Business and insurance groups including the Business Council of New York State have recently advocated for drastic reductions in workers’ compensation awards for “schedule loss of use.” These awards are payable to workers who suffer from permanent loss or loss of use of limbs, vision, or hearing. To justify their campaign, business and insurance interests contend that these awards are now “skyrocketing” as a result of the 2007 legislative reforms.
To the contrary, however, a review of cost trends in schedule loss cases from 1992 through 2015 shows that costs related to these cases were flat from 1992 to 2007. There were moderate increases from 2007 through 2012 that affected an ever-smaller portion of the workforce. Since 2012, however, costs in schedule loss cases have again been essentially flat. The data showing that there has been virtually no change in schedule loss costs for the past four years casts serious doubt on the validity of industry claims.
The WCA has just released a new paper analyzing the data and proving that the schedule loss of use costs have increased less than one-half of one percent in the past four years. You can read the paper here.
On November 14, 2016, the WCA wrote to the Workers’ Compensation Board commenting on the Board’s recent proposals to create a formulary for prescription medications and to require insurers to contract with pharmacy benefit management companies. The WCA expressed concerns about the impact the proposal would have on the availability of appropriate treatment for injured workers in a timely manner, as well as with the potential for increased system costs as yet another insurer-side “cottage industry” is developed to divert employer premium dollars from injured workers.The WCA comments can be read here. PBM Comments
NY WORKERS' COMPENSATION ALLIANCE (WCA)
Position On Governor Pataki's Proposed Changes To
The Workers' Compensation System
Budget Bill Article VII A.9561/S.6461
The New York workers' compensation system is in need of changes to keep pace with the cost of living and to effectively deliver the basic medical benefits promised to injured workers by the State Constitution. In recent years it has become commonplace to accuse the current workers' compensation system of providing too little in the way of benefits to injured workers while costing employers too much. Both of these criticisms are well founded. Unfortunately the legislation currently proposed by Governor Pataki will not provide the promised relief either to injured workers or to business.
The Governor's proposal is INADEQUATE. It provides too little in benefit increases to injured workers and contains no guarantees that it can deliver relief from the high cost of workers'
The Governor's proposal is INSENSITIVE to the real needs of injured workers and to the plight of small businesses in New York.
The Workers' Compensation Alliance (WCA) is made up of legal professionals with extensive background working within the New York workers' compensation system. We are comprised of over thirty law firms and corporations throughout the State that represent and provide service to injured workers We believe the workers' compensation system can be successfully modified to
meet the needs of New York's injured workers and at the same time deliver cost savings to New York business.
- The WCA strongly favors a genuine benefit increase to injured workers. The WCA strongly opposes any attempt to reduce current benefits to injured workers by limiting the
scope of permanent disability benefits.
- The WCA strongly favors changes in the way medical benefits are delivered injured workers that will also yield significant cost savings to employers. The WCA believes
that real cost savings are possible but that they should not be found at the expense of the injured workers the statute has always served.
- The WCA strongly favors the absolute right of the injured worker to have his or her day in Court before a Judge. The WCA thus strongly opposes efforts to erode the due process guaranteed in the statute.
This paper will explore each of these areas in some detail. We will show (1) why a benefit
increase is needed and what would be necessary to provide genuine economic relief to injured workers. We will show (2) why cost savings should not be achieved by reducing basic economic benefits to injured workers, but should be focused on control of the real cost drivers of the system. Finally,we will show (3) why it's important not to take away the injured workers' due process right to a hearing before a Judge, currently guaranteed in the State Constitution.
Why the Governor's Benefit Increase is Inadequate
In his proposal Governor Pataki seeks to raise the maximum rate of workers' compensation benefits from the current $400 per week to $500 per week by increasing the maximum rate by $25 per year between now and January 1, 2009. The Governor's proposal is both misleading and inadequate. It will actually leave injured workers in a position worse than they were on July
1, 1992 when the last increase in the workers' compensation maximum took effect.
Currently,the maximum workers' compensation rate in Connecticut is $931 per week and in New Jersey is $891 per week. Injured New York workers deserve benefits that will not force them into poverty.
