Governor Pataki has proposed two workers' compensation reforms that are long-time Business Council priorities: a cap on permanent partial disability payments and use of objective medical guidelines to determine the degree of impairment in such cases.
The Governor estimated that the reforms would reduce rates paid by employers an average 24.3 percent for savings of $631.8 million.
Workers' compensation reform is a business priority because this cost of doing business remains well above average in New York. In 1998, New York's workers' comp costs were the nation's 10th highest, 20 percent above the national average.
The Governor proposed capping maximum wage-replacement benefits for permanent partial disabilities at 700 weeks, which is over 13 years.
This is a priority reform because permanent partial disability cases account for over half of New York's workers' compensation claims costs.
Governor Pataki's plan would provide supplemental benefits to workers who are judged to be more than 15 percent impaired. The cap would apply only to wage-replacement benefits; medical benefits would continue forever.
"Despite tremendous progress under the Pataki reforms, workers' compensation rates are still too high," said Assembly Minority Leader John Faso."Use of objective medical guidelines will further reduce rates and encourage more job growth in New York."
"Under Governor Pataki's leadership, New York has made tremendous progress in reining in the cost of workers' compensation, while ensuring essential benefits to injured workers," said Business Council President Daniel B. Walsh. "But competitor states still have costs considerably below ours. That's why the Governor's new proposal, which will reduce costs even further, is so essential to strengthening New York's comeback."
Twenty-nine other states and the District of Columbia already cap indemnity benefits for permanent partial disabilities.
The Governor also urged use of objective medical guidelines to measure physical disability in cases of permanent partial disability. Thirty-nine other states already use such guidelines to help keep benefits for specific injuries consistent.
At present, benefits for permanent partial disabilities are based on two factors: a schedule for certain body parts and a subjective formula for other permanent partial disabilities.
The scheduled benefits are payable even if the worker returns to work at full wages. However, claimants can also get "non-scheduled" benefits, which are determined subjectively by the Workers' Compensation judge.
Because there is no formula for these benefits, two claimants with the same injury could get very different awards.
If enacted, this would be the second major workers' comp reform law in the Pataki administration.
Reforms enacted in 1996 limited the ability of third parties to sue New York employers, mandated safety programs for some employers based on safety records, created new anti-fraud protections, and helped reduce costly delays in the workers' comp system. These reforms helped cut rates 38 percent over four years.
Also last week, the Compensation Insurance Rating Board recommended an average increase of 17 percent in workers' compensation insurance rates for the 12-month period beginning October 1. This proposed increase must be approved by the state Insurance Department.
Such an increase would be "a shock and a disappointment," said Stacey Hengsterman, The Council's workers' compensation analyst. "We have not yet heard the arguments to justify such an increase," she added. "We hope such an increase can be avoided."
"This recommendation shows that New York needs more reform to makes these costs more competitive," said Stacey Hengsterman, The Council's workers' comp analyst.
"We will study the proposed rate increase to ascertain what has changed from last year to justify it."