELF INSURERS. Tell me WHO is "ROBBING NEW YORK of BILLIONS ?" NO ONE gives a hoot.
It is the honest hard working people that are the victims.
If the businesses joined forces with the injured workers and followed the workers comp. LAWS then injured workers for their companies would return to work after getting the medical care and the premiums would be lower. I was healthy and happy before my work injury 2/2000. NYSWC literally took my career and my life not to mention my family's suffering.
The Board Memebers that are allowing this FRAUD should be FIRED immediately and replaced with MEDICAL people. Would you want a ceo working on your car or bring your child to a vet or maybe a car salesman. Think about it. How can NON MEDICAL Board Members make a decision on an injured workers medical future??? I invite anyone to look at my case . You would truly be disturbed.

Sincerely, Donna Gilman RN (disabled by a NYWC that supported CORRUPTION)

its just another was big insurance companies are protected by the goverment,