A maximum rate of $500 in 2009, when adjusted to 1992 dollars will be significantly below what is necessary for the workers' compensation rates to keep pace with increases in the Consumer
Price Index (CPI). As computed by the Federal Reserve Bank, in order for the maximum compensation rate in 2004 to have the same purchasing power as it had in 1992 the rate should already have been raised to $538.56. The proposed maximum rate that would not become
effective until 2009 is only 92.8% of what the rate should have been in 2004 to keep pace with inflation. As prices continue to rise between now and 2009 the Governor's proposed rate increase will represent less and less real purchasing power to injured workers.
Any real increase in workers' compensation maximum benefits should be tied to the state average weekly wage. Workers' compensation lost wage benefits are calculated as a percentage of average weekly wage. From the beginning of the New York workers'
compensation system in 1914 it has been widely acknowledged that workers' compensation benefits should equal two-thirds of a person's actual average weekly wage. The last benefit
increase in 1992 was calculated to achieve this goal. Any current modification of the workers' compensation maximum rate should do the same. According to the New York State Department of Labor, in 1992 the state average weekly wage was $623.22. This meant that in 1992 the maximum workers' compensation rate was approximately 64.2% of the state average weekly wage. By 2004 the state average weekly wage had increased to $960.64 leaving the maximum workers' compensation rate of $400 to represent only about 41.6% of the state average weekly wage. To keep pace with the increase in the state average weekly wage the rate in 2004 should have been increased to $616.57. If the governor's proposal is enacted by 2009 the maximum workers' compensation rate of $500
will be only about 52% of the 2004 state average weekly wage.
The Governor cynically claims that his proposal constitutes a 25% increase in the maximum workers' compensation rates. In
fact, under his proposal the injured workers of New York State will be worse off in real dollars in 2009 than they were in 1992.It has been 16 years since the Legislature addressed the question of the maximum benefit in workers' compensation. In the last 12 years achieving an increase of the maximum benefit has been a stumbling block for other real reforms in the workers' compensation system. The only way to avoid this type of deadlock in the future is to permanently tie the maximum workers'
compensation benefit directly to the state average weekly wage.
For this reason the Workers' Compensation Alliance asks the Legislature to consider permanently linking the maximum benefit level for workers' compensation to two thirds of the state average weekly wage as computed by the New York State Labor Department.
Why basic economic benefits to injured workers should not be reduced
The most objectionable aspect of the Governor's proposal is the drastic reductions in benefits paid to permanently disabled injured workers. Under the Governor's proposal persons who have become permanently disabled due to a workplace injury would be completely cut off from wage loss benefits after a given number of years.
The Governor's proposal offers no alternative source of benefits to permanently disabled injured workers. It offers no help in rehabilitating permanently disabled injured workers. It simply tells injured workers who have lost their livelihood that they are out of luck. After the prescribed period of benefits, the economic security of the injured worker will become the responsibility of county and local government
The apparent rationale for these proposed cuts to wage loss benefits is that paying benefits to persons who have a permanent disability is expensive. There is no doubt that such payments are expensive, but it is also the right thing to do. The Workers' Compensation Law in New York has historically promised workers who have been severely and permanently injured they will not
die in poverty. The Governor's proposal is nothing short of a cruel abandonment of the most seriously injured.
To understand how the Governor's proposal would affect permanently disabled workers consider the case of Mark, a 35-year-old pipe fitter. Mark was working at a high wage construction job making more than $1200 a week when a hose from a compressor broke loose and struck him in the back of the head. Mark suffered a severe traumatic brain injury. Even
after the best medical treatment available Mark will never be able to return to work. Indeed, Mark has been granted Social Security disability benefits because the federal government has
decided that he's unemployable. Under the current wage loss limits in the Workers' Compensation Law Mark receives $400 a week, the maximum possible. He has lost his home, his vehicle and his marriage. He had to declare bankruptcy. Once he started receiving Social Security disability benefits he was able to begin rebuilding his life because when combined with his continuing workers' compensation benefits he could now afford a basic standard of living. If he loses his weekly workers' compensation benefit, even the most basic lifestyle will be
Or consider the case of Anne, a 45-year-old Emergency Medical Technician who worked at Ground Zero for three months after 9/11. Anne was earning more than $1000 a week and was a member of the EMT union. She was a "first responder" and is considered a hero by all accounts. In 2003, Anne developed a persistent cough that would not go away. She sought treatment from pulmonary specialists who informed her that she has Chronic Obstructive Pulmonary Disease as a result of the toxins she inhaled at Ground Zero. Anne was prescribed multiple medications and tried to continue to work. However, as her disease progressed, and given the physical nature of the job, she soon had to stop working as an EMT permanently. If
she ever works again it will be for much less of a wage that she made as an EMT. Anne needs the permanent reduced earnings benefits provided by Workers' Compensation to survive.
