New York State Department of Financial Services
NYCIRB 2016 Loss Cost Filing
Lev Ginsburg, Esq.
Director of Government Affairs
June 28, 2016
The Business Council of New York State, Inc. represents more than 2,300 members – businesses large and small all across the state – and have a seat as a public member on the New York Compensation Insurance Rating Board’s Board of Governors. On behalf of the Business Council’s members, I wish to submit these comments into the record as part of the Department’s consideration of the filed 2016 loss cost increase.
As the state’s largest statewide employer advocacy organization, we often address issues impacting the state’s economic competitiveness, including business costs driven by state policy actions. The proposed 9.3 percent increase in loss-costs that insurers would use as the foundation of their rate-setting for 2017 premiums is obviously not the outcome for which we had hoped. However, we firmly believe that the numbers, like the rate-settings process, must reflect the true costs of the workers’ compensation system. This loss cost calculation results from an analysis of the actual cost of workers’ compensation benefits, not an analysis of the cause of those cost increases.
The real issues facing New York’s employers are not loss-cost numbers, which are mathematically calculated by NYCIRB, but a comp system that remains deeply troubled, and that is now more expensive than before the 2007 reforms. New York’s workers’ compensation rates have dramatically risen over the last eight years, driven by increases in maximum benefits indexed to the state’s average weekly wage, increases in medical costs, rapidly growing scheduled loss of use awards, extensive litigation and a slow and inefficient implementation of reform measures meant to curb costs.
As the Department of Financial Services contemplates this current rate increase, it should note that the proposed loss-costs of the last several years were either dramatically decreased or rejected entirety, leaving the system in a perpetual state of deficit. Making a loss cost decision based on the real costs in the system is imperative to New York employers because failure to do so undermines market stability, leading to a more limited private insurance market in the state, as evidenced by the massive growth of the State Insurance Fund’s market share (now by most measures, well above 40%). This system, left unchecked will ultimately lead to severe increases in costs for employers large and small.
In recent years, in its rate settings, the Department of Financial Services has relied on the opinion that “New York's workers' compensation system is in a state of considerable transition in light of the 2007 reforms and the subsequent steps taken by the State in furtherance of the implementation of those reforms…and that the full impact of the 2007 cost-saving reforms remains to be seen.” Unfortunately, for a variety of reasons, the cost-savings promised in the 2007 have never been fully realized.
New York’s workers compensation system remains a drag on New York State’s business cost competitiveness. Governor Cuomo’s 2016-2017 Executive budget acknowledged this reality by offering a number of reforms, immediately rejected by organized labor and the trial bar. Common sense approaches, taken in many other states, were summarily rejected by these groups. An example is the extended use of Preferred Provider Organizations (PPO) which has been shown to both improve the experiences and care of injured workers and dramatically reduce lost-time, needless litigation and system expenses.
To address our cost concerns, we have asked the Workers’ Compensation Board and the Governor’s office to reexamine the system by which scheduled loss of use awards are determined. The process currently utilizes injury recovery assumptions, many of which are over thirty-years old, and statutory lost-time calculators that are just as old. Making such determinations based on old and out of date medicine, coupled with a maximum weekly benefit - now over $840 - has proven to be a major factor in growing system costs, needlessly costing the system hundreds of millions of dollars annually, as reflected in this filing.
Further, there continues to be a compelling need to fix a glaring loophole in the 2007 reform by applying permanent partial disability durational caps from date of injury, thus ending the practice of extending payments to claimants for many years beyond the intent of the 2007 reforms. Doing so would have an immediate effect on compensation costs, saving employers significantly more that than the requested loss cost percentage on an annual basis.
In summary, the New York Compensation Insurance Rating Board’s requested 9.3% increase is justified by actual system costs. Just as we remain committed to working with the administration in our ongoing efforts to implement cost-saving reforms, we also stress that the Department’s consideration of this proposed loss cost cannot be based on some hope of future savings, but on the latest statistical data reported by carriers, and on accepted actuarial principles and methodologies. As we said earlier, making a loss cost decision based on the real costs in the system is imperative because failure to do so undermines market stability, which leads to a more limited comp insurance market in the state and ultimately to severe increases in costs for all businesses.
The Business Council is committed to continuing to work to convince policymakers to concentrate on the need for meaningful, cost-cutting worker’s comp reforms. Achieving this goal is the only way to ensure that future loss cost requests will be significantly lower. Until that time, the data on workers’ comp costs supports approval of the current loss cost filing.