For Release — Wednesday, June 30, 2004
COUNCIL TESTIFIES THAT PROPOSAL TO HIKE WORKERS' COMP RATES HIGHLIGHTS THE PRESSING NEED FOR COST-CUTTING REFORMS
ALBANY—New York's workers' compensation costs are far above average, and the dramatic increase in premiums proposed by New York's Compensation Insurance Rating Board (CIRB) would make this competitive disadvantage even worse for New York, The Council told state regulators in testimony today.
"New York's costs of workers' compensation are high-72 percent above the national average on a costs-per-case basis," Kerry Kirwan, The Council's legislative analyst specializing in workers' compensation, said in the testimony. "There are specific reasons these costs are high, and it is time for them to be fixed."
"Until we reform the system itself by easing the fiscal burden on the employers of the state, we will find ourselves here year after year addressing the issue of the rates," she said. "We must not let this opportunity to fix the system slip through our hands."
The Council submitted its testimony at a hearing sponsored by the state Insurance Department at the Legislative Office Building in Albany. The hearing was intended to garner public reaction to CIRB's proposal to increase average premiums 29 percent, effective Oct. 1. The CIRB proposal would also increase assessments, a tax on premiums that all employers must pay, by 6 percent.
Comp costs in New York are above average because New York has failed to enact critical reforms-reforms that have been shown to cut costs in other states, Kirwan said in the testimony.
Her testimony highlighted the key reforms New York must enact to being reducing its costs:
- Enacting objective medical guidelines. Forty-six other states require the use of objective medical guidelines to fairly evaluate workers' injuries and illnesses. New York has such guidelines, but does not require their use. It should enact such a requirement.
Most workers' comp costs in New York State stem from cases in which
benefits are not specified in statute. These cases account for only
14 percent of cases in New York, but account for 77 percent of all costs
in the system.
"The vast majority of states recognize that certain durational limits should apply to permanent partial classifications," the testimony said. "In fact, there are 41 states that have placed limits on their duration of benefits." New York could follow their lead and cut costs, even while preserving a generous benefit, she added.
- Limiting scheduled "loss of use" awards. Current state law allows workers to collect the full benefits under "scheduled lack of use awards" even if they return to work early. Allowing workers to collect both comp benefits and pay simultaneously like this unfairly burdens employers, the testimony said. New York should reform the system to allow workers to collect half of the unused scheduled benefits if they return to work before the scheduled benefits are due to expire.
pension offsets. Many employers across the state report that some
workers make comp claims shortly before retiring, apparently in an effect
to collect benefits after they retire as a kind of supplemental pension
system, the testimony said
New York should credit 50 percent of a recipient's old-age Social Security benefits and a recipient's employer-funded pension plan toward any and all compensation awards, Kirwan said.
- Reducing the assessment formula. The Governor's program bill takes steps to lower at least part of the assessment that employers pay. His proposal would lower the assessment formula for the Second Injury fund, one of the special funds that the assessment supports, from 150 percent to 125 percent. The Business Council strongly favors a reduction in assessments, which contributed significantly to the burden of comp costs.
Two key reform bills (S.5230-Libous/A.8862-Schimminger and S.6841/A.10975, which is the Governor's program bill) contain most of these reforms. Before New York makes a bad competitive burden worse, it should enact reforms like these to bring New York's comp costs closer to the national average, Kirwan said.
"The reforms we are seeking are vital to the economic growth and stability of New York businesses," the testimony concluded.
In recent weeks, The Business Council has published a new series of reports documenting the case for workers' comp reforms. Topics covered in the five reports published in the series so far include durational limits, objective medical guidelines, scheduled payments, and Social Security and pension offsets.