Under the Governor's proposal Mark's and Anne's benefits would be ended after somewhere between 5 and 10 years of payments. The Governor's proposal would simply take away
necessary income replacement benefits from these permanently disabled workers. This loss of benefits will render these permanently disabled workers poverty-stricken and require them to
seek assistance from the welfare system. How fair is that to these seriously injured workers? How fair is the cost shifting to the average taxpayer?
Until and unless some solution is proposed that would guarantee the economic security of permanently injured workers, they should not be asked to fund insurance company profits or to
make an enormous sacrifice so that workers' compensation insurance can be slightly more affordable.
While there is no question that workers' compensation insurance needs to be made more affordable in New York, it is simply not right to ask the most seriously injured workers to be the
source of lower insurance premiums. The Legislature should seriously investigate other ways to lower premium costs. Some such ways are proposed in the Governor's legislation. The WCA
supports the proposed measures to lower medical costs by imposing new fee schedules and by reducing the amount of time it takes to get approval for medical services. The WCA also supports increasing innovative occupational safety programs and tax incentives for the safest employers. Surely there are more innovative ways to reduce the cost of workers' compensation
insurance that do not demand the impoverishment of hard working New Yorkers who have had the unfortunate luck to be injured on the job.
Why the due process right to a hearing should not be reduced
Given the urgency and gravity of the lost wage and medical concerns that face a worker who is injured on-the-job, injured workers and those who employ them are currently guaranteed an
adjudicatory hearing, held at a meaningful time and in a meaningful manner. Section 20(1) of the Workers' Compensation Law provides that a hearing "shall" be ordered "upon application of
The Governor's proposal would eliminate this absolute right to a hearing by amending Section 20 of the Workers' Compensation Law to allow for the scheduling of a hearing before an administrative law judge only after it is determined that the dispute cannot be resolved by undergoing non-binding "conciliation" procedures. This proposal is inconsistent with the due
process rights of both injured workers and employers. Not only does the governor's proposal eliminate a fundamental right of the parties in workers' compensation litigation, it does so for no real reason. This change will not result in any savings and will only prolong the time needed to resolve central issues; not a good bargain.
Not only does this proposal violate fundamental due process rights but it proposes to require use of a system of non-binding conciliation meetings that has already shown itself to be a failure
in resolving the common controversies that exist in many workers' compensation cases. The conciliation process was instituted as part of the reforms of 1996. Since that time experience with the conciliation process shows it is inappropriate for resolving any true controversy. In fact, the Workers' Compensation Board currently uses the conciliation process only after the Board itself has determined that no true controversy exists. For this reason any statistics about the so called success of the conciliation process are deeply misleading. In fact, each and every time the conciliation process has been applied when a true controversy exists it has failed.
There's no doubt that there is a place in the workers' compensation system for the conciliation process. Conciliation can be used effectively where the parties are in fundamental agreement.
However, is not uncommon that diametrically opposed positions that are not susceptible to negotiation and compromise are raised on fundamental issues in a case. To require that such fundamental disputes first undergo non-binding "conciliation" before being allowed an adjudicatory hearing imposes on the injured worker the burden of undergoing a wasteful and time-consuming layer of proceedings before any real opportunity for relief can be reached.
