STAFF CONTACT :
The business community opposes this legislation. It fails to address the high cost of workers' compensation in New York. It falls far short of correcting the inequities of the system. The legislation contains absolutely no cost saving reforms.
The sponsors' memorandum of support states that “this legislation will permit realistic benefit levels...that will not dramatically increase the cost of doing business in the state.” On the contrary. The legislation substantially increases benefits; eliminates the exclusive remedy provision-one of the foundations of the workers' compensation law; creates a medical trust fund; allows organized labor to determine the carrier of choice where collective bargaining exists; allows for additional high wage earner coverage and provides for a lump sum payment if the coverage is not used; and allows convicted felons to re-apply for benefits upon release from a correctional facility.
This legislative memorandum of opposition outlines the issues raised by the bill and explain our opposition in more detail.
NEW YORK IS A HIGH COST STATE
New York is a high cost workers' compensation state. There are factors that make this true. They are:
- New York does not have durational limits on either permanent total or permanent partial disabilities.
- New York's percentage of total costs for permanent partial claims ranks second to California.
- As a percentage of our total claims, New York's permanent partial claims account for 12.7%, while cost account for over 77%.(New York Compensation Insurance Rating Board data)
- Only Louisiana has a higher average cost per case than New York.
- Thirty-seven states have durational limits on their permanent partial disabilities.
- Forty-six states require the use of objective medical guidelines in determining functional impairment. New York does not require the use of objective medical guidelines.
BENEFIT INCREASE AND INDEXING
Beginning December 2004, the legislation would increase the maximum benefits payable under the workers' compensation system to two-thirds of the state average weekly wage, in $75 increments by December , 2006. The legislation then goes on to index the weekly maximum benefit to the statewide average weekly wage annually. The Business Council's initial estimate is that this change, alone, could raise employers' rates by 25 percent or more.
ELIMINATION OF THE EXCLUSIVE REMEDY RULE
There are two foundations on which workers' compensation law is based in New York. They are no-fault liability and exclusive remedy. Workers' compensation law provides that an employee is entitled to receive benefits for lost earnings and medical expenses, even if the injury is not related to any fault of the employer. The employers are absolutely liable for all benefits due to work related injuries and in exchange employees are not able to sue for such injuries. This bill would change the workers' compensation system in New York by allowing an injured worked to recover directly from the employer.
This legislation seeks to eliminate the exclusivity rule. It states that “any worker proximately injured or sustaining an occupational illness as a result thereof may elect to waive all benefits and compensation of this chapter and may commence a cause of action against the employer for negligence in a court of competent jurisdiction.” This one line completely throws many cases from the workers' compensation system into a tort based system. New York does not need more litigation.
CREATION OF THE MEDICAL TRUST FUND
The bill requires that the employer inform the insurance carrier and the workers' compensation board of all citations received within seventy two hours of receipt of such citation. A failure to timely notify the carrier and the workers' compensation board will be the basis for the board to fine an employer up to five thousand dollars for each case where there has been a lack of timely notice. These funds will be placed in the “medical trust fund” which will be discussed later in this memorandum. There are already adequate remedies in the law to deal with cited employers. New York does not need another.
The medical trust fund shall be funded by employers who do not maintain comprehensive health insurance at a rate per uninsured employee to be determined by the board per calendar year. In the event that there is an overutilization of the medical trust fund and a potential deficit, the board is empowered to impose a supplemental surcharge on employers not having comprehensive health insurance to avert such deficiency prior to the end of the calendar year. Does this really make any sense? Employers that are not providing health insurance are doing so because they cannot afford it. These employers are now going to bear the weight of yet another assessment to fund the medical trust fund. History has clearly proven that the special funds that are in existence are not meeting their original purposes. New York does not need another special fund.
The bill sets forth a provision for prompt access to medical care. Pending the outcome of a controverted claim, an insurer or health benefits plan maintained by the employer, shall make payments for necessary medical and hospital services for the injured worker, if the worker would have otherwise been covered. When an employer controverts a claim, and the employer does not maintain comprehensive health insurance for its employees, the injured worker shall be able to procure payment from the medical trust fund for payment of necessary medical and hospital services.
