August 10, 2004
A new effort to raise
workers' comp rates emerges
The new proposal is to increase average
rates by 9.5 percent
Less than a month after the state Insurance Department rejected a proposal to increase average workers' comp premiums by 29 percent, the department has received a new request to increase ratesthis time, by 9.5 percent.
The New York State Compensation Insurance Rating Board (CIRB), an insurance-industry entity that each year proposes changes to premium rates, said in an August 6 bulletin that it has submitted the new proposal to increase rates and asked that it take effect within 75 days of approval. The bulletin is available in PDF format from www.nycirb.org. Click on "bulletins" and choose bulletin number 2065.
"The Rating Board has responded to the concerns addressed by the Department in the Opinion and Decision [rejecting the first rate-increase proposal] and has met and discussed with the Department the possibility of a revision in rates sometimes during the upcoming rate period," the CIRB bulletin said.
Even without an increase in premiums, employers' overall comp costs are likely to go up next year because the state has approved a 5.6 percent increase in the state's assessment rate. Assessments, which are a key part of the burden of workers' compensation costs in New York State, support the operational expenses of New York's Workers' Compensation Board (WCB) and various special funds supported by New York's workers' comp system.
The new increase will bring this tax from 14.3 percent to 15.1 percent. Last year, the assessment rate increased 10 percent, from 13 to 14.3 percent.
The Business Council has argued that continuing pressure for higher premiums reinforces the importance of cost-cutting workers' comp reforms.
"We again urge state Legislators to embrace the common-sense reforms that other states have used to reduce their costs," said Business Council President Daniel B. Walsh. He noted that Governor Pataki, Senator Thomas Libous, and Assemblyman Robin Schimminger have championed reform proposals that would reduce employers' overall costs.
The National Council on Compensation Insurance (NCCI) in September 2003 estimated that the average cost of a workers' comp case in New York was $11,793, 72 percent above the national average. New York's costs are above average mainly because the state offers lifetime benefits in cases in which benefits are not "scheduled" in state statute. These cases account for 14 percent of claims, but more than 77 percent of all compensation costs.
In testimony at a state Insurance Department hearing June 30 on workers' compensation premiums in New York State, The Business Council 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.
Curtailing lifetime benefits. 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 Council's 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.
Enacting 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.