Take the common example of a construction worker who falls on-the-job and injures his shoulder. Because the treating physician believes the injury to be a rotator cuff tear, the
diagnostic test typically ordered is an MRI. If the MRI is positive, the injured worker will undergo surgery; a negative test means a course of intensive physical therapy. Any delay in diagnosis
risks a frozen shoulder.
If the MRI is granted shortly after the injury, the recovery time is usually six weeks or less. If the carrier refuses to authorize the MRI, the injured worker's only practical recourse is to request an adjudicatory hearing. The precious time spent first attempting to
"conciliate" the matter will cost the claimant at least a four-month delay in being allowed the only practical opportunity he has to achieve a successful resolution of the dispute at an evidentiary
hearing. Unfortunately, during all of this time, the injured construction worker will have had little or no use of his painful arm, will be out of work and suffer a dramatic reduction in his wages, and ultimately have a diminished opportunity to completely heal. This unfortunate scenario will be played out time and again if the Governor's proposal is passed into law.
The fundamental requisite of procedural due process is the opportunity to be heard, by way of a hearing provided at a meaningful time and in a meaningful manner. There are few instances where the urgency to obtain relief is as profound as in a Workers' Compensation case. Unimpeded access to an adjudicatory hearing is the only effective means available to an injured
worker to obtain the lost wage and medical benefits that are so desperately needed.
Detailed analysis of the proposal
For the above reasons, the WCA takes the following positions on the Governor's proposed Article VII legislation, A.9561 and S. 6461, to amend the Workers' Compensation system:
The WCA FAVORS:
1. An increase in the maximum weekly benefit, and believes that benefits should be permanently set at two thirds of the state average weekly wage. We also support the
proposed increase in the disability insurance benefit level.
2. Cost savings that can be generated by the imposition of a fee schedule for medication as well as other medical services and the development of networks of providers so long as the injured worker continues to have the right to free choice of medical providers .
3. A raise in the prior authorization limit to $1000 thereby reducing the time needed to obtain necessary medical tests and treatment .
4. A reduction from 60 to 45 days for the Board to schedule a preliminary hearing in a controverted case.
5. The revision of the Workers' Compensation Board Medical Guidelines by a panel of medical experts working in consultation with legal practitioners .
THE WCA OPPOSES:
1. An inadequate increase in the maximum lost wage benefit.
2. A cap on benefits for those permanently disabled.
3. The elimination of the right to a hearing to resolve controversies.
4. The development of a pilot program for voluntary delivery of benefits outside of the Workers' Compensation Board.
5. Development of networks of medical providers controlled by insurance companies without right to free choice of providers by injured workers.
6. Elimination of the stenographic recording for evidence in workers' compensation matters.
THE WCA takes no position on the other provisions in the Governor's proposal.
For further information please contact:
Richard D. Winsten, Esq.
Meyer, Suozzi, English & Klein, PC
One Commerce Plaza, Suite 1102
Albany, New York 12260
Phone: (518) 465-5551
Troy Rosasco Esq., Co-Chair Legislative Committee
Turley, Redmond, and Rosasco LLP
3075 Veterans Memorial Highway
Ronkonkoma, NY 11779
Phone: (631) 582-3700 ext. 123
John Sciortino, Esq., Co-Chair Legislative Committee
Segar & Sciortino, LLP
400 Meridian Centre - Suite 320
Rochester, NY 14618
Phone: (585) 475-1100
In 2007, the Business Council of New York State finally achieved the goal it had sought for over a decade – putting time limits on payments for permanently disabled workers. At the time, the Business Council and the state claimed the change would save employers over $1 billion. Ten years later, employers’ workers’ compensation costs are still lower than they were before the “reforms.”
Huge savings for employers came at huge expense to workers, especially the most vulnerable – low wage workers and immigrants. Those who were permanently disabled as the result of workplace injuries and illness faced two certainties: they would never be able to return to their jobs, and their wage loss benefits would be cut off as soon as four years and at most ten years after they were “classified.” Many of these workers face a lifetime of disability without any income from their employer’s workers’ compensation insurance.
