July 15, 2003
Workers' comp rates held flat, but 'assessment' increases 10 percent
The state Insurance Department has rejected a proposal to increase workers' compensation rates by 11 percent for 2003-2004, ruling that current rates will remain in place.
But the workers' comp assessment, a tax on premiums that all employers must also pay as part of overall comp costs, will increase by 10 percent, from 13 percent to 14.3 percent.
The state Insurance Department announced the decision to hold rates steady in a July 16 press release. The release did not mention the increase in the assessment. That increase was referred to only in the the department's formal opinion.
"The [rate] increase requested is not supported by the information submitted to the department in the filing and at the public hearing held almost two weeks ago," the Insurance Department said in a news release.
The Business Council had submitted testimony on the proposed increase warning that New York's workers' compensation costs remain far above the national average and a significant competitive disadvantage for the state.
The Insurance Department's release sharply criticized the New York Compensation Insurance Rating Board (CIRB), the insurance-industry entity that each year recommends changes in workers' compensation rates. The department's release said CIRB "has failed to follow through on the letter and the spirit of the sweeping 1996 workers' compensation reforms." The release did not elaborate on those charges.
"The cost pressures have risen for businesses, municipalities, and not-for-profits and the need for another round of fundamental reforms has increased," The Council said in its testimony on the proposed increase in workers' compensation rates.
The Council plans to work with its members, including those in the insurance industry, to continue to make the case for further cost-cutting workers' comp reforms.
Reforms championed by Governor Pataki in 1996 "brought real savings to the system," the testimony noted. But overall comp costs have been increasing nonetheless.
The testimony cited a 2002 study by the Workers' Compensation Research Institute, which identified New York as a high-cost state. That report blamed New York's high costs and far-above-average costs of claims for which benefits are not prescribed by statutory schedules.
These claims account for 71.6 percent of all comp costs in the system, but represent only 12.4 percent of claims, the testimony noted. The discrepancy stems from the fact that the duration of these benefits is unlimited.
"This is far outside the norm of virtually every other state in the country," the testimony said.
The testimony also cited other cost drivers: In some cases, workers who return to work before scheduled benefits expire nonetheless continue to collect the maximum scheduled benefits - meaning some workers receive benefits even as they collect their salary.
Many employers are finding that workers use the workers' compensation to supplement retirement and health insurance coverage. "A growing number of our members have told us there has been a rise in the number of workers' compensation claims for employees who are of retirement age," The Council's testimony said.
The lack of a requirement that objective medical guidelines be used to determine the degree of disability drives costs up. Forty-two states use such guidelines to determine "medical impairment ratings," the report said; in 39 of those states, the American Medical Association's guidelines are used.
"Adopting objective medical guidelines would provide a fair and consistent method for evaluating functional impairments," the testimony said. "Ensuring that the system of evaluation is consistent for all claimants should be a priority for all parties."
The Council's testimony praised a legislative proposal it helped develop that would:
- Limit, to 10 years, the duration of benefits given to injured or sick workers in cases in which benefits are not prescribed by statutory schedules. The goal is to give workers both ample benefits and sufficient time to seek retraining to return to work.
- Provide for Social Security and pension offsets-that is, reductions in workers' compensation benefits applied when workers receive Social Security and/or pension benefits.
- Give injured workers only half of remaining scheduled benefits if they return to work before scheduled benefits expire.
- Implement objective medical guidelines.