CHOICE OF CARRIERS
This legislation states that where collective bargaining is required, the labor representative may choose, on an annual basis, either the carrier used by the employer or the State Insurance Fund, to provide coverage for the employees in the collective bargaining unit. This provision is a sham. It is the employer who is solely responsible for the payment of all workers' compensation premiums and benefits.
HIGH WAGE EARNER
The legislation permits high-wage earners to purchase additional benefits above the state rate. Once the wage earner reaches the state maximum benefit level, they would then be allowed to purchase additional coverage. This coverage may provide up to two-thirds of the actual lost wages of the employee which exceed the state average weekly wage. These policies would be available for purchase in increments of six months up to thirty six months of protection. If the employee has purchased this protection for up to ten years prior to retiring from the workforce, and never used the policy, the employee shall be entitled to a rebate in the form of a single lump sum payment upon retirement.
This runs counter to the entire notion of insurance. Policyholders do not receive benefits back if they do not use our health, automobile or homeowners policies. Why should we be able to do so in the workers' compensation system?
In New York state if you have been convicted of a crime you are deemed to have withdrawn from the labor market and unavailable for work. You are ineligible for benefits. This legislation would allow those who have had their benefits withheld due to a felony conviction, to apply to the workers' compensation board for reinstatement of benefits. The convicted felon must provide a form to the board and proof of release. Payments by the employer or the carrier of the employer would resume within 30 days of notice of release at the workers' compensation board. Is this provision fair and equitable?
EVALUATION OF INSURANCE CARRIERS
The legislation would allow all carriers to be rated by the board on factors including, but not limited to, the speed of payment of claims, rate of controversion, the number of claimant complaints and other factors deemed by the workers' compensation board to be indicators of the efficacy of the carrier to act in the interest of all participants in the process of adjudicating claims. These ratings would be published annually along with the data upon which the ratings were based. This provision can be accomplished administratively by the board.
DURABLE GOODS FEE SCHEDULE
The legislation seeks to have the workers' compensation board promulgate rules and regulations for the development of a fee schedule for durable goods. The durable goods shall include wheelchairs and other medically prescribed equipment deemed necessary by a treating provider. We are not aware that ascertaining durable goods is a problem or that employers are controverting the need for durable goods frivolously. Durable goods are presently a negotiated item. This issue does not need to be addressed in statute.
Allowing claimants to electronically deposit their benefit checks would limit the authority of the fraud inspector general's office. Under the current system, the claimant must now sign the back of the check. This endorsement signals that the claimant has not engaged in any employment for another nor any form of self-employment. Allowing the direct deposit of the benefits would negate the ability to check for fraud.
ASSESSING ATTORNEY FEES AGAINST A CARRIER THAT CONTROVERTS A CLAIM
The bill allows the Workers' Compensation Board to charge an employer for claimants' attorney fees if the employer has unsuccessfully argued against the claim. In addition, the costs for transcripts, for copies of medical records, and of travel to and from a hearing if the board determines the employer or carrier frivolously handled the claim.
The rights of claimants are well protected under current law relative to controversy. Workers' Compensation Law Section 25 (2) (c) provides that penalty must be paid to the claimant if the employer controverts an award without just cause. Carriers and self-insured employers are very serious when they determine to controvert a claim. Current workers' compensation laws and regulations ensure that there must be a significant body of evidence to successfully controvert. There is no trend of employers or carriers frivolously controverting a claims.
Under current law, all attorney fees are paid out of the award. We believe this to be a fair practice. This legislation would provide that all attorney fees would be paid, apart from and in addition to, the award amount by the carrier and self-insured employer. We oppose this provision.
The Business Council is strongly supporting a bill (S.5320-Libous/A.8862-Schimminger) that would:
- Limit, to 10 years, the duration of benefits given to injured or sick workers in cases 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 meaningful objective medical guidelines to determine the degree of disability and the ability of workers receiving benefits to meet occupational demands.
For the above mentioned reasons, The Business Council of New York State, strongly opposes A.9736/S.6135 and urges that it be held in committee.