Still not satisfied, the Business Council has threatened to renew its assault on benefits for injured workers - and implies that it has influenced the state’s Workers Compensation Board to participate in the campaign. Lev Ginsburg, director of government affairs for the Business Council, was recently quoted as stating that despite the 2007 reforms “We have been calling for significant workers’ compensation reform almost daily for a number of years.”
In particular, the Business Council wants to reduce benefits for permanently disabled workers even further by starting the time limitations “from the date of injury,” instead of the date of permanency. Moreover, it wants to slash awards for accidents that result in amputated limbs, artificial joints, broken bones and more, known in the system as “schedule loss” cases. According to Ginsburg, the state Workers’ Compensation Board has been working on new guidelines to reduce schedule loss awards. Needless to say, the Business Council thinks this would be “a very significant and meaningful first step” in cutting worker benefits.
According to Ginsburg, the state’s existing guidelines are based on “1983 science” and changes are needed “to stymie the runaway costs of schedule loss of use awards.” Both of these claims are false.
The state’s current guidelines were issued in 2012, without objection from the Business Council. The 2012 guidelines cover the calculation of awards for both permanent disability and schedule loss. Ginsburg’s claim about “1983 science” is difficult to square with guidelines that were issued less than four years ago.
In addition, because workers’ compensation benefits depend largely on the worker’s salary, schedule loss awards have not increased for workers who earn less than $600 per week since 1992, nearly a quarter-century ago. These low-wage and largely immigrant workers suffer about one-third of all workplace accidents.
Moreover, for workers who earn up to $1,000 per week, schedule loss awards today are lower than they would have been if benefits had simply kept pace with inflation for the past twenty-five years, instead of remaining stagnant from 1992 until 2007. Nearly two-thirds of injured workers fall into this category.
If the Business Council gets its wish, low wage and immigrant workers, whose benefits were already slashed in 2007, would face a second round of benefit cuts. Every one of these workers who suffers a permanent disability or schedule loss would receive less benefits in 2017 than they would have gotten in 1992. Workers with higher wages, whose awards for temporary disability and schedule loss improved slightly in 2007 at the expense of drastic cuts in permanent disability benefits, would give back most of their limited gains. In short, the Business Council once again seeks to enrich business at the expense of injured workers.
The Governor, the Legislature, and the Workers’ Compensation Board should reject the Business Council’s campaign, and should instead seek to preserve and improve benefits for injured workers.
If employers in New York State ever needed more evidence that the real enemy to rising workers' compensation costs is insurance companies, not injured workers, they need look no further than the recent 1.6 billion dollar AIG bid rigging settlement with Attorney General Eliot Spitzer.
Bottom Line - besides rigging bids to boost their exorbitant profit margins at the expense of employers, AIG cheated the New York Workers' Compensation Board out of millions of dollars that had to then be made up higher employer premiums. All the while, AIG's now ousted CEO Maurice "Hank" Greenberg collected a tidy $29,000,000 compensation package in 2003. As of 2005, Greenberg has a net worth of 3.2 billion. If I'm a New York employer with AIG as my workers' comp carrier, I'm mad as hell. Guess what? The other workers' compensation insurance company CEO's are not too far behind.
Funny - Governor Pataki and the Business Council of New York State don't mention these facts when they complain about employer workers' compensation costs. They always blame the injured worker. Do New York employers know that the Business Council has it's own side business as a workers' compensation "third party administrator" - First Cardinal? How much does the First Cardinal CEO make? How much money does the Business Council make on this cozy little relationship? Hmm...
Hopefully, employers in New York State will wake up to the fact that workers' compensation insurance companies are making money hand over foot in New York. Every day, more workers' compensation insurance companies enter the New York market because of the lucrative profits. It's gotten so ridiculous that even State Funds from other states are coming into the New York market. Does the New York State Business Council have a response? I'd like to see it.
The only thing more ridiculous is the Governor's assertion that rising workers' comp costs had something to do with the demise of Delphi upstate. No credible business analyst would back such a silly proposition. The fact is, Delphi was cooking the books and was tanking with it's parent, General Motors. Iowans may fall for silly charades like this, but not New Yorkers, or our State Senators. Insurance company profiteering in the New York workers' compensation market is the big problem for employers in New York State. Period!
