New York Workers Compensation Alliance

Spitzer Unveils Overhaul for N.Y. Work Comp

New York Gov. Eliot Spitzer emerged Tuesday with a workers' compensation reform bill that would raise the maximum weekly benefit for the first time since 1992, abolish the state's rate board and phase out the Second Injury Fund.

Spitzer also called for the creation of task forces to review everything from medical practice guidelines to the implementation of an expedited hearings process dubbed "rocket docket" by the New York Workers' Compensation Alliance.

Spitzer said the bill will cut the costs of the workers' compensation system by 10% to 15% over time. He said the system is serving neither businesses, which are fleeing upstate New York, nor injured workers.

"The whole system has become ossified and unresponsive," Spitzer said at a press conference in Albany Tuesday. "And despite the dissatisfaction with which it was viewed on all sides, gridlock has prevailed until today."

The legislative package carries the blessings of the AFL-CIO and the Business Council of New York State, which have fought over attempts to place a cap on lifetime benefits granted for permanent partial disability.

The legislation had not been posted on New York's legislative Web sites by early Tuesday evening. But, based on materials Spitzer and the AFL-CIO made public in the press conference, it would:

* Increase the maximum weekly benefit from $400 per week to $500 later this year. The maximum would increase to $600 in 2008, $650 in 2009 and then be indexed to two-thirds of the state's average weekly wage every year thereafter.

* Raise the minimum weekly benefit from $40 to $100.

* Impose a 500-week cap on permanent partial disabilities, while creating a system for workers to petition to raise the cap in cases in which their disability is 80% or greater.

* Eliminate the Second Injury Fund for future cases in a move labor leaders said will lower assessments paid through employers and reduce hearings.

* Increase civil and criminal penalties for employers who fail to obtain coverage.

* Abolish the New York Compensation Insurance Rating Board (NYCIRB), a private association of carriers that recommends rate changes, through a sunset provision effective Feb. 1, 2008.

* Mandate lump sum settlement offers by employers, according to an AFL-CIO review of the proposal. * Create a task force for advancing a California-type security bond program for self-insureds.

* Create a task force to set requirements for data collection.

* Create a task force to establish retraining requirements for permanently disabled workers.

The bill directs acting New York State Insurance Superintendent Eric Dinallo to examine alternative structures for tracking losses and recommending rates to the department and come up with recommendations for replacing NYCIRB.

The rating board's last two recommended rate increases were rejected by former Insurance Superintendent Howard Mills, who said the industry has not done enough to police employers who don't provide coverage.

The system's structure, which requires the state-run New York Workers' Compensation Board to decide claims and NYCIRB to handle rate issues, has been under fire from claimants' attorneys, labor and others saying it is so fragmented that Spitzer's negotiators couldn't find the data they needed to map a reform plan.

States use a variety of means for producing loss costs -- or "pure premiums" -- on which rates are based. The National Council on Compensation Insurance (NCCI) recommends rates in 37 states.

In addition to NCCI, independent rating bureaus operate in California, Delaware, Indiana, Massachusetts, Michigan, Minnesota, New Jersey, North Carolina, Pennsylvania and Wisconsin.

Andy Mais, a spokesman for Dinallo, referred all questions on the bill to Spitzer's office.

Monte Almer, NYCIRB president, did not return telephone calls. An aide said he was at a conference Tuesday afternoon.

The legislation would also make New York one of at least three states considering abolishing their second injury funds this year.

A Senate subcommittee chairman in South Carolina said last week he is leaning toward amending a reform bill to phase out the fund.

Arkansas regulators, business owners and labor are also discussing the proposal.

The bill drew mixed reviews from the New York Workers' Compensation Alliance, a group of claimants' attorneys and other workers' advocates who have adamantly opposed capping permanent partial disability benefits.

Troy Rosasco, the alliance co-chairman, said the bill is a victory for workers whose benefits have remained capped at $400 since 1992. The bill also doubles the threshold at which a doctor must get prior approval to perform a procedure from $500 to $1,000.

Doctors accepted into a state "best practices" program would be exempt from the prior approval requirements. Standards for that program would be established by a task force established under the bill.

Rosasco said the alliance proposed the "rocket docket" concept, which would expedite some claims to speed the start of medical benefits.

But the battle against a permanent disability cap by the alliance and the AFL-CIO gridlocked last year's efforts by former Gov. George Pataki to reform the system.

"The real concern that the Workers' Compensation Alliance has is that there now may have been an elimination of a safety net for seriously injured workers who, by no fault of their own, are both partially disabled and unable to gain competitive employment in the workforce," Rosasco said.

But the AFL-CIO praised the compromise. The union's New York president, Denis Hughes, appeared at the press conference and said the union was "immensely pleased."

Spitzer also got accolades from legislative leaders in the New York State Assembly and the state Senate.

"Labor, business and political leaders joined together to forge an historic agreement for the common good of injured workers, the business community and all New Yorkers," Hughes said. "This agreement ... immeasurably improves a system long believed to be broken beyond repair."

Kenneth Adams, president of the Business Council, called it "a major step toward reducing the cost of doing business in New York. It is a big win for improving our economic climate, especially upstate."

The Business Council said Second Injury Fund claims comprised 17% of the cases in the system but 73% of the cost.

The Independent Insurance Agents & Brokers of New York (IIABNY) called the legislation "a step in the right direction."

"The plan is bold and forward thinking," said IIABNY Chairwoman Sharon Emek. "Eliminating such inefficiency as the Second Injury Fund and the Compensation Insurance Rating Board, while limiting the number of years a small population of claimants can receive benefits under permanent partial disability, will drive substantial costs out of the system."

Spitzer said the bill directs Dinallo to find ways to reduce rates by the next rate cycle. And the governor said capping permanent partial disability will save hundreds of millions of dollars.

Rosasco said his group won't oppose the bill but will work with the task forces to make it suitable for injured workers. The key will be establishing the process at the state Workers' Compensation Board for petitioning to extend benefits.

"You really have to give Gov. Spitzer credit for doing a sweeping reform of the workers' compensation system in New York," Rosasco said. "He did what he said he would do."

--By Michael Whiteley, WorkCompCentral Southeast Bureau Chief
mike@workcompcentral.com

The beginning of a National Worker's Compensation Reform Movement that I am spearheading and will be a part of the 2008 Democratic Party Presidential Platform.

Could you tell us how this new reform will effect people already on partial disability
how will it effect them as far as caps are concerned and also their beneifits in the future

I find it hard to beliebe that the Injured Workers advocates allowed "closed networks" for prescription medications. All this will entail is insurance companies contracting with PBM's (prescription benefit managers) who will enforce their own formulary, paying for what they want. In addition, these networks are all located outside of New York. Whatever happened to "any willing provider"? A fee schedule is long overdue. With a fee schedule, why would it matter what pharmacy a patient goes to. To add insult to injury, these PBM's are the very same entity that Gov. Spitzer sued for fraud as Att. Gen, and here he is, handing them over all the Workers Comp business in NYS.