New York's workers' compensation system has taken a few high hard ones to the head lately. Premiums are now the 5th highest in the nation (according to the well-respected "2012 Oregon Workers' Compensation Premium Rate Ranking"); its surcharges are the highest in the nation; the Spitzer reforms, aimed at reducing costs to employers and improving care for injured workers, have done neither; attorney involvement is among, if not the, highest in the nation; the house-that-Jack-built bureaucracy is cumbersome and unwieldy; and all the parties in the system, every last one of them, bemoan what they perceive to be a train wreck of monumental proportions.
At the same time, New York's Workers' Compensation Board has come under wilting criticism from nearly all quarters. Mike Whitely, from Work Comp Central, has been doing an excellent job of reporting and documenting the whole thing. Last week, the New York Business Council weighed in with some heavy artillery of its own. In short, everyone's frustrated, and tempers are frayed.
I know the Board's senior management, and I am absolutely convinced that all of them, from Jeff Fenster on down, are highly dedicated. These are competent professionals doing the very best they can, but they are up against long odds. They are David with a broken slingshot, and Goliath is growing bigger every day. It does not appear that New York's loggerheaded vested interests - lawyers, doctors, insurers, unions, the Legislature, employers, and more still - will come to any grand bargain anytime soon.
So, is there anything the Board or anyone else can do to create some positive, forward momentum? I think there is, and it involves what is known as Code Rule 60, which is the New York Department of Labor's Workplace Safety and Loss Prevention Incentive Program. It's sometimes known by its really catchy and memorable acronym, WSLPIP. Code Rule 60, which came into being in September of 2009, is supposed to help employers establish DOL certified and approved safety, return to work, and drug and alcohol prevention programs. Participating employers receive premium credits: 4% for safety, 4% for return to work and 2% for drug and alcohol prevention. The credits run for 3 years (but the two 4% components drop to 2% in the second and third years) and are renewable. Only employers with experience modifiers of less than 1.3 are eligible (although why the state prohibits employers who would seem to need it the most from participating is a piece of logic beyond my comprehension).
The premise of Code Rule 60 is that employers who establish these programs will have safer workplaces and, eventually, lower costs. Not a bad idea. The problem is that the DOL has made the program so ridiculously bureaucratic that it would be easier for a New York employer to find his way through a dense maze of thorns, blindfolded, than to negotiate the journey to Code Rule 60 certification. Don't believe me? Here is the official Labor Law Regulation (PDF), in other words, the way through the thicket. It's 20 pages of dense bureaucratese. Busy employers find it nearly impossible to wade through the legal Pig Latin.
Code Rule 60 is totally process driven. There is no performance requirement. No performance measurement. Just build a certified program, and good things will happen. Maybe. The New York DOL doesn't seem to care if the program reduces loss costs. All the DOL wants to know is: Have employers built their programs the way we told them to build them?
With the preceding as background, you might be forgiven for asking how successful has the program been? Regardless of whether they've reduced loss costs, how many employers have succeeded in getting those precious premium credits? Even the New York Business Council couldn't find out, but, anecdotally, the number is fewer than five. Since September, 2009.
So, here's my proposal: First, scrap Rule 60. It's not working, and it never will in its present form. Second, Jeff Fenster should pick up the phone and call Paul Meagher, the highly respected President of the Massachusetts Workers' Compensation Rating and Inspection Bureau (WCRIB). Why? Because long ago at the height of the Massachusetts workers' compensation crisis, when 65% of the Commonwealth's employers were in the High Risk Pool, Mr. Meagher was instrumental in establishing the Massachusetts Qualified Loss Management Program. The QLMP (later replicated in Missouri, West Virginia and New Hampshire) is totally performance driven, and it played a big role in the Massachusetts workers' compensation turnaround, the continued success of which was documented last week by the Workers' Compensation Research Institute and last month in the Oregon study.
Here's how it works. Premium credits accrue to Loss Management Consulting Firms whose Massachusetts customers the WCRIB certifies have reduced their loss costs in the year following engaging a firm. The greater the loss cost reduction, the greater the credit, up to 15%, which is then passed on to the Loss Management Consulting Firm's customers in the succeeding year. Lower loss costs mean lower premiums for employers. The Loss Management Consulting Firms have to requalify every year. So, if a Firm's results slip, it will see its credit, and probably customer portfolio, reduced. In the QLMP, all of the incentives are lined up so that everyone is motivated towards reducing costs, while providing safe workplaces and high quality care for injured workers. (Full disclosure moment: The QLMP was an idea I gave to the WCRIB and the Massachusetts Division of Insurance).
Here are the rules for the Massachusetts QLMP (PDF), with a Q&A at the end. Four pages, written in simple English that any employer or agent can understand.
Senior management of the New York Workers' Compensation Board has told me on many occasions that their overarching goals are to reduce costs to employers and to see that high-quality care is provided to injured workers. It's obvious that Rule 60 is doing neither. A New York version of the Massachusetts QLMP would be a good first step in that direction.