July 11, 2007
Businesses expected to save $1 billion this year from 20 percent cut in workers' comp rates
In a victory for The Business Council and New York State employers, Governor Eliot Spitzer has announced a 20 percent average reduction in workers' compensation premiums—a cut that he said would save employers about $1 billion in the 2007-08 fiscal year.
In a press release, the Governor said that the cut in rates ordered by Eric Dinallo, superintendent of the state Insurance Department, was attributable to the landmark workers' compensation reform law approved earlier this year.
"We promised that we would reduce the cost of workers' compensation as part of our effort to make New York more business friendly," said Governor Spitzer. "I'm proud to say that the reforms we instituted have already produced the biggest single year decline in workers' compensation rates since at least 1975, the first year for which data is currently available."
"This is great news," said Business Council President Kenneth Adams. "The New York State business community is grateful to Governor Spitzer and the legislative leaders for their efforts to drive down the costs of workers' compensation insurance.
"Between the legislation passed in March and the ongoing administrative reforms, comp costs should drop even further," he added.
The state Legislature approved the landmark workers' compensation reform bill in early March after many years of advocacy by The Business Council and about three months of intensive negotiations involving the Spitzer administration, legislative leaders, Business Council President Kenneth Adams, and the state AFL-CIO.
The reform law imposed limits on the duration of benefits in "permanent partial disability" cases, which had driven New York's workers' comp costs to a level that has been some 80 percent above the national average. It also increased the maximum weekly benefits available to injured workers.
In addition, the reform deal included a pledge from Governor Spitzer to pursue savings for employers through additional administration reforms. The administration reforms being sought include: the design of an expedited hearing process; implementation of factual medical guidelines to determine accurately the degree of disability in comp cases; the design of new treatment guidelines; the design of new return-to-work initiatives to help injured workers; and new training for administrative law judges who hear workers' comp cases.
The new law:
- Limits the number of years during which benefits would be available in permanent partial disability cases, which now account for a high percentage of costs in New York's comp system. The previous law allowed lifetime payment of cash benefits in all such cases. Now, based on current caseloads, it is estimated that benefits will be capped at eight years or less for more than 90 percent of cases, and that the average PPD claimant will get 344 weeks of benefits upon classification.
- Increases the maximum weekly benefit for injured workers from $400 to $600 over three years. In the fourth year, the maximum weekly benefit will become two-thirds of the average weekly wage in New York, with the maximum thereafter adjusted annually beginning in the fifth year.
- Creates new programs designed to help injured workers get workers prompt medical treatment and return to gainful employment.
- Creates strong new anti-fraud measures.
- Eliminates the Second Injury Fund, which has forced significant recent increases in surcharges that are added to all employers' workers' compensation bills.
- Continues medical services for workers whose benefits in PPD cases expire would continue.
- Provides a "safety net" would be established for cases determined to involve extreme hardship.