Workers' Compensation Alliance Legislative Co-Chairs John Sciortino and Troy Rosasco will travel to Albany tomorrow to take part in the second of a series of Roundtable Discussions hosted by Senator George Maziarz, New York State Senate Labor Committee Chair, regarding Workers' Compensation Reform. Since Workers' Comp Reform was recently detached from the Governor's budget bill, it appears that workers' compensation reform will continue to be on the Albany radar screen for the rest of the year.
Also scheduled to participate in the Roundtable are: Randall Wolken, President, Central New York Manufacturing Association; Cecelia Norat, Director of State Operations for AIG; William Melchionni, Nationwide Insurance; Mark Alesse, New York State Director, National Federation of Independent Business; and Ted Potrikus, Executive Vice President, Retail Council of New York State. Members of the Senate Labor Committee are also expected to be in attendance.
Of course, the Workers' Compensation Alliance will be advocating for a long overdue benefit increase, no caps on PPD's (permanent partial disabilities), and expediting needed medical care for injured workers. Yet we will also be proposing a fair pharmacy benefit schedule that should save employers significant amounts of money by mandatory use of generic drugs. Surrounded by all these insurance and employer lobbyists, it looks like John and Troy have their work cut out for them!
The WCA opposes A10160/S6978, which would extend the term of the New York Compensation Insurance Rating Board (CIRB) as the rate service organization for setting workers’ compensation insurance rates for an additional five-year period.
The CIRB is an entity authorized by State law to propose Workers Compensation rates for private carriers. CIRB is trusteed and funded by private carriers. The 2007 amendments to the Workers’ Compensation Law included provisions that were intended to sunset CIRB’s authorization by 2012. In the course of the 2007 reform process it became clear that CIRB was unable to provide policymakers with accurate and reliable data. The Insurance Department rejected CIRB’s rate application in 2006 due to a lack of reliability, and reduced CIRB’s application in 2011 because it could not account for the disparity in CIRB’s claim experience as compared to that of the State Insurance Fund.
Based on dissatisfaction with CIRB’s performance, the Legislature and Governor public members were added to its Board in 2007 as an interim step to transferring its data collection and rate-making functions to the Insurance Department, now the Department of Financial Services (DFS).
In 2007 and 2008, CIRB recommended reductions in workers’ compensation insurance rates of almost 25%. These recommendations were made based on factors including (1) the imposition of time limitations on permanent partial disability benefits (PPD caps); (2) projected increases in the maximum weekly benefit rate; (3) the creation of a mandatory deposit of PPD benefits into the Aggregate Trust Fund (ATF) for private insurers; (4) the elimination of the Second Injury Fund; and (5) other anticipated administrative and regulatory forms related to insurer diagnostic test and pharmacy networks and Medical Treatment Guidelines (MTG).
From 2009 through 2011, CIRB retracted its recommendations, requesting increases in workers’ compensation insurance rates of more than 22%. It has now submitted an additional rate increase application of 11.5%. In essence, CIRB now contends that the impact of the 2007 reforms was not to decrease costs by 25%, but to increase them by 9.5%.
CIRB accounts for this reversal by claiming that the 2007 reforms have proceeded at a slower pace than it anticipated. This claim is unjustified. CIRB and all actors were aware in 2007 that the PPD caps would not result in significant benefit termination until 2015, and the impact of the caps on settlements is already being realized. CIRB was also aware in 2007 that the maximum weekly benefit rate would double in the five-year period after the reform legislation was enacted. Department of Labor data has demonstrated that increases in the maximum weekly benefit rate after July 1, 2008 have had limited impact on workers’ compensation costs, as two-thirds of injured workers do not earn sufficient wages to obtain a benefits in excess of $550 per week. Therefore, neither the PPD caps nor the increase in the maximum benefit rate present factors that were unaccounted-for in the 2007 and 2008 premium reductions, and cannot be responsible for the subsequent requests for increases in excess of 34%.
The use of diagnostic and pharmacy networks was fully and quickly achieved, and while the implementation of Medical Treatment Guidelines did not occur until the end of 2010, data has demonstrated that the use of the MTG has increased, not decreased insurer costs. Thus, the delay in implementing the MTG did not result in an increase in costs.
There is therefore no valid basis in support of CIRB’s applications for increases in 2009, 2010, 2011 or 2012. The state of the system in those years is unchanged from 2007 and 2008, when CIRB recommended substantial reductions.
It remains the case that CIRB is unable or unwilling to provide policymakers with accurate and reliable data upon which proper statutory, regulatory, or administrative decisions can be made. It is the position of the WCA that CIRB’s authority to function as the exclusive rate service organization should not be extended for an additional five year period, and that DFS should assume data collection and rate-making functions in the workers’ compensation system. A better course would be to extend CIRB authority for for one year and to hold hearings on a better entity and process to propose comp rates.
On June, 25, 2012, the WCA submitted oral and written testimony to the New York State Department of Financial Services opposing CIRB's request for an 11.5% hike in employer's workers' compensation insurance premiums. A copy of that testimony can be found here.
The New York Workers’ Compensation Alliance, a coalition of injured workers and those committed to protecting the rights of injured workers, hailed a decision by the New York State Department of Financial Services to reject a request for an 11.5 percent increase in workers’ compensation premiums.
NYWCA called for full transparency of insurance carrier costs, claiming that the unverified numbers submitted by insurers are unnecessarily driving up costs for New York State businesses.
The 11.5 increase requested by insurers followed premium increases of nearly 23 percent between 2009 and 2011, and would have imposed an estimated $500 million in additional premium costs on employers in New York State. The 2009 – 2011 increases, which WCA feels were unjustified, nearly eclipsed premium reductions of 25 percent that were achieved through workers’ compensation reforms enacted in 2007.
For the past two years, NYWCA has testified before DFS against rate increases, and this year it was joined by a host of businesses testifying against the increase request, which was based on unverified cost increases submitted by the very insurance carriers that stand to benefit from the overall rate increases.
Rate increase requests are submitted by the New York Compensation Insurance Rating Board, a statutory rate service organization that until 2007 was comprised solely of private insurers. The cost increases reported by insurance carriers as the basis for rate increases are not independently verified. Nor are the numbers broken down to reveal insurance company profits, expenses and costs.
“The NYWCA represents injured workers and we strongly object to unnecessary premium increases whose only beneficiary is private insurance companies,” said Robert Grey, chair of NYWCA. “The costs for the increases fall unfairly on businesses and the blame falls unfairly on injured workers.”
Grey said that the DFS decision and the vocal opposition by employers to the unnecessary increases is a tremendous victory for injured workers. “When rates go up it becomes extraordinarily difficult to advance good legislation that benefits workers’ health. It is critical for businesses to know that claim costs are not the primary driver of increased workers’ compensation costs – insurer profits are.”
Grey said that stronger supervision and regulation of insurers is needed. Ironically, the only part of the 2007 workers’ compensation reforms yet to be implemented is a provision intended to replace NYCIRB with a transparent, accountable entity to set workers’ compensation insurance rates.
“When a group of unregulated insurers is permitted to propose rates and the state remains unwilling or unable to call for data and accountability, employers and injured workers suffer,” Grey said.
On February 22, 2012, an arm of Public Employers Risk Management Association (PERMA) released a “report” claiming that workers’ compensation assessments are a “tax” that is dramatically increases employer costs. This “report” was filled with misleading statistics and misinformation, to which the WCA responded on March 16, 2012.
On September 10, 2012, PERMA released a “new” report that simply repackages its prior claims, perpetuating the same factual and legal inaccuracies.
The WCA believes that sound public policy must be based on accurate information, and not mischaracterizations of the facts and misstatements of the law. As a result, the WCA has again responded to PERMA’s release and set the record straight.
The key points of the WCA report are:
- Assessments are not a “tax.” To the contrary, most assessments are a reinsurance system that benefits employers and insurance carriers. According to PERMA’s own report, nearly 80% of assessments relate to the Special Funds, which reimburse money to employers and carriers. Almost 98% of the money employers and carriers pay in assessments related to the Special Funds is returned to those same employers and carriers.